The Irish Independent – Charlie Weston
A not-for-profit company set up with the aim of buying distressed mortgages in order to keep people in their homes has threatened to take legal action to block AIB’s planned sale of €1bn of its home loans.
Homeoptions claims a process used by the largely State-owned bank to sell a book of bad home loans to a so-called “ethical fund” is “flawed”.
Homeoptions, headed by Dublin-based businessman Brian Reilly, is a not-for-profit company that was set up as an alternative buyer of bank distressed mortgages, which have overwhelmingly been bought by vulture funds. Its aim is to buy the loans and allow people in deep arrears to stay in their homes as renters, rather than repossess the properties.
It is understood Homeoptions has submitted an indicative bid of €800m.
It has written to AIB chief executive Colin Hunt complaining that it was mislead over the bank’s plans to sell a portfolio of soured loans.
In July, amid the backlash against banks’ sales of distressed home loans to vulture funds, AIB launched an alternative process allowing not-for-profit groups to bid for mortgages.
AIB is selling a portfolio understood to have around 8,000 non-performing loans in it, called Project Alder. It is understood the portfolio is valued at around €1bn, but only a portion of the residential loans would go to an ethical fund.
Last week, the Irish Independent revealed that two funds have been short-listed to buy the loans.
They are David Hall’s Irish Mortgage Holders Organisation (IMHO), backed by private equity group Arrow, and Home For Life, a mortgage-to-rent operator funded by UK-based LCM Partners and supported by private mortgage-to-rent operator Arizun. The two will now be given the chance to prove they have the funds to buy some of the non-performing home mortgages.
However, the head of third bidder Homeoptions, Mr Reilly, has threatened legal action to disrupt the process.
He has questioned how it was conducted and told the AIB boss he will seek a court injunction.
In the letter to Mr Hunt, seen by this publication, Mr Reilly claimed AIB was backing vultures, and “not backing brave”. This is a reference to AIB’s advertising slogan, which refers to backing brave.
“As a courtesy to yourself I thought it only fair to let you know that it is our intention now to seek a judicial review of the misleading process undertaken by AIB in conjunction with KPMG (the bank’s advisers on the sale).”
The letter also claims Homeoptions was “misled from the outset of this process”.
Mr Reilly questions how a sales process reserved for ethically funded alternative mortgage groups came to include private companies.
Neither Home For Life nor the Irish Mortgage Holders Organisation responded to requests for a comment, as they are understood to have signed non-disclosure agreements. AIB had no comment.