Vulture funds now own 1 in 6 mortgages in house market
Non-bank entities hold fourth-largest number of mortgages in the State
VULTURE funds now control the fourth-largest number of mortgages in the State, sparking fears of an increase in distressed home loans.
New figures provided by the Central Bank confirm ‘non-bank entities’, or vulture funds, now control 112,630 privately held mortgages across the country.
This is around 16% of the entire 712,347 home loans in the State, which are valued at just under €100bn.
Of these, 61,708 mortgages – around 9% of all home loans – by the end of June were categorised as ‘restructured’.
The Central Bank figures were confirmed by Finance Minister Michael McGrath in response to parliamentary queries from Sinn Féin TD Patricia Ryan.
In his reply, Minister McGrath said more than a third (22,984) of the restructured mortgages are held by ‘non-bank entities’.
He said the Central Bank also noted that: ‘For non-banks, a greater proportion of family home accounts held are in longer-term arrears when compared to banks.’
However, the figures show vulture funds – mostly international investment funds that seek out and buy up distressed investments – have now expanded far beyond their previously regarded role as just a clearing house for mortgages in arrears.
Although a breakdown of the amount of mortgages held by individual banks is not available due to the departure of Ulster Bank from the market, industry sources say AIB, the Bank of Ireland and Permanent TSB are the three pillar banks when it comes to home lending.
However, the emergence of vulture funds as the combined fourth major player in the market has raised alarm among political parties and debt advocates.
Responding to the figures, Patricia Ryan said that, as interest rates continue to rise, a growing number of mortgage customers ‘are effectively being held to ransom’ by investment funds.
The Kildare South TD told the Irish Mail on Sunday: ‘Numerous constituents contacted us about their struggles with their mortgages having been sold to vulture funds without their consent and who are now facing mortgage repayments that are almost double what they were before the recent spate of ECB and mortgage interest rate hikes.
‘Some of those with vulture funds were hit with rates as high as 8% or 10%. They are effectively being held to ransom as there is no option to fix, so they are trapped paying higher mortgage repayments than they would with retail banks.’
Deputy Ryan said that, for these ‘mortgage prisoners’, refinancing ‘is rarely an option, especially where an alternative payment arrangement was already in place.’
She urged the Government and the Central Bank ‘to ensure a clear path for these mortgage prisoners, whose loans are held by vulture funds, to be brought back into the mainstream mortgage market’.
Ms Ryan added: ‘The banks have a moral responsibility to do this, as the loans were sold without the borrower’s consent.
‘Not only should this pathway be facilitated by the Central Bank and retail banks, but there should also be a clear requirement that vulture funds facilitate mortgage holders to switch to mainstream mortgage lenders.’
Mortgage advocate David Hall also warned the expansion of vulture funds ‘poses a grave challenge’.
The Irish Mortgage Holders Organisation told the MoS: ‘It would be a matter of grave concern were the participation of vulture funds across all sections of the mortgage market be normalised. ‘Such a development can only lead to an increase in mortgage arrears and of families finding themselves in trouble.’
Green Party TD Steven Matthews, who chairs the Oireachtas Housing Committee, said the emergence of vulture funds as a major player in the overall mortgage market ‘is a serious matter’, adding: ‘The [Oireachtas] Finance Committee should convene a hearing on this with some urgency.’
Earlier this year, veteran Fianna Fáil TD Willie O’Dea signalled alarm over what he described as ‘the number of people who are living in financial straitjackets because their mortgages were sold to vulture funds without their knowledge or consent’.
He said at the time: ‘It is impossible for those people to get away from the vulture funds. I made representations to the major financial institutions to take on some of these mortgages for people who have never missed a single instalment, and the answer I received has invariably been “no”.
‘The mortgagors are chained to the vultures. I have been approached by people paying €700 and €800 a month extra on what they were paying this time last year.
‘There was a family in touch with me who are paying €850 per month over and above what they were paying last year.’
In response to queries from the MoS, a spokesperson for the Central Bank said it is ‘acutely aware of the challenges and pressures borrowers are facing with the rising cost of living and rising interest rates’.
They added: ‘The Central Bank has put in place a range of measures in order to protect consumers who are mortgage holders.
‘The consumer protection framework applies to all regulated entities regardless of whether they are banks or non-bank lenders and provides the same protections for borrowers.’
The spokesperson said the Central Bank is also ‘scrutinising the conduct of firms to ensure those borrowers who should expect to be able to switch product or provider are supported to do so’.
They added the Central Bank ‘will also continue our work to ensure borrowers facing financial difficulties are supported with alternative repayment arrangements, where appropriate, and that interest rate increases are in line with the terms and conditions of the loans concerned, published variable rate policy statements and the regulatory framework we are charged with supervising.’
‘Customers are effectively being held to ransom’
‘Ensure a clear path for these mortgage prisoners’