New law to keep the vulture funds at bay
Taoiseach says legislation will help protect families
A PROPOSED new law will protect mortgage holders from so-called vulture funds, the Taoiseach has claimed.
Leo Varadkar said legislation was currently being enacted to ensure those repaying mortgages to investment
funds will have exactly the same consumer protections as those with loans from a bank.
A number of loans and mortgages were bought up by various forms of private equity firms and pension funds during Ireland’s financial crash. The Taoiseach
said he was reluctant to use the term vulture funds, describing it as political.
‘What we’re talking about here is investment banks, investment funds, finance houses, you know. There are lots of different things and lots of different financial entities there and the term is used – vulture funds,’ he said. ‘But you’ll know from the numbers that
they’re often better at write-downs of loans than our own banks are.
‘Our own banks tend to “extend and pretend” rather than coming to settlements with people.
‘Increasingly, they’re covered by the same regulations and the same consumer protections as the banks are. So, what we’re working on is enacting legislation that [Fianna Fáil TD] Michael McGrath has brought forward, which is to make sure that so-called vulture funds are being regulated.
‘We support that and we are going to make sure that anyone who has a mortgage, who is repaying their mortgage, making a reasonable effort to pay it, continues to have the exact same protections, the exact same consumer protections as they would if the loan was still owned by the banks.
‘That’s our commitment to make sure that people who pay their mortgages, pay their bills, are no worse off as a result and have the exact same protections.’
Mr McGrath brought a private member’s Bill in February this year to bring the vulture funds within the full suite of Central Bank regulations.
The sale of bank loans to investment funds has become a major political issue, especially in recent months.
Until now, banks have largely been selling loans in arrears, known as non-performing loans, to foreign investment funds.
However, in November, Permanent TSB announced it had transferred thousands of ‘performing’ mortgages to an investment fund, in a deal worth €1.3billion.
The Project Glenbeigh deal contains 6,139 home mortgages and 133 investment properties, known as ‘buy-to-let’.
The loans will now come under the control of a new company, Pepper Finance Corporation (Ireland)
DAC (Pepper Ireland) on behalf of investment or ‘vulture’ funds, which are not regulated in Ireland.
From the second quarter of next year, the mortgage holders will have to deal with Pepper directly, and not with PTSB.
According to a statement from PTSB on the loan sale, the bank stated: ‘These loans have been restructured and are operating in line with restructuring arrangements agreed between PTSB and the relevant account holders.’
Cormac Ryan, CEO of Pepper in Ireland, said at the time that Pepper now manages over 8% of Irish home mortgages, the majority of which are performing loans.
‘This reaffirms our long-term commitment and ambition for the Irish market and cements our position as the leading residential mortgage servicer in Ireland,’ he said.
Last week, Sinn Féin introduced a Bill that would prevent banks from selling mortgages to investment funds without the mortgage holder’s consent. The party’s finance spokesman Pearse Doherty said his Central Bank (Transfer of Mortgages) Bill would replace the voluntary Central Bank code under which banks should get the borrower’s permission before selling the loan.
Mr Doherty said the code is totally ineffective and banks have ‘turned a blind eye’ to it. He said a new law is needed to make it compulsory.
‘The idea that we allow banks to just sell on to whoever, regardless of who they are, regardless of what their long-term interest is in the State, or how they will deal with those loans in the future without the consent of the borrower is simply not on,’ he said last week. Comment – Page 14
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Banks ‘turned blind eye to the code’