An Irish not-for-profit organisation is aiming to put a new scheme in place to reduce the risk of distressed mortgages ending up in the hands of vulture funds.

The Irish Mortgage Holders Association (IMHA) is working on a bid to acquire over 5,000 Permanent TSB mortgages that are due to be sold.

It comes after Permanent TSB insisted it would press ahead with the planned sale of around 18,000 property loans on its books.

The ‘Project Glás’ portfolio includes around 14,000 private dwelling homes.

On Thursday, it emerged that some 4,300 of these are split mortgages on primary dwellings.

'Friendly vulture fund'

IMHA founder David Hall is teaming up with international financers to bid for around 4,300 of the state-backed bank’s split loans and 1,000 of its non-restructured loans.

Split mortgages are put in place when a homeowner enters financial difficulty. A percentage of the loan is 'warehoused' in an effort to make monthly payments more manageable.

Permanent TSB has said that, under European rules, the split mortgages are classed as underperforming – regardless of the fact that the customers are meeting their payments.

The bank says European regulations require it to include the split mortgages in its sale in order to bring down the level of non-performing loans it has on its books.

This afternoon, Mr Hall told Newstalk that “every effort will be made to try and prevent these loans being sold where their circumstances could change.”

He said his ‘friendly vulture fund’ would look to purchase where there was any danger that “any effort might be made to diminish the spirit of the split mortgages or the restructures that were intended by Permanent TSB customers.”

“I am working with a number of people and all I can say at this stage is that positive discussions have taken place to be in a position to try and bid for those loans and try and secure them and ensure that those people who have split mortgages - the spirit and the contractual terms within those splits are maintained.”

Regulation

The proposed sale led to a political stand-off in late February, until the Government agreed to support a Fianna Fáil bill aimed at ensuring vulture funds face full Central Bank regulation.

The bill also aimed to beef up the code of conduct governing loan owners.

The Sunday Business Post reports this morning that one of the options under consideration is for the eventual purchaser of loan portfolios to agree to work with advocacy organisations to ensure customers are treated fairly.

Mr Hall has also approached AIB about the possibility of purchasing a number of loans the bank.