Sale of mortgage arrears to “vulture funds” a cause of concern

11 May 2018

Sale of mortgage arrears to “vulture funds” a cause of concern

New solutions needed to tackle unsustainable debt burdens

The announcement by Ulster Bank that it intends to sell approximately 3,600 owner occupier mortgages and 2,900 buy-to-let-mortgages (BLT) to so called “vulture funds” will do little to address the unstainable debt burdens of thousands of Irish mortgage holders, Free Legal Advice Centres (FLAC) has said. 

FLAC is urging lenders take a different approach to tackling mortgages that are in deep arrears in order to prevent the possibility of largescale house repossessions. Today’s decision by Ulster Bank follows similar proposals by Permanent TSB and means that close to 20,000 primary dwellings are now subject to the a vulture fund regime. 

FLAC, Senior Policy Analyst, Paul Joyce said; “Once again, the mortgage holder is being treatedas a commodity. By selling off loans to unregulated vulture funds, vulnerable mortgage holders are at the mercy of unaccountable bodies whose sole motivation is return on investment. 

We need to remember that mortgage holders aren’t simple financial “entities.” They are people with families and lives. It is our view that this move increases the insecurity and uncertainty for people who already find themselves in difficult financial circumstances. 

Ulster Bank’s proposed sale relate to mortgages which are in deep arrears, our experience tells us that many of these mortgage holders will have made genuine efforts to make arrangements with their creditors but were simply not offered affordable arrangements. When their loans are in the hands of vulture funds, a reasonable accommodation is even less likely. 

While some have argued that vulture funds offer the same protection and safeguards to mortgage holders as banks, FLAC has seen instances where these funds employ more aggressive measures to recoup their investment.

FLAC has consistently argued that existing debt burdens are not sustainable and that lenders must consider at least a partial write down in mortgage debt. In addition, mortgage to rent schemes need to be considered as a potential solution. 

Currently, there is a genuine risk that thousands of people could lose their homes. Banks  need  to modify their approach,  to those who have been in  deep arrears for several years.”

 As part of its work, FLAC engages in research and advocates for reforms to personal debt and consumer credit legislation and regulations.