Phil Hogan (Carlow-Kilkenny, Fine Gael) | Oireachtas source

I am standing in for the Minister for Finance, Deputy Noonan, who is overseas on official business. I am sorry he is not able to be here to answer the question with more knowledge and detail. I will give the Deputy the benefit of the information with which I have been furnished.

The Irish Bank Resolution Corporation Act 2013 was introduced to enable the liquidation of the IBRC to proceed in an orderly manner consistent with financial stability and in the interests of its creditors. Special liquidators were appointed to oversee the liquidation of the IBRC for the benefit of all creditors of the institution, including taxpayers. This process involves the valuation and sales process for all the assets of the IBRC, including the residential mortgage portfolio. The special liquidators have engaged professional independent valuers to provide a confidential valuation of the loan books of the IBRC. As the valuation of the loan book was being progressed, the special liquidators wrote to all IBRC borrowers, including the residential mortgage customers, to give them an update on the special liquidation and on the sale of their loans. Borrowers were invited to make representations on the method of disposal of their loans and the criteria for determining who may bid for their assets.

The special liquidators have given significant consideration to how this portfolio should be sold. In light of the independent sales advice received and the responses received from the borrowers, the special liquidators arrived at the decision that the residential mortgage book should be split into four segments - performing, non-performing, owner-occupier and buy-to-let mortgages - and brought to the market. I am advised that the independent advice received recommended that this sales approach would be the most beneficial with regard to maximising sales and the return to creditors, including taxpayers. The decision to sell the mortgage portfolio in this manner was arrived at having regard to the scale of the sale process and the size of the loan book. At the end of May, there were 17,411 residential loans in the IBRC outstanding to more than 13,000 individual customers. The special liquidators independently decided that the most efficient method of disposal and the one most likely to maximise sales was to sell the loans as part of a larger portfolio.

It is important to note that the special liquidators are obligated by the conditions set out under the 2013 Act to ensure the assets are sold at a price which maximises the overall return for its creditors, including the State. I understand that many mortgage owners might be interested in buying their loans, but the time, cost and practicalities involved would make this option more costly. Taxpayers have already incurred far too high a price from this bank to impose further costs on them. The special liquidators are obliged to ensure the assets of the IBRC are sold at a price that is equal to or in excess of the independent valuation obtained from the independent valuers. If a bid is not received which is either at or above the valuation price, the loan asset will be transferred to NAMA at the independent valuation price. In the event that the portfolio is transferred to NAMA, the board of NAMA will determine its strategy at that stage. In doing so, NAMA will be mindful of its legal obligations and the general market norms under the Central Bank code of conduct on mortgage arrears and mortgage arrears resolution strategies.

Although I understand the anxiety of individual customers in relation to the sale of their mortgage loans, they can be assured that the contractual terms and conditions of customer mortgages and other borrowings have not changed as a result of the appointment of the special liquidators, nor will they change as a result of the ultimate sale of these obligations to a third party. All debts owing to the IBRC will remain due and enforceable. In order to avoid breaches of their obligations, it is important for customers to continue to make payments on their loans and otherwise honour the contractual obligations of their borrowings. The special liquidators are under the instruction of the Minister for Finance to ensure the valuation of all assets is completed by 30 November. The sale of all IBRC assets should be agreed or completed by no later than 31 December 2013, or as soon as practicable thereafter. The decision on how the mortgage portfolio is to be sold must take account of the time constraints faced by the special liquidators.

It is important to note that the decision concerning how the loans are packaged for sale and what bidders constitute qualifying bidders for the purposes of the sales process is to be made by the special liquidators. The Minister for Finance is not in a position to interfere with these decisions, as to do so would leave him open to challenge from other IBRC creditors. The special liquidators are confident that the decision to sell the residential mortgage book as part of a large portfolio is the most efficient method of disposal and the one which is most likely to maximise sales. This is in the best interest of the creditors of the IBRC and, by extension, the State and the Irish taxpayer.

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