Saturday 25 October 2014

Thousands of homeowners set to lose out in bank mortgage sales - warning

Thousands of homeowners set to have mortgages sold to unregulated funds

Published 27/06/2014 | 07:23

David Hall of the Irish Mortgage Holders Organisation. Photo: David Conachy
David Hall of the Irish Mortgage Holders Organisation. Photo: David Conachy

THOUSANDS more homeowners are set to have their mortgages sold on to unregulated funds.

This will mean they will lose valuable consumer protections policed by the Central Bank, leading mortgage campaigner David Hall said.

It comes after Bank of Ireland confirmed it was selling a tranche of its ICS mortgages to an unregulated fund.

More than half a dozen loan books have been bought out by funds that are not regulated by the Central Bank.

Mr Hall of the Irish Mortgage Holders’ Organisation said banks were rushing to sell mortgage books now ahead of a new law that will mean future buyers will have to observe Central Bank consumer protection rules.

Funds do not need to be regulated to buy existing loans – only to offer new ones.

Bank of Ireland yesterday confirmed it has agreed to sell its ICS Building Society’s distribution platform as part of its EU

restructuring programme. Under the deal, Bank of Ireland will sell a €250m mortgage asset pool to Irish financial services company Dilosk Limited, which is seeking regulation from the Central Bank.

All of the loans in the portfolio are performing and none is in arrears. It is thought that up to 2,000 mortgages have been sold.

Details of the sale came days after Permanent TSB said it was selling its subprime division Springboard, which involves around 2,200 mortgages.

The bank admitted at its annual general meeting that half of the Springboard mortgages are in arrears.

Mr Hall said all the banks were now engaged “in a frenzied rush to sell off mortgage books”.

He accused the Department of Finance of giving advance warning to banks to sell mortgages now, a year ahead of the introduction of a new law to force buyers of loan books to observe consumer codes.

“We are set to witness a flood of sales of mortgage books. This is a consumer protection nightmare, with mortgage holders being thrown under the bus,” he said.

Banking analyst with Investec, Emmet Gaffney, said: “There could be more mortgage book sales, especially from Danske Bank and ACC who are

exiting the market.”

Already subprime lender Start Mortgages has admitted it is exploring the sale of its business here.

Its sale would represent the second largest disposal of a troubled mortgage book following the controversial sale of

three tranches of the IBRC mortgage book earlier this year. These loans were taken over by unregulated vulture funds Oaktree and Lone Star.

GE Money sold its subprime mortgages to Pepper, while Bank of Scotland sold some mortgages to Tanager.

New legislation is due in 2015 that will force funds that buy up mortgage books to honour the Central Bank’s code of conduct on mortgage arrears and decisions made by the financial services ombudsman.

A Department of Finance spokesman said it was working on the Sale of Loan Books to Unregulated Third Parties Bill.

“Detailed engagement with the Attorney General’s office and the Central Bank on draft proposals has now commenced.

The bill is listed for publication in 2015,” he said.

 

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