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AIB revives €1bn-plus problem mortgages sale


AIB, the Republic’s largest mortgage lender, has relaunched a planned sale of a deeply in arrears mortgage portfolio that had been put on hold at the height of the coronavirus crisis earlier this year, according to sources.

The bank decided in March to postpone indefinitely its first sale of non-performing private residential mortgages, which was dubbed Project Oak, and included loans that had an original value of €1.3 billion.

Overseas distressed debt firms Lone Star and Cerberus were among firms circling the assets, ahead of what had been set as a mid-April bid deadline. Sources said at the time that the loans were expected to achieve a discounted rate of between €700 million and €800 million.

It is understood that the level of loans in the portfolio has declined since March, due to ongoing loan restructuring. A portion of the family home loans back on the market are earmarked to be taken over by so-called “ethical” finance houses and charities that have been set up to use the State’s mortgage-to-rent scheme, sources said.

A spokesman for the bank declined to comment on the planned disposal.

Sustainable

“AIB has reduced NPEs (non-performing exposures) from €31 billion in 2013 to €4 billion for the third quarter of this year. The vast majority of the reduction in NPEs has been achieved through working with customers,” he said.

“We remain focused on reducing non-performing loans to a normal, sustainable level. Supporting customers in difficulty remains a key priority for AIB, and where feasible we will continue to implement sustainable solutions for customers who engage with the bank on a case-by-case basis.”

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The planned sale of legacy problem mortgages, resulting from the last crisis, comes as banks prepare for a surge in non-performing loans emerging from the coronavirus economic shock as the relief provided by temporary payment breaks to struggling households and businesses wears out.

As of the end of October, 85 per cent of 153,000 payment holidays extended to Irish households and businesses had expired. More than 86 per cent of owner-occupier mortgage accounts within the group had returned to normal payments, with 10 per cent not repaying in full and 3.8 per cent repaying on an extended term, according to Banking & Payments Federation Ireland data.

Arrears

Active payment breaks at the end of October stood at 1.9 per cent of all Irish owner-occupier mortgages. Loans subject to industry-wide payment breaks were not categorised as being in arrears.

Meanwhile, of the total number of owner-occupier loans in arrears at the end of June, 17 per cent (or 9,591 accounts) were overdue by between two and five years, 21 per cent (or 11,936 accounts) were in arrears by between five and 10 years, while 8 per cent (or 4,701) were in arrears greater than 10 years, according to Central Bank data.

All told, those more than two years in arrears make up 3.5 per cent of all home loans.


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