Should the country prioritise private debt over what the State owes?
By Business Editor David Murphy
The escalating row about the State’s sale of 13,000 IBRC mortgages is far bigger than it seems at first glance.
Evidence suggests the Government has left these borrowers unfairly exposed. Also, the Minister for Finance’s policy clears the way for other banks to sell mortgages to unregulated companies if they wish.
The IBRC mortgages were originally issued by Irish Nationwide and are now part of a company which is being liquidated by the State.
But the borrowers have been denied some important protections.
They are not part of the published targets forcing banks to offer sustainable solutions to mortgage holders in arrears and the borrowers’ complaints are not being entertained by the Financial Services Ombudsman.
Also, borrowers may not be covered by the Code of Conduct on Mortgage Arrears if the loans are bought by an unregulated company.
Department of Finance sources say conditions cannot be attached to the sale of the mortgages, which is already underway.
If caveats were added at this stage of the liquidation it could disadvantage other creditors, they argue. That could leave the Government open to the threat of legal action.
So, despite the protests of the home owners, the sale is rolling ahead regardless.
Taoiseach Enda Kenny says that if the loans are sold to an unregulated company the Central Bank will try to come up with a solution to ensure borrowers are protected.
But the issue could become a lot bigger – many other banks are likely to sell their mortgage books too.
A series of foreign-owned banks are pulling out of Ireland; Bank of Scotland Ireland, Danske Bank and ACC are folding their tents.
When banks pull out they close current accounts and repay deposits. But dealing with mortgages is more difficult.
Bank of Scotland Ireland has sold some of its residential mortgages to US-group Apollo Global Management.
Many of the borrowers affected are worried about what this will mean for them. So far they have not been told.
Danske Bank has moved its mortgages to its non-core division.
It says it has no plans to sell these home loans – but shifting them into to a non-core operation indicates that could change.
The policy the State has adopted in relation to the IBRC home loans has set the ground rules for the other banks.
The Government has effectively said it is okay to sell these loans to an unregulated entity and hope that they buyers will volunteer to sign up to consumer protections.
If the State can adopt this position there is nothing stopping other banks from doing the same.
It is time for the Central Bank and the Government to develop a clear framework to ensure consumer are protected.
Hoping the buyers will be nice people is not a policy.
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