Cerberus steps up action against mortgage holders in arrears

US vulture fund Cerberus is stepping up enforcement action against buy-to-let and residential mortgages, according to both court lists and interest groups.

Since 2014 Cerberus has bought loans with a face value of €20 billion from institutions such as State assets agency, Nama, Ulster Bank and Royal Bank of Scotland, giving it the right to seek repayment of the debts.

Many of the deals included large numbers of buy-to-let and owner-occupier mortgages owed to the banks by private individuals rather than companies. Court lists show that its subsidiaries have begun taking action against a number of these borrowers.

So far this year, companies connected to the fund, most of which use the title "Promontoria", have begun 77 cases in the High Court, many of them against individuals or couples.

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David Hall, of the Irish Mortgage Holders' Association, says his organisation is getting an increasing number of enquiries from borrowers with arrears who have been contacted by the US group and other funds.

He estimated Cerberus bought loans secured on around 900 family homes and 2,000 mortgages taken out by private borrowers to buy properties to let out. Mr Hall added that the US fund and Mars Capital were amongst the bigger buyers of debts tied to residential properties.

Many of the home loans bought by the group were classed as “non-performing” – that is the borrowers had fallen behind with repayments for long periods. The debts are a legacy of the property market crash at the end of the last decade.

Mr Hall explained that a case, Permanent TSB v David Langan, dealing with the question of whether the High or Circuit courts should hear some repossession proceedings, stalled groups such as Cerberus from taking action against many borrowers.

Repossession proceedings

However, a Supreme Court ruling in the case and a change in the law earlier this year have since clarified the position. Mr Hall noted that this paved the way for such funds to begin legal action against borrowers.

“They have got themselves organised now and they are starting to step up enforcement,” said Mr Hall. He explained that Cerberus and other funds work through the loans in “batches”, contacting borrowers and seeking repayment of the loans, and taking proceedings where debtors do not, or cannot, pay.

His group believes that the number of actions begun by Cerberus and other such funds will increase once the new law term gets under way in the autumn.

Mr Hall also said Irish lenders may also step up repossession proceedings as they come under pressure from the European Central Bank to tackle non-performing loans. Unlike banks, he said that funds do not restructure home loans.

“There is a real pressure point coming,” he warned. “You either pay up or you go. They don’t bring proceedings as some sort of threat to get you to talk to them.”

However, he acknowledged that repossession took time . When courts order that a lender be allowed take control of a home, they stay it for nine months, with the idea of allowing the sides to come to some arrangement. If that happens the order can be lifted.

Cerberus declined to comment when contacted on Monday.