Vulture funds not repossessing more than banks - report

Updated / Tuesday, 13 Nov 2018 16:59

The report says there is 'no evidence' that credit servicing firms are not seeking to engage with borrowers in arrears

By Aengus Cox

A new report into how so-called vulture funds deal with home owners who are in mortgage arrears has found there is "no material difference" in the level of repossessions by such funds compared to banks.

The Central Bank's latest review of the effectiveness of the Code of Conduct on Mortgage Arrears (CCMA) also found that, on average, vulture funds are "considering" more debt-solution arrangements than banks.

However, it added when it comes to actually reaching an agreement with a borrower, banks are putting in place "a more diverse range of arrangements" than vulture funds.

The report says there is "no evidence" that credit servicing firms (CSFs) - which act on behalf of vulture funds that are not regulated in Ireland - are not seeking to engage with borrowers in arrears.

The Central Bank also said it did not identify any "material breaches" of the mortgage arrears rules by these firms.

Some non-material breaches were discovered, such as not issuing letters to customers on time and not including certain statutory information on firms' websites.

But in some cases CSFs "have gone beyond minimum regulatory requirements to assist distressed borrowers," according to the report.

It noted that pre-existing arrangements are being honoured by funds after they buy mortgages from banks.

The report follows a series of high-profile sales of bad loans by Irish banks to vulture funds and concerns as to how customers are being treated by the new loan owners.

Minister for Finance Paschal Donohoe welcomed the report, saying: "I am glad to see, in this instance, that the Central Bank is satisfied that, for borrowers who engage with the process, the Code of Conduct on Mortgage Arrears is working effectively and as intended".

He added the Government is "always prepared to make changes and support actions where the Central Bank thinks they are necessary". 

Fianna Fáil Finance Spokesperson Michael McGrath said the report shows "unregulated loan owners are offering fewer types of restructure arrangements to borrowers and they are also placing a greater reliance on short term arrangements.

"This is consistent with the fact that they are working to a short-term business model and have no interest in working through a distressed mortgage over a prolonged number of years.

"Fianna Fáil’s private members’ bill to regulate these so called ‘vulture funds’ will go to report stage in the next couple of weeks and I would hope it can become law before the end of the year," he added.

The protections of the Code of Conduct on Mortgage Arrears (CCMA) remain with the loan where the loan has been sold to an unregulated firm.  See the below infographic for more information on how the CCMA works.

— Central Bank of Ireland (@centralbank_ie) November 13, 2018

Director of Consumer Protection Gráinne McEvoy said the CCMA is "delivering for borrowers in difficulty - more than 116,000 mortgages are currently classified as restructured with 87% meeting the terms of their new arrangement.

"We assertively supervise compliance with the requirements of the Code and will continue to do so. While the range of arrangements offered is a matter for lenders, we will be engaging directly with industry on providing fuller information to borrowers on why particular arrangements may not have been offered in their case."