The hype-machine is in full throttle on the sale of the former INBS loans. The fear being that some large evil hedge-fund is out there waiting to repossess homes in the thousands.
There may be such a fund headed by some unknown Dr. Evil, but chances are a hedge-fund is the best outcome for the IBRC mortgage holders.
While some of the points about who does and doesn’t fall under various regulations has been made here already, it is worth pointing out that several other factors must apply.
Firstly is that IBRC loans have no recourse to the FSO already, and loans in the IBRC cannot be changed outside of the original loan terms so people simply can’t get a solution while they are IBRC owned.
This is a problem common in other lenders such as Bank of Scotland who don’t exist here any more, only original loan terms can apply so apart from interest only there is no creativity for a mortgage resolution allowed.
Due to that structural deadlock, that these loans are leaving IBRC is a blessing unto itself, the next question being ‘where to from here’.
Again, we have already demonstrated that any regulated entity within the EU being the buyer will mean they come under the code of business rules set out by the Central Bank, this offers the standards that normally apply.
If you are in the ‘unregulated equals bad’ camp then NAMA doesn’t offer any better outcome, they aren’t regulated.
A hedge-fund is probably the best outcome, no Irish bank or Irish entity has shown the level of willingness to accept writedowns as the foreign buyers have. The likes of Pepper have already been doing widespread 50% writedowns, we showed this was occurring back in mid 2012.
Sources with knowledge of both the quality of the INBS loan book and purchasing such assets in particular have told me they expect the sale price to be less than 30c on the Euro.
If that happens the odds are not that the buyer will want to stay in Ireland for 20 years eking out a margin on lending. Rather it will be likely that they come in fast as they can to get deals done and closed with discount offers. They buy for 30 settle at 50 and make damn good money in the process, everybody wins.
Worst case scenario? Is that an entity with long term intentions in Ireland buys these loans, because then they’ll be planning on staying here and using existing collections infrastructure to bleed every penny they can out of the borrowers.
The final point about ‘mass repossessions’ is an example of the hyperbole that surrounds this debate all too often. That is without pointing out the contradiction where people say ‘they can’t go to the FSO and the bank will be going legal’. Once legal proceedings are initiated there is no longer recourse to the FSO, that’s the way it has always been.
IBRC borrowers aren’t going to be able to get taken over by a regulated entity and avoid legal proceedings so in any case the FSO will be shut off for many of them either way.
One can’t help but think some of the recent commentary is aimed at one of two things, either the ‘talking down’ of the loans so that there isn’t public outrage about the low sale price, or the Government don’t want to let go, risk a morale loss and this is all about getting the loans into NAMA. One way or another, something isn’t making sense.