Catherine Murphy (Kildare North, Independent)
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The special liquidators of the Irish Bank Resolution Corporation are moving to sell the loan book as quickly as they can with substantial discounts. Just over 11,000 IBRC mortgage holders are owner-occupiers while just over 2,000 are in the buy-to-let category. I have been hearing from some of them who feel they are affected by this and whose loans are performing.

The Minister for Finance confirmed to me in a reply to a parliamentary question last week that it was intended to split the loan books into four distinct segments, namely, performing, non-performing, owner-occupier and buy-to-let, to maximise market interest. This comes after the special liquidator sought advice from PricewaterhouseCoopers. It is clear that only bids from big operators will be entertained. Of course, it was PricewaterhouseCoopers which was asked to assess the balance sheet of Anglo Irish Bank and the other core banks after the bank guarantee. The information it provided about the solvency and capital ratio of Anglo Irish Bank was critical to the decision to nationalise the bank in 2009. There is an issue of confidence in terms of where the information is being obtained.

The decision has been taken to dispose of the legacy of IBRC as quickly as possible. The Minister for Finance told us on budget day that there was no Anglo Irish Bank any more, but that is not quite the case. We must ensure there are protections for citizens against the excesses of the market.

The special liquidators have decided to dispose of the loan portfolio in blocks of 30 and 40, and I relied on an article in The Irish Times for that information. This has the effect of enabling large corporate debtors to buy out their loans at a discount. There is an inherent moral hazard on a number of levels to what is happening. It seems moral hazard is a concept invented for the small guy. Who is benefiting here? Will we see people who gambled as bondholders, perhaps foreign investors, and who were bailed out by this country coming back in to buy these loan books at a discount?

There is absolute fury among some of the people, in particular those directly affected by this, that this is again being done at the taxpayers' expense. Some people are being rewarded and being given a bargain opportunity. The only conclusion one can draw is that these people are getting an opportunity. They may well be the very people who had the benefit of us paying them in full, and now they are coming back to take more out of the pot at a discount. There is little or no risk to them because many of these loans are performing.

To be perfectly honest, the only people who seem to be rewarded in all of this are those in the big corporate sector. People who have mortgages that are performing are being bounced around the place and will be moved on under this plan. I have been contacted by several people who are absolutely furious about what is happening. I will be interested to hear what the Minister has to say on this matter.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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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.

Catherine Murphy (Kildare North, Independent)
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The Minister has said he understands "the anxiety of individual customers". Those who have non-performing loans might be anxious, but those who have performing loans are absolutely furious that large corporate entities will be able to come in and buy those loans at a discount. The loans that are being valued relate to properties that have already been discounted because of negative equity. I do not know how these discounts will work. It is clear that large corporations will be able to cherry-pick, whereas individuals will be unable to bid to buy their mortgages, obviously, because the banks are not making enough loans available to allow that to happen in a timely way. These people are being cut out by the speed with which this process is being pursued. The Minister said that borrowers received letters asking them to outline how they would prefer to proceed. It was a one-way communication in relation to the individual mortgage holders. Essentially, it will be decided for them. They will not be able to make an input into how the decision will be made. There is real anger because people who have been paid in full for bonds, some of which were not even secured, will be able to use that money to buy performing loans at a discount. It just seems absolutely unconscionable. When people see that scenario in front of them, they have to question whether the best return for the taxpayer is being achieved.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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There is no easy way to maximise the return for the taxpayer from the sale of a loan book, especially at a time when the pillar banks in this country, like society in general, have very few options when trying to access credit for people who wish to retrieve their loans from those institutions. Those who wish to buy products from NAMA or the IBRC or from loan books generally, which is desirable if we are to maximise the return for the taxpayer, are depending largely on institutions outside this country. The sad situation in this country is that the low level of liquidity in the financial institutions means that people are finding it difficult to retrieve and buy back their loans. As policy makers, we continue to worry about the moral hazard issue when we are making decisions. The Deputy referred in her contribution to people who are paying their loans in the normal way and do not want to subsidise others who have made no effort to deal-----

Catherine Murphy (Kildare North, Independent)
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That is not the point I was making.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I suppose the Deputy's point is that she does not want to see corporate greed entering into this situation and taking advantage of the problems I have mentioned.

Catherine Murphy (Kildare North, Independent)
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Yes.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Minister for Finance thought about this long and hard before putting in place a process, including an Act of the Oireachtas, to ensure we maximise the return for the taxpayer. The judgment calls have to be made. We will see the outcome of those calls in November, when we will know what value we will get from the sale of the loan book in the first instance.