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Fears as 10,000 mortgages now in the hands of 'vulture funds'

The selling off of IBRC assets leaves home owners vulnerable to a rise in interest rates.

Image: Mortgage via Shutterstock

AS MANY AS ten thousand Irish mortgages are now in the hands of unregulated entities, sometimes known as vulture funds.

These are mortgages held by bodies outside of the influence of the Central Bank of Ireland, and as such, do not have the statutory protection of the code of conduct on mortgage arrears.

The figures, confirmed by Minister for Finance Michael Noonan in a parliamentary question, show that between 5,000 and 10,000 mortgages have been sold to unregulated entities in recent years.

In April of this year, Governor of the Central Bank of Ireland Patrick Honohan spoke out against what he called ‘vulture funds’. He described himself as being “not happy” at the sale of mortgage books to bodies that are not regulated by Irish authorities.

Denise McCormack is a homeowner who recently had her mortgage sold by the IBRC to Mars Capital Ireland Limited, which is a subsidiary of Oaktree Capital Management LP.

On the sale of her mortgage to an unregulated body, McCormack said:

We want to be able to go to the financial ombudsman, if they decide to put up the interest rates. I’m in a performing mortgage, but if they decide to put the interest rates up, then I’m gone.

McCormack is a member of the group IBRC Mortgage Holders, a collective of those who have had their IBRC mortgages sold to unregulated entities.

Responding to the question from Fianna Fáil’s Michael McGrath, Noonan explained that the government is bringing forward legislation to ensure that consumers will still be protected by the regulator.

Another concern for McCormack, however, is that those proposed laws – designed to compel those buying out mortgages to act in line with the Central Bank’s legislation – will not cover loans already bought by these ‘vulture funds’.

“With the legislation to be brought in, I’m doubtful if it will apply to the loans that have already been bought out. Are they going to go by a law that wasn’t in place when they bought the loans? I don’t think so.”

Speaking to TheJournal.ie this week, Irish Mortgage Holders Organisation (IMHO) Director David Hall said:

There is no transparency – you’re not even obliged as an unregulated entity to deal with the IMHO. These are very fundamental issue. It is like dealing with a money lender. How these transactions were allowed to take place is mind blowing.

He also claimed there are ongoing problems with the code of conduct on mortgage arrears.

“It does not compel any bank to provide any solution to any mortgage arrears problem. They are not compelled to provide any solution at all.”

In his Budget 2014 speech last October, Minister Noonan announced “a comprehensive suite of measures to help mortgage holders”. In response to this, Hall said:

Those suite of solutions are about as useful as a suite of furniture. No lender in the state is compelled to provide any solution. It is on each individual bank to provide solutions, if any at all.

In the code of conduct on mortgage arrears laid out by the government, it says that:

“This Code sets out how mortgage lenders (referred to in this document as “lenders”) must treat borrowers in or facing mortgage arrears, with due regard to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits.”

Permanent TSB is currently in the process of selling off its commercial property and sub-prime residential mortgage loan books. The two portfolios are valued at €2.6 billion.

READ: The verdict on Bank of Ireland’s €250 million mortgage book sale

READ: Honohan “not happy” about mortgage sales to vulture funds

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