Ulster Bank has confirmed the sale of a portfolio of non-performing mortgages - both home loans and buy-to-let properties - worth about €800m to US vulture fund CarVal Investors.

Pepper Finance Corporation will become the legal owner and servicer of the mortgages once they move from Ulster Bank but will not hold an economic interest in the loans.

The bank had said in July that it was planning such a sale and confirmed today that it involves about 3,175 mortgages.

89% of the portfolio being sold off is made up of home loans and 11% of it is buy-to-let mortgages. Ulster Bank said the portfolio does not contain any home loans in an arrangement. 

It said that 40% of the home loans have been in arrears for over seven years and 90% of the buy-to-let mortgages have been in arrears for more than 12 months during their lifetime.

In a statement, the bank said that Pepper Finance Corporation will become the legal title holder and servicer of the mortgages once the transfer is complete.

A spokesperson for Ulster Bank said the move to sell off the portfolio was "a difficult decision", taken following a period of concentrated engagement with customers. 

"Our preference is to work with customers to find a solution that keeps them in their home while paying a mortgage that is affordable for them in the long term. This is not possible for every customer," the spokesperson said.

"For mortgages that are not sustainable, additional forbearance will not bring them back to a performing position and we are obliged to reduce the level of non-performing loans on our balance sheet," Ulster Bank said. 

"We take this step only as a last resort following an extensive campaign to find sustainable solutions for our customers. In fact, the portfolio has reduced since it was announced due to more customers entering a sustainable arrangement," it added.

Ulster Bank said it will be in contact with all affected customers at the appropriate time to help them as their loans transition to the new owner.

Before today's sale, around 11.3% of Ulster Bank's loans were classified as non-performing.

The bank, along with all the other main Irish banks, is under pressure from the European Central Bank and the Central Bank to reduce that figure to 5%. 

In August last year the bank announced the sale of 5,200 non-performing mortgages worth €1.4 billion to so-called vulture fund, Cerberus. 

The difference in that case, however, was that just 45% of the portfolio was made up of mortgages on family homes, far lower than in the current portfolio. 

Once the sale of the loan portfolio is complete, Ulster Bank's non-performing loans will be down to around 7%.