Flac warns about danger of vulture funds

People could suffer homelessness and extreme poverty without new rules to block the sale of mortgages to so-called vulture funds, the Free Legal Advice Centres (Flac) has declared.

The Oireachtas Finance Committee is currently examining a Sinn Féin Bill that would prevent banks from selling home loans to so-called vulture funds without borrowers' permission.

The No Consent, No Sale Bill 2019 passed an initial vote in the Dáil in January by 80 votes to 45. However, the Central Bank has opposed the proposal, saying borrowers retain the same right no matter who owns the loan.

Flac chief executive Eilis Barry said the new loan owners had "no regulatory or statutory obligation" to honour previous debt restructuring arrangements.

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“We fail to see any clear provision there that imposes a specific legal obligation on a lender reviewing an arrangement to continue that arrangement where the borrower’s circumstances have not changed,” she said.

‘Regulatory code’

“Even if it was to be interpreted that there is such an obligation, its enforceability in strict legal terms under a regulatory code may be questioned.”

Ms Barry pointed out that the Central Bank had said it could not interfere with the commercial decisions of lenders who were complying with their regulatory and contractual obligations.

“If it is the case, as the bank maintains, that it cannot interfere with a lender’s or owner’s contractual rights, how can it impose an obligation on an unregulated loan owner to continue a long-term restructured arrangement against its will where there is no regulatory or statutory obligation to do so?”

Legal protections needed to be enhanced for borrowers whose loans had already been sold, she said. Where the borrower is meeting the terms of a long-term restructuring arrangement, the loan buyers should be legally bound to abide by that agreement subject to appropriate conditions.

Where the arrangement is not being met by the borrower, the new loan owner should be obliged to reassess the account under the terms of the Mortgage Arrears Resolution Process and the Central Bank’s Code of Conduct on Mortgage Arrears with a view to putting alternative repayment arrangements in place, Ms Barry said.

‘Fed to vultures’

David Hall of the Irish Mortgage Holders Organisation told the committee that families were being "fed to vultures". The sales were as a result of "incompetence from banks in not offering realistic restructuring arrangements to customers in mortgage arrears", Mr Hall said.

“Deputies can note that I said ‘families are being fed to vultures’ because it is not just loans that are being sold but real families, real people and real lives that are being fed to vultures, and this is a real social issue.”

These funds had shown they were not willing to do restructuring deals with borrowers to keep them in their homes, he said. The Bill was “an essential tool to help families in mortgage arrears as we are facing an avalanche of loan sales to vultures over the coming 12 months and these families face a very uncertain future,” he added.