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Finance committee

Homeowners with €6,000 owed on mortgage given repossession orders, committee told

An Oireachtas committee was told non-banking entities own more than 56% of all domestic mortgages in arrears.

REPOSSESSION ORDERS HAVE been granted for an investment fund in cases where less than €6,000 was owed on a mortgage, and where the mortgage was still being paid with €11,000 owed, an Oireachtas committee has been told.

The Money Advice and Budgeting Service (Mabs) criticised a “power imbalance” between individuals and institutions with “an army of lawyers at their disposal” and said the key component in these cases was the mortgage holder was not present in court.

Mabs social policy and research executive Dr Amie Lajoie told the Oireachtas Committee on Finance, Public Expenditure and Reform on investment funds, that so-called vulture funds are playing an increasing role in Ireland’s financial sector, in direct lending to individuals.

Dr Lajoie said non-bank lenders have also increased their share of mortgage lending from 3% in 2018 to 13% in 2021, and that they own more than half of domestic mortgages in arrears.

“As of September 2022, non-banking entities own over 56% of all domestic mortgages in arrears, up from 43% in March 2021 and 37% in March 2019,” she said.

Sinn Féin TD Mairead Farrell described the increase as “really shocking”.

Mabs also expressed concern over loan transparency and communication, chain of loan ownership, and interest rate hikes over the past six months, with some clients facing spikes of more than 6%, and a lack of public accountability.

Mabs business manager Dermot Sreenan said they were experiencing “increasing numbers trying to access our services”.

“It is all hands on deck,” he said.

He said the shrinking of the retail banking market and the exit of banks means there will be a further increase going to the non-banking entity market.

“We’re also concerned about the rising interest rates because we feel that is going to pull more people into default and they are going to be pushed into the process of the mortgage arrears protocol,” he said.

Also addressing the committee, the chief executive of Free Legal Advice Centres (Flac) Eilis Barry, criticised recent Consumer Protection Acts as primarily facilitating the development of a loan sale industry.

Sinn Féin finance spokesman Pearse Doherty said the sale of such loans to funds with short-term goals was a “recipe for disaster”.

Dr Lajoie said latest Central Bank data shows 17 authorised retail credit firms and 26 “transitional” firms in this category, as well as 18 credit servicing firms and a further three “transitional” firms.

Flac senior policy analyst Paul Joyce said these firms have essentially been given regulatory status to conduct their business.

“The sale of loans is now endemic in the financial system,” he said.

He said firms that are “transitioning” continue to operate while awaiting authorisation.

Joyce said Flac was “very disturbed” by a lack of progress in the review of the Personal Insolvency Act which was due to conclude at the end of 2017.

He said rent arrears was another “huge problem”.

“There is no data published by the Central Bank on a quarterly basis of the number of unsecured loans of all types in arrears,” he said.

Sreenan said 25% of clients responding to its recent survey were in the rental market and of those, 45% saw an increase in accommodation costs in the previous six months.

“We are anticipating when the [eviction] moratorium ends at the end of this month, our services are going to see a huge increase,” he said.

Committee chairman John McGuinness said “hundreds” of meetings have taken place between vulture funds and the Department of Finance.

He asked if there was an imbalance in how inclined the Department was to listen to Mabs and Flac.

“I would suggest that consultation has decreased over the years since the global financial crash,” Joyce said.

He said Flac “does not get the same ear” as it once had in the past and it was “hard to believe” legislators’ actions were protecting consumer interests.

Joyce added that it was almost as if the sale of loans is now a “fait accompli”.

He said the fallout of the global financial crisis and reckless lending from the Central Bank facilitated this.

Joyce criticised the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 which he said allows a hire purchase agreement offered by a retail credit firm to charge APR of 23%.

“It really is beyond belief how this is being allowed to happen,” Joyce said.

He also warned of the potential that Ireland was about to “go into some kind of mini-credit bubble and series of debt problems”.

Deputy chairman of the committee Bernard Durkan said there were incidents of lending institutions “terrorising” borrowers.

Farrell said the methods of some vulture funds “terrifies people” and this has a “huge impact on people’s lives”.

Sreenan said a recent case involving a vulture fund putting pressure on a Mabs client was “appalling”.

Mabs national development officer Ger O’Brien said there is a sense of “distress and hopelessness” for clients and the process is also having a “corrosive affect” on Mabs’ advisers

“It is that acute,” he said.

He said some advisers have had to leave because they are “taking the caseload home”.

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