Mr. Eamonn Richardson:

My name is Eamonn Richardson and I appear here today with my colleague and fellow special liquidator, Kieran Wallace. We thank the committee for this opportunity to present on the special liquidation process as it impacts on IBRC mortgage customers.

With the committee's permission, we have an opening statement which we would like to provide to it. I will highlight some of the key contents from that statement. Then we will be available to take questions from the committee. The members of the committee will be aware that we retain obligations of confidentiality towards individual borrowers of IBRC and we are unable to discuss the specifics of any particular account or borrower. Furthermore, the sales process for the residential mortgage portfolio is ongoing with final bids due on 14 March 2014. As I am sure the members of the committee will appreciate, there are certain matters that remain commercially sensitive in relation to this transaction which we are unable to discuss.

Mr. Wallace and I were appointed as joint special liquidators on 7 February 2013 under the Irish Bank Resolution Corporation Act 2013, IBRC, Act 2013. The passing of the IBRC Act and the appointment of the special liquidators was part of the promissory note transaction which yielded significant benefits for the State.

On our appointment, we were instructed by the Minister for Finance to arrange for the valuation of IBRC's loan assets by independent advisers. In this regard, the special liquidators appointed PwC as independent advisers to value the residential mortgage portfolio.

PwC was also appointed to provide independent advice in developing a robust and credible sales strategy for the sale of the residential mortgage portfolio which would ensure that maximum value was achieved for the benefit of all creditors of IBRC. We understand the committee sought a copy of this report issued by PwC. In view of the commercially sensitive nature of the material contained in that report, we regret that we are not in a position to make this available or to put it into the public domain.

It is also worth noting that, per the ministerial instructions, the assets of IBRC could only be sold at a price equal to or in excess of the independent valuations obtained. Should a bid in excess of the independent valuation obtained not be received, the loan asset will transfer to NAMA at the independent valuation price.

I will give a general update on our loan sales processes to date. For operational reasons, the loan assets of IBRC have been divided into six portfolios, code named Evergreen, Sand, Rock, Salt, Stone and Pebble. The Sand portfolio comprises Irish originated residential mortgage loans with a par value of €1.8 billion. In total, there are 15,734 borrower groups comprising 24,632 loans for sale across the six portfolios. Thirty-three of these borrower groups, representing 0.2% of total borrower groups, were or are being offered for sale on a stand-alone basis. No IBRC borrower is being provided with an exclusive opportunity to buy back his or her loans at a discount, and each sales process is a competitive sales process involving third parties.

Within the Sand portfolio, there are 11,825 individual residential mortgage customers comprising 12,702 mortgages with a par value of €1.8 billion. Following receipt of legal advice, we corresponded with these residential mortgage holders and provided them with an opportunity to make written representations on the method of disposal of their loans and the criteria for determining who may bid on those loans. We received 1,224 residential mortgage holder representations. The special liquidators have reviewed and considered each representation. In addition, the representations were considered by PwC in delivering its sales strategy advice to us.

The valuation of the Sand portfolio was completed on 11 November 2013, with the sales process commenced on 14 October 2013.

As indicated, we expect to be in receipt of final bids on the portfolio on 14 March 2014.

We did consider the concept of selling individual mortgages but for a number of reasons we could not proceed with that. We can discuss these with the committee in more detail later. However, some of the issues we encountered included the cost of running such a process; timing; the independent advice received from PwC; borrower-only bids; the confidentiality of personal information that would be in the public domain; delivering best results for the creditors, including the taxpayer; and the execution risks associated with such a strategy.

We confirm that since the commencement of the special liquidation, the residential mortgage holders have continued to enjoy the protection of the Central Bank code of conduct on mortgage arrears, CCMA, and other protections in Irish consumer law. We have established a robust residential mortgages credit committee process and have reviewed mortgage accounts for forbearance, restructuring and enforcement measures.

Of the 12,702 mortgage accounts in IBRC, 10,622 relate to mortgages on a borrower’s private dwelling house, PDH. Of the PDH accounts, 4,175 are in arrears. Over the past, year we have been engaging with borrowers to address these arrears. A key development we have achieved to date is that we have concluded restructuring with 38% of the customers in arrears, with a further 6% in the final stages of completion. In addition, we are working towards a solution with 42% of the remaining accounts, which, with borrower co-operation, we will endeavour to deal with before the sales process. We do not currently have sufficient information to devise a solution in respect of 14% of our customers. Further information is being requested from these borrowers with a view to working towards a sustainable solution for them.

We are currently making approximately 16,000 customer interactions per month across the full Sand portfolio. Efforts to contact borrowers are via telephone and letters, and we are urging borrowers to re-engage with us and work towards a sustainable solution. We are in monthly contact with in excess of 98% of our customers in arrears. Any IBRC borrower can repay all borrowings with IBRC at any time up to the end of the sales process. The full amount, or par value, of all borrowings outstanding at the time must be repaid.

Some concerns have been expressed on the intentions of third-party purchasers of the Sand portfolio. In this context, it is important to note the objective of any third-party purchaser will be to make a financial return on the purchase. It is unlikely that this purpose could be achieved through actions that would make it more, rather than less, difficult for borrowers to comply with the terms of their loan agreements. Third-party purchasers will be required to honour the legal terms of the underlying loan agreements.

We can confirm that the third-party bidders who are bidding on the residential mortgage portfolios have confirmed they will be directing that the mortgages be serviced in accordance with the terms of the CCMA should they be successful in acquiring those loans. We are satisfied that the voluntary nature of this arrangement strikes a fair balance between the interests of the mortgage holders as well as the interests of the creditors of IBRC.

The sales process for the Sand portfolio is ongoing and it is, therefore, too early to comment on what percentage of it will be sold to third parties or to NAMA at the valuation price. We will continue to work with residential mortgage holders who are in arrears and we are willing to correspond with them pending the sale of the portfolios to third parties or to NAMA to arrive at sustainable solutions for them.

I thank the Chairman and other members of the committee for their time. We are now available to take questions on our statement.