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Concerns over letters sent to mortgage-holders demanding full payment of arrears within 30 days

The Central Bank is aware that a regulated entity has written to a number of buy-to-let borrowers in arrears.

Image: Shutterstock/fizkes

CONCERNS HAVE BEEN raised over letters being sent to a number of mortgage-holders demanding that they pay the full amount of their arrears within 30 days.

Cabot Financial Ireland Limited, the debt collection agency, was appointed by Promontoria Scarriff Designated Activity Company as the regulated entity responsible for dealing with its mortgage administration.

Last year, Ulster Bank sold a loan book portfolio, known as Project Scariff, worth €1.6 billion.

It consisted of €900 million of owner-occupier loans across 3,600 accounts and €700 million of buy-to-let (BTL) mortgages across 2,900 properties.

Pay up in full 

TheJournal.ie understands that Cabot has written to a number of borrowers who are behind in their payments, demanding that all arrears be cleared within 30 days.

This has been confirmed by the Central Bank of Ireland, which said in a statement: 

The Central Bank is aware that a regulated entity has written to a number of buy-to-let borrowers in arrears.

The letter, seen by this website, sent to mortgage-holders indicates that if they fail to pay up the full amount they owe, Cabot will have “no other option but to appoint a Receiver over the secured property”.

The issue was also confirmed in a recent parliamentary question asked by Sinn Féin Pearse Doherty.

In his reply, Finance Minister Paschal Donohoe said:

I am advised by the Central Bank of Ireland that it is aware that a regulated entity has written to a number of buy-to-let (BTL) borrowers in arrears and that it is engaged with that particular entity but cannot comment on the specifics of any individual firm.
Any borrower who is concerned or who has received letters should contact their regulated entity directly. If they are not satisfied with how they are treated, they are entitled to make a complaint to the regulated entity. If they are not satisfied with the response they receive, they can make a complaint to the Financial Services and Pensions Ombudsman.

Cabot declined to comment when contacted by TheJournal.ie.

Concerns renters could be evicted

Speaking to this website, Doherty said:

“The actions of Cabot are exactly what people fear from vultures. Simply moving to the final option without any genuine engagement shouldn’t be acceptable. The ‘fixed asset receiver’ role is to effectively liquidate the asset on behalf of the vulture.

“A bank would not act this way which is why my No Consent, No Sale Bill is essential to protect borrowers. When government officials say there is no difference between a bank and a vulture they should be directed to how Cabot are acting here.”

Doherty states that due to the properties being buy-to-lets, the same protections to primary residences, or homes, do not apply. While some show less concern for the threat against buy-to-lets, the Donegal TD said government are failing to see the bigger picture. 

We have to consider the tenants in these homes now probably facing eviction at short notice. Ulster Bank cannot simply wash their hands off this situation either. All banks should be working with customers to find lasting solutions wherever possible.
The political nod from Fine Gael for this vulture bonanza means more cases like this will happen and without my Bill no mortgage is safe from the vultures.

Buy-to-let protections

Doherty recently raised his concerns about the letters with the Deputy Governor of the Central Bank Ed Sibley when he appeared before the Oireachtas Finance Committee. 

He questioned Sibley about how he could maintain that mortgage-holders are not worse off if their mortgage is sold on to a vulture fund, stating that banks are in the mortgage business long-term, while vulture funds are not.

Banks have an image to keep up to customers, while vulture funds do not, he argued.

“I am hearing now that a fund that bought a certain number of buy-to-let loans from one of the banks… is now issuing letters asking for the arrears to be paid within 30 days. If the arrears are not paid within 30 days then the organisation will appoint receivers. This is standard practice of the vulture fund now,” Doherty told the deputy governor. 

Sibley also confirmed that the Central Bank is aware of the funds actions, stating: 

I am aware of the parliamentary question the deputy submitted (referred to above) on the matter. It is difficult for us to get into the specific details at the committee. We will certainly respond on the specific question asked and we are engaged with that particular entity in respect of what is happening.

The image of a bank versus a vulture fund

Doherty replied that this case showcases why people should be fearful of vulture funds buying up their mortgage:

We have a sale by a main bank in this State to a vulture fund. It involves buy-to-let mortgages that were in arrears. The bank could do the same thing in the morning. It could have done exactly the same thing but it has not done so. However, I understand the vulture fund is doing it. Contractually, the fund has the right to instruct the borrower to settle the arrears within 30 days or it will appoint a receiver over the properties.
That is why people do not want their loans sold to vulture funds.

BANK 095_90544602 Deputy Governor of the Central Bank of Ireland, Ed Sibley. Source: Sam Boal

Sibley said it is important to distinguish between owner-occupiers and buy-to-let arrangements in terms of the level of protections, stating that in this case, the houses affected are investment properties.

“The right to appoint rent receivers is in many of the bank contracts and has been
exercised by the banks on rental properties already to a significant degree. We can argue the wrongs and rights of it but the ability to appoint a rent receiver is stitched into the majority of buy-to-let lending arrangements. It does not apply to all banks,” said the deputy governor. 

Knock-on impacts on rental crisis 

The Donegal deputy said the actions of agencies such as these has a knock-on impact on the housing and rental crisis, pointing out that these people who find themselves in arrears oftentimes have reached arrangements with their commercial bank before finding themselves sold on to vulture funds. 

The mortgage-holders are meeting their agreed repayments, however, it is within the rights of the fund to call in payment of the arrears. 

“This is nearly a strategic default. The idea is that the fund calls in all of the arrears within 30 days. That is next to impossible for someone who is trying to manage through an arrangement.

“These individuals are making repayments. However, the idea involves an instruction to clear up arrears in 30 days or else a receiver will be appointed. Then, when the fund appoints the Receiver, it does not have to go through the court system.”

Expecting a deal to be honoured

While the deputy governor said he did not want to comment on individual circumstances, he added:

One would expect that if a borrower was engaged or up to date in terms of the restructuring arrangement agreed with the lender, then that scenario would not arise.

David Hall spokesperson for the Irish Mortgage Holders Organisation said vulture funds calling in the full amount of arrears on buy-to-lets is a “daily occurrence”.

A bank may have reached a payment arrangement with their customer, but once the loan is sold to a vulture fund, particularly in the case of a buy-to-let, they can just order that the full arrears, no matter what the price, to be paid in full, “and fast”, said Hall. 

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