banks selling mortgages

CIARAN_BOYLE

A lot of people I know have gotten letters in the last year telling them that their mortgage was sold to a finance company.

Looking at these cocompanies through a search through the C.R.O. I see that these companecomcompany's directors are current directors of 70-100 other finance compnies. Shareholding of these companies are identical. All of the companies have been set up relatively recently and no accpaccounts have as yet benfiled with the C.R.O. In total I have 3 of these interlinked chains of companies
Does anyone know what the rationale for having so many companies with identical shareholding and directors.

My thought is that each company is an investment vehicle which borrows money and buy a small number of loans in a leveraged fashion. if a packet of loans doesn't perform then the individual limited company will go belly up and default on its loans while the other limited companies dontinue trading as normal.

If so does this not remind anyone of subprime mortgages in America?

Eric Cartman

banks want junk mortgages off their balance sheets to improve their ability to access credit. standard enough practice really, package all the bad ones up as one and if even 1 of them keeps paying it looks like one profitable revenue stream.

johnnyskeleton

CIARAN_BOYLE wrote: »

A lot of people I know have gotten letters in the last year telling them that their mortgage was sold to a finance company.

Looking at these cocompanies through a search through the C.R.O. I see that these companecomcompany's directors are current directors of 70-100 other finance compnies. Shareholding of these companies are identical. All of the companies have been set up relatively recently and no accpaccounts have as yet benfiled with the C.R.O. In total I have 3 of these interlinked chains of companies
Does anyone know what the rationale for having so many companies with identical shareholding and directors.

My thought is that each company is an investment vehicle which borrows money and buy a small number of loans in a leveraged fashion. if a packet of loans doesn't perform then the individual limited company will go belly up and default on its loans while the other limited companies dontinue trading as normal.

If so does this not remind anyone of subprime mortgages in America?

The problem with the subprime crisis is not what they were doing but the manner in which they did it. As long as people know what they are buying into, value it properly, cary out due dilligence and dont use state money for it, it isnt a problem

CIARAN_BOYLE

johnnyskeleton wrote: »

The problem with the subprime crisis is not what they were doing but the manner in which they did it. As long as people know what they are buying into, value it properly, cary out due dilligence and dont use state money for it, it isnt a problem

What concerns me is that a company has 100 irish subsidiaries that buy loans from banks which have been incorporated within 12 months. It just seems dodgey to me. The only business model I can conceive of whereby it would be beneficial to have so many companies doing this owned by a parent company is definitely dodgey.

johnnyskeleton

CIARAN_BOYLE wrote: »

What concerns me is that a company has 100 irish subsidiaries that buy loans from banks which have been incorporated within 12 months. It just seems dodgey to me. The only business model I can conceive of whereby it would be beneficial to have so many companies doing this owned by a parent company is definitely dodgey.

The three main reasons that I can think of are:
1. Limited liability on each company to spread risk (as you pointed out);
2. An accounting exercise which turns €X of dodgy loans into €X investment in subsidiaries; or
3. Because the companies are all part owned by one company and part owned by a number of smaller investors in different proportion depending on the loan.