Tens of thousands of KBC mortgage customers feared the bank would sell their mortgages to a vulture fund without telling them.
customers were shaken after their April mortgage payments were collected by an unknown entity called Phoenix Funding 7.
Fears that the mortgages might be sold to a fund ignited when the legal entity collecting their mortgage switched from KBC Bank Ireland PLC to Phoenix 7 on current account statements.
This triggered panic and resulted in a large number of calls and emails to KBC Bank.
The bank insisted that the use of the name Phoenix 7 which appeared on the statements instead of KBC Bank was wrong.
He said he did not sell the mortgages, but admitted he securitized them. Customers were not informed.
Securitization is where a lender consolidates a pool of mortgages and borrows against monthly interest payments.
It is a way to raise funds on the markets.
The lender remains the economic owner of the loans and continues to service them.
From the research done by this publication, it appears that there are 33,000 mortgages worth € 5.9 billion that have been consolidated, securitized and called Phoenix 7.
In what is a highly technical piece of financial engineering, KBC Bank Ireland has transferred the ownership of the mortgages to another entity within the wider KBC group.
KBC Group is headquartered in Belgium.
A bond was then issued on the back of the securitized loans, with a 149-page prospectus released as part of this process.
A person familiar with what happened explained: “It was an internal securitization. So a little financial engineering. The biggest KBC bank still holds the mortgages.
“They didn’t sell the mortgages to a fund. They just bundled them up and asked another part of the bank to buy them. They then issued a bond to raise funds.
The prospectus shows that mortgages are predominantly residential, with a minority of rental buyers.
According to a Phoenix 7 analysis released by rating agency Fitch, around 40% of the portfolio’s mortgages were issued before 2011, when mortgage underwriting standards were lower.
But those older loans are mostly paid off, Fitch says.
Customers became angry when they learned through this publication that their loans had been securitized without being told.
KBC mortgage holder Siobhan McMahon, from Skibbereen in Cork, said: “My God, I hate the idea of our mortgage being sold to a non-entity. And not to be told. I have been with them since 1997-1998 and have never missed a single payment.
“I feel very betrayed now.”
She was just one of many clients who contacted the Irish Independent about the situation.
The bank insisted it was under no obligation to tell mortgage clients that their loans had been securitized and used to raise funds through bond issuance.
The bank “followed all regulations” regarding whether or not customers should be notified, a spokesperson said.
He said in a statement: “Some clients’ KBC mortgage payments appear on their checking accounts with a description of ‘Phoenix 7’ instead of ‘KBC Bank Ireland’.
“This is the result of an internal problem and KBC is working to resolve it.
“This had no impact on the processing of customer payments and we apologize for any confusion this may have caused.”
He added that he was using an “internal securitization program to support the financing of his balance sheet.” This is a well-established practice in the industry and has no implications for customers, he said.