Warning of legal hurdles in new laws
Calls to restrict the sale of soured residential mortgages to regulated bodies only is likely to run in to legal difficulties, according to experts.
Permanent TSB's planned disposal of €3.7bn of impaired home loans, the majority of which are tied to owner-occupier mortgages, has fuelled a debate about whether the so-called vulture funds should face tougher restrictions.
Currently these investors typically hold these discounted debts in a tax-neutral special purpose vehicle and outsource the day-to-day running of the repayments to firms like Pepper, Cabot, Link or Acendan. Under this structure a borrower's financial difficulties are dealt with by a regulated entity as the servicing of loans is an activity authorised by the Central Bank.
Fianna Fáil's finance spokesperson Michael McGrath, who has waged a political campaign for hard-pressed borrowers, wants to extend this regulatory oversight to all loan owners. Sources argue this could have complex ramifications. Bond issuers, for example, could be swept up in such reforms as these securitisation vehicles own loans. If the demands shift to restricting loan sales to regulated entities, the likelihood is that the vultures will be able to get around this through various partnership agreements.