TAOISEACH Leo Varadkar was unaware of the sale of more than 10,000 mortgages by State-controlled lender Permanent TSB as the controversial deal was announced.

Reacting after the deal with a so-called ‘vulture fund’ was confirmed, the Taoiseach yesterday said he “hadn’t heard about that”.

The State-backed lender finalised its sale of mortgages linked to 10,700 properties, including 7,400 owner-occupied homes, to US private equity giant Lone Star. Shares in PTSB rose almost 10pc following the news.

Lone Star is a so-called distressed debt investor – a type of investor commonly dubbed a vulture fund. The loans were sold at a massive discount,reflecting the deep arrears of many of the borrowers.

Mr Varadkar said: “That’s news to me today.”

He added: “I suppose without stating the obvious, our view when it comes to the sale of these loan books is always to seek an assurance and try to make sure those people who are paying their mortgages and those people who are making a genuine effort to repay their mortgage aren’t adversely affected by it in any way. It’s something I want to talk to (Finance) Minister Donohoe about.”

Speaking on RTE Radio One's Morning Ireland programme today, the Finance Minister said that he had been aware since January that the process to sell the loans was underway and was informed yesterday that PTSB would be making a stock market announcement in relation to it.

Mr Donohoe sought to assure homeowners affected by the sale that they will be protected.

"I am confident because of the protections that we have in place that we will be able to give continued protection to homeowners that could be affected by this. The reason for this is because if you are a tenant or if you are a borrower your protection is not affected by who owns the loan book.

"If you look at what we have come through, we have seen over 120,000 mortgages restructured in Ireland, 87pc of which have adhered to the terms of the restructuring. We have seen the amount of bad loans in our country reduce from €54bn to €22bn, all the legal protections that were in place across that period will continue to be in place across the coming period and in addition to this I have asked the central bank to conduct a review of the code of conduct of mortgage arrears to look if any further change needs to be made," he said.

The deal had been well flagged in advance. It provoked major controversy last February when it was first announced by the bank. After the initial public outcry, Permanent TSB scaled back the sale, known as Project Glas. The bank removed €900m of split or partially restructured mortgages, bowing to pressure not to sell the home loans of borrowers who had engaged with the lender after falling into arrears.

The deal was especially politically sensitive because the State is the largest shareholder in Permanent TSB. The bank will receive a cash consideration of €1.3bn for the loans. That is a steep discount to the €2.1bn owed on the mortgages.

Lone Star, the Texas-based distressed debt heavyweight, is buying the home loans through its Irish units Start Mortgages and LSF Irish Holdings 97 DAC.

Start Mortgages is regulated by the Central Bank of Ireland.

Permanent TSB chief executive Jeremy Masding said that protections which exist for homeowners transfer with a loan when it is sold.

“Customers will continue to be afforded the protection of existing regulatory protections after the transfer,” he said.

The bank launched the sale after coming under pressure from the European Central Bank (ECB) to speed up the clean-up of it balance sheet.

The ECB wants bad loans to shrink to around 5pc of banks’ loan books. The mortgage sale will cut Permanent TSB’s share of bad loans from 25pc to 16pc.

Earlier this week, Bank of Ireland chief executive Francesca McDonagh said her bank may now also look to sell some of its €2.5bn of problem mortgages to hit the ECB target.

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