Tuesday 18 December 2018

Vulture funds are engaging with borrowers in arrears, Government report finds

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Charlie Weston and Laura Larkin

A report for the Government has found that vulture funds are engaging with borrowers in arrears.

Its publication prompted Finance Minister Paschal Donohoe to dismiss fears of an avalanche of repossession cases hitting the courts.

Some commentators have claimed that up to 20,000 repossession cases are before the courts.

But Mr Donohoe said: “That level of repossessions has not happened in our past and it’s not happening at the moment.”

He was commenting after launching a Central Bank report that found there is “no material difference” in the level of repossessions by vulture funds compared with banks.

The report found that vulture funds are considering more arrangements to help people in mortgage arrears than banks and other credit firms.

The Central Bank report found “no evidence” that firms acting on behalf of vulture funds were not engaging with borrowers in arrears.

The report was ordered by Mr Donohoe after large number of sales of mortgages to vulture funds announced during the summer.

But campaigner on behalf of those in arrears David Hall said dismissed the findings as “spin”. The report states that vulture funds were abiding by the Central Bank code of conduct on mortgage arrears.

Mr Hall said: “The code of conduct on mortgage arrears does not have to be adhered to, as the High and Supreme Courts have confirmed. The code does not require a solution to be provided to someone in arrears, so why wouldn’t vultures engage with it? This is just spin.”

He also claimed the Central Bank study was carried out before some of the recent large vulture fund sales.

Vulture funds are not regulated in this country, but the credit servicing firms that they must use are regulated by the Central Bank.

Existing loan terms are being honoured when handled by vulture funds or credit-servicing firms acting on their behalf, and people whose “circumstances have not changed” are not being moved from their existing loan arrangements.

One of the most active personal insolvency practitioners (PIP) in the State, Mitchell O’Brien of IRS Ireland said vultures are not necessarily more difficult to deal with. He has to get any official personal insolvency deals he does approved by the courts.

This is because they are usually under less pressure to make an investment return because they have bought the loan at a discount.

Mr Donohoe asked the Central Bank to review its code of conduct for how financial institutions deal with those in mortgage arrears earlier this year. It was in response to concern over the sale of loan books to so-called vulture funds.

The new report comes as the European Central Bank president Mario Draghi warned that regulating vulture funds that buy Irish loans may limit the ability of banks to lend and potentially lead to higher costs for borrowers.

Fianna Fáil has produced a bill that would see funds that buy loans regulated.

Mr Draghi said in Dublin the draft law would give the Central Bank powers over so-called vulture funds that it does not even have over mainstream lenders.

Concerns over the attitude of buyers of Irish loan portfolios prompted Fianna Fáil to introduce its Bill to the Dáil in February, even though the Central Bank has argued that mortgage holders enjoy the same protections whether they are indebted to banks or funds. Laws enacted in 2015 in Ireland stipulated that firms managing loans on a day-to-day basis, even on an outsourced contract, must be regulated in Ireland and adhere to the regulator’s code of conduct on mortgage arrears and consumer protection code.

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