Protecting borrowers

The 13,246 mortgage holders with the Irish Bank Resolution Corporation (IBRC) – the former Anglo Irish Bank and Irish Nationwide Building Society – which is in liquidation, have justifiable concerns about the fate of their loans.

The liquidators are preparing to sell the IBRC mortgage loan book: over four- fifths of which are home loans, with the remainder buy-to-let. At present these mortgage holders enjoy full consumer protection rights on their loans. However, if those loans are sold to an unregulated third party or firm – and some US private equity or so-called vulture funds have shown interest – then the legal rights of those mortgage holders will be greatly reduced.

For unregulated buyers of these loans are not bound by the Central Bank’s code of conduct on mortgage arrears. And if the mortgage owner is unregulated, aggrieved mortgage holders cannot complain to the Financial Services Ombudsman.

The fears of the IBRC mortgage holders are well founded and the Government has been slow to address them, given that a sale of the IBRC mortgage loan book is imminent. Last week, Minister for Finance, Michael Noonan, promised legislation that would provide equal treatment for all mortgage owners. Unregulated funds that buy mortgage loans from banks would be subject to the same rules that now apply to regulated entities.

But Mr Noonan also said the proposed legislation would not be enacted until 2015, claiming that it was a “legally complex” matter.

Undoubtedly, the Government faces a difficult challenge. It has to strike a balance between protecting the taxpayer, who is owed the best price that the liquidators can secure in selling the IBRC mortgage loans, while also trying to ensure that the legal protection that the mortgage holders enjoy is best protected.

Hopefully, the liquidators of the IBRC, who are shortly due to appear before the Oireachtas finance committee, can be of some assistance in helping to produce an equitable solution to this aspect of the mortgage loan problem.