IRISH mortgage holders could be facing a wave of litigation this year from unregulated “vulture funds” that snapped up their home loans at discount rates from Irish banks in recent months, according to campaigners.
Foreign investment funds have bought up to 10,000 home loans when Irish banks began offloading them last year. There are fears that 2015 could be the year in which the unregulated entities come down heavy on residential customers who get into difficulty.
Campaigners and opposition parties fear that the New Year could bring a wave of litigation against customers who fall into arrears, while all mortgage holders are vulnerable to a rise in interest rates.
Campaigner David Hall of the Irish Mortgage Holders Organisation says most non-regulated entities have only taken over the loan books in recent months, so the scale of litigation is too early judge.
He described the sell-off of residential loans to these non-regulated entitles as a “consumer protection nightmare.”
Fianna Fail’s finance spokesman said that Irish homeowners whose loans have been taken over by unregulated entities need greater protection.
Michael McGrath said last week: “While these entities claim to be complying with the Code of Conduct on Mortgage Arrears, there is no way of verifying this. In truth, these mortgage holders are left in a no man’s land scenario relying on the goodwill of unregulated firms who are accountable to no Irish authorities.”
Tanager, an American- owned private equity fund that bought up 2,000 distressed home loans from Bank of Scotland Ireland launched a number of legal actions against their clients in the last months of 2014.
A handful of legal cases have been lodged by other non-regulated entities against mortgage holders in trouble.
A spokesman for Tanager said that the fund was not allowed to be regulated by the Irish Central Bank and so has voluntarily signed up to the Code of Conduct for Mortgage Arrears here.
“I can confirm that any litigation action taken by Tanager relates to when a customer has been deemed non co-operative under Sections 28 and 29 of the Code of Conduct on Mortgage Arrears, and that Tanager only takes such action when all avenues have been fully explored. Any such action would relate, in Tanager’s case, to heavily delinquent mortgages,” he said.
The Government is introducing new legislation this year to force funds that buy up mortgages from Irish banks to abide by the Central Bank’s code and the Financial Ombudsman.
The legislation is unlikely to apply retrospectively.
There is considerable confusion as to exactly how many Irish residential mortgages are now in the hands of unregulated “mortgage vultures”.
Finance Minister Michael Noonan said the figure was 5,000 to 10,000 but Mr McGrath said the figure could be much higher, even as high as 15,000 to 20,000.
The state-owned IBRC – now in liquidation – sold off home loans from customers of Irish Nationwide to unregulated entities Lone Star – which owns Shoreline Residential – and Oaktree Capital Management, which owns Mars Capital Ireland. Both entities undertook to abide by the Central Bank’s Code of Conduct on Mortgage Arrears.
Permanent TSB sold around 2,200 home loans to Mars Capital, with half of them in arrears. GE Money sold its subprime mortgages to Pepper.
Last weekend, it emerged that Mars Capital Ireland had to apologise to a couple who were threatened with repossession before Christmas after they fell into temporary arrears.