Monday 20 October 2014

Vulture fund protections for homeowners by end of year

Published 22/07/2014 | 02:30

Thousands of homeowners have had their mortgages sold on to unregulated funds
Thousands of homeowners have had their mortgages sold on to unregulated funds

THE Government has promised to fast-track changes to the law to ensure that companies that buy mortgage books abide by consumer protection rules.

Thousands of homeowners have had their mortgages sold on to unregulated funds, meaning they lose valuable consumer protections policed by the Central Bank.

More than 10,000 mortgages have already being sold on to funds that do not have to observe consumer codes and protections. And the planned sale of Start Mortgages and the moves by Permanent TSB to sell its subprime lender Springboard could see thousands more homeowners with nowhere to turn to if they need to make a complaint.

But now the Department of Finance is proposing changes to existing legislation that will mean that any firm that buys a mortgage book will have to apply to be regulated by the Central Bank. Department officials are proposing that funds that buy mortgage books will have to become what are called retail credit firms.

The legislative changes will force funds that buy up mortgage books here to honour the Central Bank's code of conduct on mortgage arrears, and decisions made by the financial services ombudsman.

The proposed legislation is not retrospective, but vulture funds that have already bought mortgages here will now have to apply to be regulated by the Central Bank.

Under the proposed new rules the ownership of credit, as distinct from the provision of credit, will become a regulated activity. Department officials have initiated a public consultation process, calling for views on the plans.

Officials said it was planned to have the changes in place by the end of this year, and not next year as originally planned.

"The mission of the Government is straightforward: to ensure that borrowers whose loans are sold by a regulated entity to a currently unregulated entity maintain the same regulatory protections as they had prior to the sale, including under various Central Bank codes (including the Code of Conduct on Mortgage Arrears)."

The mortgage arrears code sets out how financial institutions have to act when it comes to dealing with problem loans.

And it provides borrowers with a complaints and appeals procedures if they feel unfairly treated.

The latest move comes after Bank of Ireland confirmed it was selling a tranche of its ICS mortgages to a currently unregulated fund.

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

Some 13,250 mortgages were sold when IBRC was liquidated. These were mainly originated by Irish Nationwide Building Society. Mortgages have also been sold by Bank of Scotland.

At the moment funds do not need to be regulated to buy existing loans - only to offer new ones.

Those who want to respond to the proposals should email consumer.protection@finance. gov.ie before August 22.

Irish Independent

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