# What is the logic in ptsb selling off its non-performing loan book?



## Brendan Burgess (18 Feb 2018)

https://www.irishtimes.com/business...on-performing-mortgages-sale-to-4bn-1.3392050

permanent tsb is selling loans worth €4 billion - € 1 billion of buy to lets, and €3 billion owner occupied. 

This represents about 20,000 mortgages. 

28% of the loan book is classified as non-performing. 

"However, it also includes a large portion of so-called split loans, where repayments on part of the original mortgage have been put on ice over the long term. These loans are still seen as non-performing by regulators, even though the borrowers are adhering to their new terms."

*Our refusal to allow lenders repossess homes *
It must be very frustrating for permanent tsb not to have any effective sanction on borrowers who simply won't pay their mortgage.  So they might well be responding to this frustration. 

*It makes no sense for ptsb to sell off performing split loans *
These loans have a three year review clause in them. If the borrower's financial position has improved, they can move money from the warehouse into the active loan. 

As many of these will be moving into positive equity, these borrowers will be more inclined to act responsibly. 

There is just no logic for ptsb to sell these off.  

*Many loans are classified as "unsustainable" even though the borrower is meeting their repayments *
The Central Bank rules do not allow ptsb to offer a restructure if the SFS does not show a sustainable solution.  So if the borrower has arrears from 5 years ago but they are now meeting their repayments, it is a non-performing loan in arrears. 

This is madness.  

*This is bad news for good borrowers *
If the likes of Tanager buys a split mortgage from ptsb, they will move quickly to transfer as much as possible from the warehouse to the active mortgage. 

They already tell customers that they do not offer arrears capitalisation as a solution. 

They will find it very difficult to get an order for possession, but they will pile on the pressure on the borrowers and many of them will crack and just agree to a voluntary sale. 

*It might be good news for people in negative equity who can't afford their mortgage. *
The funds which buy them are likely to offer deals


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## gahfan (19 Feb 2018)

Should people be worried? I am in am arrangement with P Tsb. Interest plus a small portion.


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## Delboy (19 Feb 2018)

David Hall was on Sean O'Rourke earlier and was quiet irate about this sale so it looks like your both in agreement on something Brendan 

Perhaps PSB just want to move on. They've taken the write down on their books and these loans are mostly just more trouble than their worth. They cannot repossess or every politician and crank from a fringe movement wuld be out shouting an barricading themselves in.
Clean their slate and move on


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## gahfan (20 Feb 2018)

I would draw a distinction between people who have engaged and pay an agreed amount and those who have not


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## Maz2408 (20 Feb 2018)

I have 2 restructured buy to let mortgages with PTSB, a large portion of both mortgages warehoused, first time in 10 years that we've had our head above water.  Currently spending around €4000 on much needed refurbishment works on one of the properties before re-letting, the property is still in approx €70k negative equity the other property is in good condition and tenanted but around €50k in negative equity, but the long term warehouse deal made the negative equity less of a burden.  I now have no idea whether to continue refurbishment which could be throwing good money after bad or to leave house as is untenanted until I know if my property is include in the PTSB portfolio.


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## gahfan (21 Feb 2018)

Maz2408 said:


> I have 2 restructured buy to let mortgages with PTSB, a large portion of both mortgages warehoused, first time in 10 years that we've had our head above water.  Currently spending around €4000 on much needed refurbishment works on one of the properties before re-letting, the property is still in approx €70k negative equity the other property is in good condition and tenanted but around €50k in negative equity, but the long term warehouse deal made the negative equity less of a burden.  I now have no idea whether to continue refurbishment which could be throwing good money after bad or to leave house as is untenanted until I know if my property is include in the PTSB portfolio.



They are saying a lot haven't engaged or paid anything in 7 years but I find it hard to believe there are that many who haven't engaged or paid anything in that long a period.

Also if it does go ahead what exactly are the vultures going to do with 14,000 homeloans? Force them to sell? Bring them to court?


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## Jim2007 (21 Feb 2018)

Brendan Burgess said:


> There is just no logic for ptsb to sell these off.
> 
> This is madness.



Of course it makes sense, if you look at it from a management or investor point of view.  Brendan, you can't complain about EU banks not entering the market place and at the same time decry an attempt to clean up the mess.  The best thing for the Irish consumers is that this bank gets back to being a fully functioning commercial bank as soon as possible and it can't do that with this albatross around it's neck for the next 5, 10, 15 years.


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## TLO (21 Feb 2018)

PTSB is under pressure from the European Central Bank to clean up it's ledgers.  So far, so good.  But Lorcan O’Connor, (Director of the Insolvency Service of Ireland (ISI)) has gone on record in today's Irish Times saying that PTSB should not have blocked PIAs for "technical reasons".  Had PTSB embraced the new insolvency environment they would have cleaned up their NPL book and would be in much better shape today.

Article at:


https://www.irishtimes.com/news/pol...debt-deals-says-insolvency-director-1.3399555


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## Early Riser (21 Feb 2018)

TLO said:


> But Lorcan O’Connor, (Director of the Insolvency Service of Ireland (ISI)) has gone on record in today's Irish Times saying that PTSB should not have blocked PIAs for "technical reasons". Had PTSB embraced the new insolvency environment they would have cleaned up their NPL book and would be in much better shape today.



For a different take on it :

https://www.irishtimes.com/opinion/...e-little-to-fear-from-vulture-funds-1.3399155


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## The Horseman (21 Feb 2018)

Jim2007 said:


> Of course it makes sense, if you look at it from a management or investor point of view.  Brendan, you can't complain about EU banks not entering the market place and at the same time decry an attempt to clean up the mess.  The best thing for the Irish consumers is that this bank gets back to being a fully functioning commercial bank as soon as possible and it can't do that with this albatross around it's neck for the next 5, 10, 15 years.




Exactly how do you expect competition to enter the market if they can't get a return. People made an economic decision, it did not work out.

If people purchased a principle private residence and sold it for a profit (therefore no tax liability) is the bank entitled to a share in the profit. In a word "no" so why should the bank or any bank let people stay in property they can't afford. There are others who can afford to purchase but the supply of property is not there.


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## Delboy (21 Feb 2018)

gahfan said:


> They are saying a lot haven't engaged or paid anything in 7 years but I find it hard to believe there are that many who haven't engaged or paid anything in that long a period.
> 
> Also if it does go ahead what exactly are the vultures going to do with 14,000 homeloans? Force them to sell? Bring them to court?


I'm surprised at your surprise! The average arrears on the book they plan to sell off is 3.5 years. 
Plenty of cases have appeared in the papers of people who hasn't paid mortgages for years and we know that only a fraction of the arrears cases have actually got into the courts. The courts have taken it upon themselves to act as some sort of super social worker for the state.


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## LS400 (21 Feb 2018)

I absolutely detest PTSB for many reasons, and, took a pay out from them for the way they conducted themselves with me trying to obtain a loan last year,  But on this occasion, I agree fully with their plan to offload to a vulture fund.

Dealing with one entity regarding many loans, against dealing with every individual regarding the same issue, is a no brain`r.

It may sound cold hearted of me, but there are reports that are many not engaging to rectify their own situation, getting away with this practice for years, which is causing the knock-on effect, where you are a fool not chancing your arm, the longer this is dragged out by the courts, the longer this situation will take to sort out this mess.

I am aware of one such individual who has adopted the strategy of long playing the system, drives a 151 Qashqai, when I asked him if his long term plan involves a similar approach with his financed vehicle, its gas, but No was the answer, as he says, They'll only come and take it away.

Spoke volumes


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## Sarenco (21 Feb 2018)

Early Riser said:


> For a different take on it :
> 
> https://www.irishtimes.com/opinion/...e-little-to-fear-from-vulture-funds-1.3399155


Excellent article from Ross Maguire.

The Fianna Fáil position on this issue really is populist nonsense.


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## Jim Stafford (21 Feb 2018)

I agree that Ross's article is a good summary of the issues involved. As Ross's article suggests, we have one of the best personal insolvency regimes on the planet for dealing with financially distressed home mortgages.

We have found PTSB to be very "tough" but fair when it comes to PIA's. It still puzzles me why so many people have signed up to "split" mortgages when they could have done a PIA and reduced the value of the mortgage down to the market value of the home.

Jim Stafford


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## Brendan Burgess (21 Feb 2018)

ptsb statement 

Statement by Permanent TSB Bank

Tuesday 20
th
 February 2018.
The following statement is issued in response to various enquiries in respect of the NPL issue.

Regulatory Expectations On Non-Performing Loans

The level of NPLs in certain jurisdictions has been an area of concern for European authorities.  The
lead regulators of the European Banking sector, the Single Supervisory Mechanism (known as the
SSM) in Frankfurt, have set out clear expectations that all European banks with above average NonPerforming
Loan
(NPL)
ratios

will develop and implement measures to reduce significantly their NPL
ratios as a matter of urgency.  Permanent TSB (the Bank) is not alone amongst banks in the Eurozone
or in Ireland in having to deal with a significant NPL issue.   

The regulators in this area are clear that in dealing with this issue, the Bank must address all NPLs,
whether restructured or not.  

A Wide Range Of Approaches
As part of the Bank’s response to this issue, it has utilised a range of innovative approaches.  For
example, agreements have been concluded with over 1,200 mortgage holders under which the Bank
has agreed to write off outstanding debts which are owed to the Bank and linked to Investment
Properties once the mortgage holders surrendered those properties to the Bank.  Arrangements
have also been put in place to cater for up to 1,000 mortgage customers who may be eligible to avail
of the enhanced Mortgage To Rent (MTR) scheme. Under the MTR scheme, qualifying customers can
remain in their homes with all debts to the bank secured by their property, written off after its sale
to an Approved Housing Body.

Last week, the Bank confirmed that, in addition to these measures, it would prepare for the sale of
certain NPLs to third parties (Project Glas).
Project Glas
In total, loans linked to approximately 18,000 properties are included in Project Glas; approximately
14,000 of which are Private Dwelling Homes (PDH).  

The total value of all loans included is approximately €3.7 billion, with approximately €1 billion of
this accounted for by properties bought specifically as investment properties (But-To-Let/BTL).  

Of the remaining €2.7 billion in loans, just under €2 billion is accounted for by PDH loans which are
typically owned by customers who have not engaged with the Bank, whose mortgages are
unsustainable or who have been unable to meet the terms of various treatments put in place.  Of
this portion of Project Glas, some account holders have not engaged with the Bank for over 7 years
and on average the loans are over 3.5 years in arrears.  Many have made no payments at all for
years.

Project Glas also includes some loans which are currently subject to agreed forbearance measures,
but which remain categorised as NPLs and which, therefore, we are required to address.

1

It is important to note that, in preparing this loan book for sale, the Bank did exclude a significant
number of customers who will be resolved through other means.

The sale of non-performing loans to third parties is common in the UK and other European
countries.  In the UK there are a number of examples since the current crisis began of the UK
Government disposing of homeloans to third party funds.
Safeguards For Account Holders

The Bank is conscious that customer safeguards must be a key element of any NPL reduction
programme.  In that regard, there are a number of points worth noting;
• Under the Consumer Protection (Regulation of Credit Servicing) Act 2015, if the purchaser of a
mortgage loan is an unregulated entity, then it can only deal with account holders of these loans
through a Credit Service Firm (CSF) which itself must be regulated by the Central Bank of Ireland.
The CSF’s obligations include taking any necessary steps for the purposes of collecting or
recovering payments; notifying the borrower of changes in interest rates or in payments due,
and communicating with the borrower in relation to matters such as errors and complaints.
• CSFs are bound by the same regulations when dealing with account holders as currently apply to
Permanent TSB and they are required to comply with the Code of Conduct for Mortgage Arrears
(CCMA).
• In regard to potential legal action, the Court system does not process cases involving third party
funds any differently than it does with cases brought by banks.   
• Under the Consumer Protection Code (CPC) regulations, where a loan sale is eventually agreed –
likely to be months from now -  customers whose loans are included in the sale can expect to
receive confirmation of that fact from the Bank at least sixty days before the loan transfers.
• Unlike the selling Bank, third party funds have greater flexibility to develop tailored solutions for
individual home owners.  
After Ten Years

NPLs are one of the last significant legacy issues of the financial crisis.  All stakeholders have worked
extremely hard over almost a decade to minimise the number of loans that are not performing and
to give customers the space and time to try to resolve their issues themselves.  However, we are
now almost ten years on from the start of the crisis.  A new generation of home buyers needs to be
able to engage with healthy, competitive banks who can finance and purchase homes and, the banks
themselves need to ensure that they are strong, profitable and capable of withstanding potential
future shocks.  

Given all this, and the existence of appropriate consumer protection regulation of the interaction
with customers by any acquirer, the Bank believes that now is an appropriate time to implement
measures that are considered part of normal banking practice in the UK and other European
countries.  These include allowing third parties to work out these Non-Performing Loans and
allowing banks to use their resources to concentrate on providing new loans to home buyers and
businesses who need access to credit.
Issued on behalf of Permanent TSB by Gordon MRM


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## Brendan Burgess (21 Feb 2018)

*This statement today confirms many of the points I made *

·  Ptsb is selling 3,500 family home loans which it does not want to sell. They are “good” non-performing loans and they are profitable and a bank in trouble is being forced to sell them.

·  Ptsb is right to sell the other 10,000 because many of them have paid nothing for years and there is no sanction available to ptsb.



“good” non performing loans

Project Glas also includes some loans which are currently subject to agreed forbearance measures,

but which remain categorised as NPLs and which, therefore, we are required to address.


“bad “ non performing loans

Of this portion of Project Glas, some account holders have not engaged with the Bank for over 7 years and on average the loans are over 3.5 years in arrears.  Many have made no payments at all for years.


*The ECB/Central Bank is completely out of order here. *


Ptsb has 28% of its loan book non-performing.

One of the reasons for this high percentage is that the ECB forced ptsb to sell its CHL performing loans. The percentage of non-performing loans would be lower, if they still had these loans on their books.


Classifying a profitable, performing split loan is a disaster for ptsb and for the borrower, who will probably have the split removed by the vulture fund.


*The sale to vulture funds will be an advantage for the “bad” non performing loans*


The vulture fund will do deals with the borrowers. Sell the home and we will write off the shortfall.

And this includes selling it to the council as part of the Mortgage to Rent scheme.


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## Brendan Burgess (21 Feb 2018)

Hi Jim

What I actually said was 



Brendan Burgess said:


> *It makes no sense for ptsb to sell off performing split loans *
> These loans have a three year review clause in them. If the borrower's financial position has improved, they can move money from the warehouse into the active loan.
> 
> As many of these will be moving into positive equity, these borrowers will be more inclined to act responsibly.
> ...



Do you know what a split mortgage is? 

Typically, there is an active mortgage of €200k on which they are charging up to 4.5%.  There might be a warehouse of €100k on which they are charging no interest. 

So the effective interest rate is 3%. 

In addition, every three years, they review this and can move money from the warehouse into the active part. 

There is no sense to ptsb in selling a performing split loan. 

Your arguments do apply to the guys who are paying nothing. There is nothing that ptsb can do about them. They can't repossess them, so they have to sell them off. 

I would prefer if we allowed lenders to repossess such loans and not force them to sell them off. 

Brendan


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## breakonthru123 (21 Feb 2018)

Brendan Burgess said:


> For
> example, agreements have been concluded with over 1,200 mortgage holders under which the Bank
> has agreed to write off outstanding debts which are owed to the Bank and linked to Investment Properties once the mortgage holders surrendered those properties to the Bank.



Am intrigued by the above scentence from PTSB...

*What does it mean exactly?*

Having not paid a cent in capital or interest in nearly three years and having amassed about €140k arrears on BTL’s, I wonder would it be worth my while contacting them and discussing the above agreement?

(I was waiting till I got a date at the high court for bankruptcy. All docs have been lodged with IMHO, but the above might encourage me to make another offer to PTSB).

I don’t think it matters in the long run - as a write down of debt is put on my ICB report and so would a bankruptcy. So either way, i’m locked out of getting credit for 6 years or so..


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## Delboy (21 Feb 2018)

May I ask if you were receiving rent in those 3 years on the BTL's?


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## Brendan Burgess (24 Feb 2018)

Jeremy Masding will be before the Oireachtas Finance Committee on Tuesday 

*14.00Finance, Public Expenditure and Reform, and Taoiseach (Joint) CR4, LH 2000*
AGENDA: Matters relating to the sale of loan portfolios to private investment firms [Mr Jeremy Masding, Chief Executive Officer, Permanent TSB]


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## gahfan (24 Feb 2018)

Brendan Burgess said:


> Jeremy Masding will be before the Oireachtas Finance Committee on Tuesday
> 
> *14.00Finance, Public Expenditure and Reform, and Taoiseach (Joint) CR4, LH 2000*
> AGENDA: Matters relating to the sale of loan portfolios to private investment firms [Mr Jeremy Masding, Chief Executive Officer, Permanent TSB]



I thought he had pulled out


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## Delboy (26 Feb 2018)

*Not-for-profit group may bid for PTSB mortgages*
https://www.rte.ie/news/ireland/2018/0225/943497-permanent-tsb/


> The move comes after CEO of the Irish Mortgage Holders' Association, David Hall, confirmed that he is attempting to secure funding to buy up to 6,000 of PTSB's restructured loans.
> These include split mortgages, where the bank agreed to freeze a portion of the distressed loan, interest free, and allow the borrower to make repayments only on the remainder.
> It is believed that PTSB is selling up to €800m of restructured loans...
> ...Speaking to RTÉ News, Mr Hall confirmed that conversations have taken place with a UK bank and a UK investment fund with a view to bidding for the loans.....
> ...


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