Thursday 22 March 2018

Mortgage-holders may lose protection as Start plans sale

The lender has some of the highest arrears levels in the State
The lender has some of the highest arrears levels in the State
Charlie Weston

Charlie Weston

Subprime lender Start Mortgages has been put up for sale, in a move that could see thousands of mortgage-holders lose vital consumer protections.

The lender has some of the highest arrears levels in the State, as it gave mortgages to people during the housing boom who could not get approval from mainstream banks.

Now the company has admitted to the Irish Independent that it has initiated a sales process – saying it has "decided to explore the possibility of a potential sale of Start Mortgages".

Its sale would represent the second large disposal of a troubled mortgage book following the controversial sale of three tranches of the IBRC mortgage book earlier this year.

Start Mortgage holders are currently covered by the Central Bank's code of conduct on mortgage arrears.

This is a legally enforceable rule-book that sets out how people are to be treated when they genuinely can't repay their mortgage.

Start's customers could lose these protections if the mortgage book is sold to an unregulated fund from outside the State.

However, the buyers of the IBRC mortgages have volunteered to abide by the mortgage arrears code.

And any buyers may also be more likely to do a deal with troubled mortgage holders to write off some of their debt so they can get their repayments back on track. This is because they are likely to acquire the mortgage book at a big discount.

Pepper Mortgages, which bought the mortgage book of GE Money and manages mortgages for a number of now-departed lenders, offers write-offs to "right-size" mortgages down to levels where customers can now meet the repayments.

A spokesman for Start said the sales process was an an early stage, and there was no certainty it would end up being sold.

The Irish lender is owned by British subprime lender Kensington, which is in turn owned by South African bank Investec.

One of the most controversial mortgage providers in the country, Start Mortgage features heavily in court repossession cases.

Interest rates as high as 8pc are charged as it took on some of the most high-risk cases during the property boom, but the lender said the average was less than 5pc.


Many of its borrowers have impaired credit records. They have typically consolidated other loans, such as credit card and car loans, into the new mortgage they took out from Start.

A spokesman for the company would not say how high its arrears are, but mortgages it has bundled together and sold on to investors have arrears levels of up to 45pc.

Asked if the mortgage protection code would apply if Start is sold, a spokesman said: "The current practice of those non-Irish-regulated entities buying mortgage loan books is to agree to abide by the code of conduct on mortgage arrears, so it's likely that potential purchasers may follow suit.

"It's in the best interest for potential purchasers to abide by it, so we believe that they are likely to do so."

The lender says it offers a full range of solutions for those unable to meet their repayments.

Irish Independent

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