ptsb and Pepper explain the sale of mortgages at a Finance Committee meeting

Brendan Burgess

Ptsb and Pepper appeared at the Oireachtas Finance Committee on Thursday 6th December.

You can watch it back here:

It starts at about 20 minutes

What I learned from it or had clarified

The deal has been concluded. Glenbeigh is now the beneficial owner and Pepper is now the legal owner of the mortgages. For the next 6 months, ptsb will act as the servicer for the mortgages.

Pepper has long term plans to grow their business in Ireland and to use Ireland as a base to grow their loan servicing business in the EU.

Pepper has been delegated all authority to deal with these mortgages.

Pepper has the sole right to decide interest rates.

The Review period is at least every three years. So Pepper could do it annually. I had thought it was exactly every three years.

When a borrower's circumstances improve, it's in their own interests to have a review so that they will not have a balance due on maturity of the mortgage.

Securitisation law required ptsb to retain a 5% stake in the securitisation.

Pepper believes in transparency but is not allowed to disclose the identity of the investors in Glenbeigh.
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Brendan Burgess

You can read Jeremy Masding's Opening Statement here.

It's easier and quicker to read the Opening Statement so skip to 30 minutes to watch the guy from Pepper

I have also attached Jeremy's Opening Statement to this thread.

It could be useful to anyone who ends up in a dispute with Pepper.

Not sure if Pepper's Opening Statement is available. But it can be got on the Finance Committee minutes


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Brendan Burgess

Pepper Opening Statement

Cormac Ryan and Dermot Caden, Chief Executive and Finance Director

We will have €10 billion of residential loans under management

80% are performing.

There will be 5 key protections for the Glenbeigh customers
1) All the legal protections continue
2) The restructuring in place continues
3) Where a borrower's financial circumstances don't change, the existing agreement continues.
4) Where a borrower's circumstances improve, we will review their agreement
5) Where a borrower's circumstances disimprove we will work with them to find a sustainable long term solution

The loans are performing. There is a steady stream of cash. We are in this for the long-term as it's attractive.

We have the full power to do all things on this portfolio.

If these loans had remained with ptsb, they would have been reviewed anyway.

All these loans have a significant amount of capital where repayments have been suspended. They all have an amount due on maturity of the mortgage term. It is in the customer's interest to make sure that the deal is reviewed so that amount can be reduced where possible.
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Brendan Burgess

Joan Burton - making her first appearance at this committee that I have seen. (She actually told me that she was not on the Committee and that the website saying she was a member was wrong.)

Kicks off with a constituent's ptsb case.

ptsb has miscalculated her arrears.

ptsb included the Domiciliary Care Allowance in her income. But all the banks have stepped back from that.

Are Pepper seeking to write off the warehouse or are you seeking to recover them in full?

It seems from your presentation that you are not going to write them off even though you bought them at a heavily discounted value - maybe 100% discounted.

How often do you intend to review the splits?

Will the investors have any role in the management of the loans?

Does ptsb remain anyway involved?

Eamon Crowley FD of ptsb
It was a bundle and there was one price. Splits and reduced capital. Trackers and non-trackers. There was no special price for the warehouse.

The deal is closed. We are sub-servicing for the first 6 months. Legal Title will change in 6 months. At that stage, we are out of it.

We have a legal obligation to retain 5% of the holding.

The full amount is due, although we have sold the loan at net book value.

We have already reviewed split mortgages
  • some have remained the same
  • Some have moved from the warehouse into the main loan
  • Some are not performing in accordance with the split. They are not in this portfolio. They were sold as part of Glas.

We would flag that customer as a vulnerable customer

Glenbeigh is now the beneficial owner. But Pepper is the legal title holder. Glenbeigh bought the loans and passed the legal title to us.

There is a mechanism of eligible debt forgiveness outlined in the Prospectus. It is in very exceptional cases e.g. insolvencies.

There is no change to the review process. It is often in the best interests of the customers to have regular reviews. It is done "up to triannually". They can be done up to two years or up to one years. We don't plan to do them more than once a year. We must review them in accordance with the CCMA e.g. we must give one month's notice.
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Brendan Burgess

Michael McGrath

This session should be about giving reassurance to customers.

Are you saying categorically that the decisions will be made by Pepper and by no one else.

Ryan: There will be an operating committee which makes the decision. Pepper will be on the committee and Glenbeigh will have one representative.

Setting interest rates have been delegated to Pepper. The committee is only consultative on this issue.

Every interaction is guided by the CCMA.

Eligible Debt Forgiveness. Absolutely exceptional cases. But they must be agreed to by Glenbeigh.

McGrath: Who is Glenbeigh

Ryan: We advocate transparency. But we are not in a position to identify the main investors in Glenbeigh. We are subject to a non-disclosure agreement.

We do not need to follow the instructions of the investor.

McGrath: The contract allows you to terminate split mortgages unilaterally for any reason.

Ryan: That is not our interpretation of the contract. [Brendan: nor mine either.]

McGrath: Do you offer the full suite of restructuring as set out in the CCMA?

Ryan: We compared our suite with ptsb's and they are comparable.

Jeremy: Post Glas, our NPL ratio is 16%. The european average is 3.5%. We need to manage it down so that we can compete.

The bank believes that this is the right outcome for customers and for the bank and for Ireland plc.

McGrath: Did you consult with the Minister

Jeremy: Yes, in line with our obligations. The minister responded at the end of November with a letter of non-objection which was the requirement of the ptsb board.
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Brendan Burgess

Kieran O'Donnell

How does the sale to Glenbeigh differ from a sale to a fund.

What happens if Glenbeigh decides it wants its money back tomorrow

Crowley of ptsb: We initiated the structure so that we could design the vehicle to protect customers.

The term of the vehicle is 2057.

The bonds are repaid as the loans are repaid.

Caden of Pepper: Legal title and beneficial title can be bifurcated apart.

O'Donnell: Who is on the board of Glenbeigh? What role do they have in relation to the loan

permanent tsb: It is an SPV structure with two directors. The trustee, Bank of New York, will appoint the directors.

[O'Donnell has no idea how it works and they can't really explain it to him]

Brendan Burgess


Some contracts say at least every three years.

Others have no set period.

Masding: I would have instructed my staff to do it more often as the loan approaches maturity

It would be a positive conversation to move the bullet payment into the main mortgage

Brendan Burgess

Senator Conway Walsh : You did not pass on ECB interest rate cuts for 5 years from 2012 to 2017

Ryan: They were standard variable rates. The legal title holder or bank has the right to decide what rate to charge.

Pepper will make the decision on the SVRs.

The main factors ... [interrupted by Senator]

How can customers trust you on SVRs in the future?

"the terms and conditions will remain the same" Is that legally binding?

Brendan Burgess

Are you planning to sell any more mortgages?

Masding: After this sale our NPL ratio will still be 10% which is too high.

I am not ruling anything in or anything out.

Senator: Would you not have been better off keeping these performing NPLs?

Masding: We had no choice. They were classified as NPLs

Senator: Do you intend to sell any of the cheap trackers?

Masding: We have no plans to do so.