Some non-performing mortgages originally issued by the Irish Nationwide Building Society (INBS) before the property crash have encountered new problems as Covid-19 affected household finances and property sales.
A 359 million euro portfolio of old INBS loans and a 518 million euro pool of mortgages underwritten by the now defunct company and risk lender Springboard during the housing boom saw monthly collections of Borrowers’ money fall 25% between February and April, compared to the previous six months, according to a new report from rating firm DBRS Morningstar.
Both portfolios came from mortgages purchased by foreign investment firms following the crash and refinanced in international bond markets in recent years through a process known as residential mortgage-backed securitization ( RBMS).
“Based on the information and performance data available so far, there is no clear evidence that the drop is directly correlated with Covid-19, but according to comments provided by portfolio administrators in recent years. weeks, some form of distress in the midst of Covid-19 had been anticipated, ”said Laura Lombardo, deputy vice president of European structured finance at DBRS Morningstar, in response to questions from the Irish Times.
Separately, industry sources said that much of the wallet’s cash flow came from the sale of properties – especially rental loans – after troubled borrowers made deals with repairers of RMBS vehicles. There is generally a higher level of sales of closed loans in December than at any other time of the year.
“The interruptions in payment will have had an impact on the collections, but this impact was only really visible in May and June,” said a source, who declined to be named. “Real estate sales activity also came to a halt between April and June, but has now restarted.”
The proportion of non-performing loans in the € 359 million portfolio increased significantly last summer, as the vehicle holding the loans – known as European Residential Loan Securitization 2018-1 DAC – sold part of the performing loans that were in the original wallet.
Repairers of the two vehicles which had experienced a decline in collections had signed up with traditional banks in March to offer temporary payment interruptions to borrowers affected by Covid-19.
According to DBRS Morningstar, collections in larger pools of non-performing mortgage loans contained in RMBS vehicles in the Republic have been broadly “stable” since the start of the year.
“However, we will continue to monitor the amount of actual gross collections recorded on a monthly basis and their sustainability in the medium to long term,” he said.