Analysis & Comment

Charlie Weston: 'Smart move by shrewd bank as it tries different approach to thorny issue of problem mortgages'

What’s not to like? That will probably be the reaction of many people to the development that will see AIB offering a package of non-performing mortgages for sale to debt charities and others engaged in the restructuring of bad loans.

The likes of HomeOptions, Home for Life, the Irish Mortgage Holders Organisation and Arizun are likely to attempt to buy the distressed loans. The idea is to offer the loans to groups who engage with troubled buyers rather than the usual option of selling to a vulture fund.

Vultures have a bad name. People see them as faceless and not upfront about their intentions. They usually buy distressed loans for around 50c in the euro.

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They try to restructure the loan so they can get a return. This may involve writing off some of the debt by agreeing to a personal insolvency arrangement or some other debt deal.

Alternatively, they will seek a voluntary repossession or a court-ordered repossession if no engagement from the borrower is forthcoming.

People fear vultures are too eager to repossess.

It is no longer the case that they are unregulated as they have recently had to register with the Central Bank.

If a charity or mortgage-to- rent operator ends up buying unsustainable mortgages they too will try to right-size the loans to get the homeowners paying again and back on their feet. Mortgage-to-rent deals are likely to predominate.

The difficulty will be with those refusing to engage.

It will not be any easier for a charity to get hold of the keys to a property where nothing has been paid for years and the homeowner is delusional about the need to engage.

If a large number of those borrowers whose loans are bought by a charity remain non-engaging, it will make the funding of the deal precarious.

But those shrewd operators at AIB will be happy to have outsourced such problem loans to some other entity to deal with.

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