In this time of mortgage and loan instability in Ireland, data can help the government make decisions to bolster the failing economic climate. Unfortunately, the Central Bank of Ireland does not have data. The number of business loans that have been sold out to so-called “vulture” funds is completely unknown.
No records of sales
According to Finance Minister, Michael Noonan, in correspondence with Fianna Fáil finance spokesperson, Michael McGrath, the Central Bank keeps no details or statistics on loans sold to the vultures. McGrath’s original question was about whether the banks or the finance department had any records of “commercial loans that have been sold on by the original underwriter and if so, the details”. “I have been informed by the Central Bank that it does not maintain a record of the number of commercial loans sold on by the original underwriter. Portfolio sales are considered as part of normal supervisory engagement where they are sufficiently material,” was Noonan’s response. In addition, he went on to advise that the Consumer Protection Act (2015) protected the small to medium enterprises (SMEs).
McGrath described the situation as “incredible”. “A typical SME loan agreement is stacked so heavily in favour of the lender that, in many cases, it is relatively easy for the loan owner to trigger a default and call in the loan. This can result in the collapse of a going concern business and the loss of many jobs as a result,” replied McGrath.
Vulture Funds circling
Vulture Funds, as they are known, are companies that will invest heavily in debts that can be considered as “distressed securities”. These loans and mortgages are very weak, in default or on the verge of liquidation or repossession. These hedge funds or private equity funds buy the loans at a hugely discounted price, when the banks just want to get them off their hands. Handling troubled debt is complicated, and a lot of hard work, so many banks offload in this way when they feel they are not getting the return on their investment they expected. Once bought, the “vultures” then use any means necessary to obtain a larger return than their purchase price.
Mortgages are vulture food too
Moreover, it is not just the business loans that they snap up in their sharp beaks. They just as happily take on troubled mortgages as well, and use the same methods to get the return. And as they have no long-term relationship with the debtor, quite often the homeowners find themselves facing legal action to recover the debt. And if this continues, the trend could end with forced unemployment and evictions.
Sales to Vulture Funds
In 2015, Permanent TSB boss, Jeremy Masding, was called before the Oireachtas Finance Committee regarding the sale of 481 million Euros in loans to several vulture funds. When asked if he knew what happened to the homes included in that sale, Masding responded that once the sale was completed the bank was no longer involved with the homeowners.
Ulster Bank also sold 900 family homes as part of a 2.5 billion Euros portfolio. Ulster claimed that all of the mortgages in the portfolio were already in default and most were already in the court process. And whilst the SMEs and homeowners are still protected by the same regulations and legislation, and the same terms and conditions as when they were with the bank, this may be of little use if the mortgage is already in arrears. Many are calling for the government to act, and put a stop the practices of the “Vulture Funds”.
Related articles published in Mortgage loan :
- Property market: Predicted growth in 2017
- Permanent TSB backs out of 100m dollars mortgage purchase
- Ulster Bank: Mortgage Lending Up
- The European Central Bank urges the Central Bank of Ireland for vigilance
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