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Experts say 'vulture friendly' commentary from government is 'dangerous'

An Oireachtas committee yesterday heard legislation is needed to ensure banks cannot sell mortgages to vulture funds without a customer’s consent.

Image: Shutterstock/Antonio Guillem

EXPERTS WHO WORK with people facing home repossession have said government commentary about vulture funds offering better deals to customers in arrears is “misleading” and “dangerous”.

The Oireachtas Finance Committee held a meeting yesterday to discuss Sinn Féin TD Pearse Doherty’s No Consent, No Sale Bill, which aims to give mortgage-holders the power to block the sale of their loan to vulture funds. 

The committee heard from representatives from Free Legal Advice Centres (Flac) and from CEO of the Irish Mortgage Holders’ Organisation David Hall, two organisations offering direct support and advice to people who are in arrears. 

In his opening statement, Hall hit out at both the Central Bank and the government for “vulture friendly comments”:

As a citizen it is concerning to hear our Taoiseach and Minister for Finance state that vultures are good and that the protections available for those in mortgage arrears carry from the bank where a loan is sold to a vulture fund. This is simply not true.

‘Protects everyone’

Earlier this month Finance Minister Paschal Donohoe said he would not mind if his own mortgage was held by a vulture fund. He said the advice from his department was that the current code of conduct in relation to how mortgage holders are treated “protects everyone equally”, whether the mortgage is held by a traditional bank or a vulture fund.

The Taoiseach has also previously said that vulture funds often offer better write-downs on loans than banks.

A review by the Central Bank of its Code of Conduct last year found no evidence that vulture funds are failing to engage with borrowers in arrears. It also said there was no difference between the number of repossessions by vulture funds and those by banks. 

And it claimed these funds are “considering” more debt-solution arrangements than traditional banks.

Both Hall and Flac’s senior policy analyst Paul Joyce pointed out to the committee that this review by the Central Bank was carried out before mass sales of loans to vulture funds by Permanent TSB and Ulster Bank.

Hall said commentary about vulture funds being on par with banks in terms of repossession figures is “misleading” as these funds have “come late to repossession activity”.

Their bulk purchases of home loans have been relatively recent, while “the banks have been at this since 2009″, he reminded the committee. 

‘They don’t care’

As for their willingness to offer restructuring arrangements to distressed borrowers, Hall cited two examples where funds had rejected offers by his approved housing body iCare to buy loans under the mortgage-to-rent system.

The offers – on loans the funds had already bought at a considerable discount – were 15% and 8% below the market value. In one case iCare offered more than €258,000 to a fund. He said these were just two examples of many.

“The two cases have now been terminated out of mortgage-to-rent and moved to be repossessed. These are the true actions of vultures, not the fairy-tale version promoted by some.”

He said vulture funds “want the money and they don’t care how they get it”. 

Joyce said there is a need for the Department of Finance to carry out an assessment of the mortgage holders that banks deem to be “non-performing” even though they have reached arrangements and are meeting those payments. 

From looking at files, a lot of the loans in difficulty are ones where the household’s problem is financial incapacity and there have been payment arrangements in place. There are lots [of customers] in arrangements for five years, some up to ten years. Households don’t have the capacity to make the kind of payments that we feel vulture funds sooner or later will be looking for. 

He told the committee that there are 27,500 accounts in arrears for more than two years and one third of those are already “in the hands of unregulated firms”.

“They are already moving to bring proceedings or continue ones already in existence.”

The No Consent, No Sale Bill

Doherty’s bill was passed in the Dáil, despite opposition from the government, at the start of the year. 

The bill would put into law some provisions that already exist in the Central Bank’s Code of Conduct, which experts told the committee today was voluntary. 

This includes a section in the regulator’s code which states “a loan secured by the mortgage of residential property may not be transferred without the written consent of the borrower”.

It goes on to say that if a bank is to transfer a mortgage of one of its customers it must provide a statement containing sufficient information to enable the borrower to make an informed decision and give a clear explanation of the implications of a transfer.

“It must also set out how the transfer might affect the borrower. The borrower must be approached on an individual basis and given reasonable time to give or to decline to give his consent,” it adds. 

Despite the fact that the Central Bank’s own code of conduct lays out rules similar to those in the bill, the regulator advised the government to oppose it. It said it had concerns about it from a “consumer protection, prudential supervision and financial stability perspective”. 

It also said the banking industry believes “there would be many adverse outcomes” attached to the proposed legislation. 

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Joyce today told the committee he does not believe there is “anything legally enforceable” in the code in relation to vulture funds honouring the terms of restructuring arrangements. This is why Flac is calling for legislation that would make the code’s requirements statutory. 

Just this week it emerged that Cabot Financial Ireland Limited, a debt collection agency appointed by Promontoria Scarriff Designated Activity Company, has been sending letters to mortgage-holders demanding they pay the full amount of arrears within 30 days.

David Hall said the reality is that if a household’s mortgage is in arrears and facing the prospect of dealing with a vulture fund “you are more likely to lose your home”.

He said this bull was “an essential tool to help families in mortgage arrears” as he families are facing “a very uncertain future”.

“To those who say the bill is unconstitutional, why not let the courts decide rather than joining the herd”.”

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