Banks insist borrowers do not lose out in mortgage loan sales
THE State’s banking lobby group has defended the sale of non-performing mortgages to investment funds.
Banking and Payments Federation Ireland insists borrowers retain consumer protections when their loans are sold and disputed claims there will be a tsunami of repossessions by vulture funds that have bought mortgage books.
Head of the Banking Federation Brian Hayes claimed a number of myths had grown up around the sale of mortgages that are in arrears to funds.
David Hall of the Irish Mortgage Holders Organisation has been vocal in the past claiming funds that take over mortgages offered a limited number of mortgage restructuring options and that funds are more inclined to repossess properties than mainstream lenders.
But Mr Hayes, a former junior minister for finance, has now issued a report which “tackles head on various false claims made about the process”.
He said: “The sale of non-performing loans (NPLs) to third-party investment funds provides benefits for banks and protection for borrowers.”
Mr Hayes said banks have made huge progress reducing the levels of non-performing loans.
He said this was not just good for the banks, but for the wider economy which depends on banks for personal and business lending.
“At the same time, the Central Bank of Ireland, with the support of the Oireachtas, has ensured that the protections afforded to borrowers by the relevant codes, including the Code of Conduct on Mortgage Arrears, travel with the loans.”
He said it was a myth to say investment funds do not offer to borrowers forbearance measures similar to those from banks.
“Fact: Investment funds do provide a wide range of forbearance measures to borrowers.”
He said it was false to claim Ireland is facing a “tsunami of repossessions”, as Mr Hall has repeatedly said.
“Fact: Repossession here are low by international standards.”
Mr Hayes insisted that investment funds do put arrangements in place for borrowers.
Just last month Bank of Ireland sold a €250m portfolio of non-performing buy-to-let property loans to US fund Cerberus.
And AIB is seeking expressions of interest from “ethical” finance houses and charities for a sale of family home mortgages worth hundreds of millions of euros.
A recent report found that banks in this country have been the second-most-active sellers of problem loans so far this year, behind Italy.
US investment bank Evercore said lenders here sold €6.2bn of loans, driven by a massive AIB non-performing loans disposal.
International funds have been snapping up portfolios of non-performing property. They find these loan books particularly attractive because the property market has rebounded so strongly in recent years.
If the borrower is able to repay the loan in full, the fund makes an immediate profit as it bought the loan at a discount. If the borrower cannot repay, the fund will take enforcement proceedings to secure the underlying property.