Sunday 22 October 2017

Vulture funds offer to slash your mortgage by 40pc

Homeowners could see €160k written off mortgage as vulture fund offers huge discount

(Stock image)
(Stock image)
Charlie Weston

Charlie Weston

A vulture fund that took over thousands of mortgages is offering to sell homeowners their tracker homeloans at a huge discount.

Tanager, which is part of a huge US private equity fund, is offering discounts of up to 40pc on the outstanding debt if the tracker mortgage-holders can get them financed somewhere else.

This is now expected to be followed by other vulture funds offering to sell mortgages to homeowners at a discount.

Tanager is part of US private equity giant Apollo. It bought 2,000 mainly distressed mortgages from Bank of Scotland (Ireland) in 2012. It is now trying to sell them off.

At least 45,600 residential and buy-to-let mortgages are owned by unregulated vulture funds, with some estimates putting the total at 90,000.

The Tanager offer would mean someone with a €300,000 mortgage would get a discount of €120,000 if they can get it refinanced elsewhere, but they will lose the tracker rate.

Karl Deeter said the offer is likely to be the first of many. Photo: Bryan Meade
Karl Deeter said the offer is likely to be the first of many. Photo: Bryan Meade

Most of the Tanager trackers are understood to be set at 0.5pc, about the European Central Bank rate, which means an effective rate of 0.5pc.

Banks claim they lose money on tracker rates as they are set at such a low rate. Variable rates are up to 4.5pc.

Read more: Sinead Ryan: Things are looking up for first-time buyers - but policies and interest rates need a big review

One offer letter seen by this newspaper outlined to a person with tracker mortgage that was originally taken for with €400,000 that Tanager is prepared to write off €160,000 of the mortgage if the homeowner buys it out.

It was sent by Lapithus, an associate of Tanager-owner Apollo.

The letter states that "in response to current market conditions, we understand that some of our customers may wish to refinance with another lender, as they may want to move or borrow additional money and that we are unable to assist them".

"We have undertaken a review of our mortgage loans and we are delighted to confirm to you that, to facilitate such an arrangement, we would be in a position to offer you a discount on your loan should you wish to refinance with another lender or otherwise repay your mortgage early."

The deal means that if the homeowner can get a new mortgage, they would have to borrow €240,000. The house is currently worth €380,000.

If they sell the house, they would walk away with €140,000 in tax-free cash.

However, many of those who have received an offer may be unable to get new financing as they have been in arrears in the past, or are in negative equity.

Financial expert Karl Deeter of Irish Mortgage Brokers said the offer was likely to be the first of many made by the dozen or so vulture funds that own mortgages here.

Reluctant

And he said people who owe money to a vulture are more likely to get a discounted buy-out offer as vultures tend to want an exit from their investment inside seven years. Banks are very reluctant to do deals, he said.

"It's outrageous that Irish banks, who received so much taxpayer support in the past, won't do a deal for a borrower that the vultures are doing," Mr Deeter said.

"They'd rather sell these loans at a loss so that another party can come in and offer people the resolutions that should have been on the table to begin with. The fact is that Irish banks give vultures a bad name, not the other way around."

A recent analysis by the Irish Brokers' Association showed that homeowners with tracker mortgages should not switch to standard variable rates unless they secure a write-down of at least 25pc of the outstanding mortgage.

Tanager failed to respond to requests for a comment.

Funds have in the past offered some discounts but only where homeowners in arrears are prepared to surrender properties without the involvement of the courts.

The Tanager offer appears to be the first time that a vulture fund has offered large discounts to people on trackers to effectively sell the loans to the homeowners.

Insolvency specialists say it can be easier to secure debt forgiveness from vulture funds than from banks.

This usually results in the borrower agreeing to sell the property and losing the home - which is what the majority of banks want to avoid.

Irish Independent

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