Troubled mortgages: Housing body to take on vulture funds

A voluntary housing body established to compete with so-called vulture funds for at least €150 million worth of mortgages in arrears could be in place by next summer, the scheme’s architect has said.

David Hall of the Irish Mortgage Holders Association said plans are at "an advanced stage" to establish a housing association to administer loan books bought off Irish banks with a view to keeping distressed borrowers in their homes.

“You don’t have to be a brain surgeon to know that there is a cohort of people who can’t pay their mortgages and the banks have limited options when it comes to dealing with these people,” he said.

He suggested a question that needed to be answered was whether it was better to look after people “in an organised way through a voluntary housing agency and help them to stay in their homes, or sell loan books to vulture funds?”

Mr Hall said his job in the months ahead would be to put together “a coherent option that will allow people to keep a roof over their head”.

He said he had held discussions with financial institutions about providing backing for the new association and expressed the hope the scheme could be up and running by as early as the middle of next year.

Recent years have been marked by vulture funds moving into the Irish mortgage market as banks look to offload troubled loan books and clean up their balance sheets. Typically, they sell the loans to the vulture funds at a substantial discount with some loan books being sold for as little as 20 per cent of their total worth.

Offloading loan books

In 2013, just 2 per cent of the total stock of residential mortgages outstanding were owned by what are also referred to as “non-bank entities”. By March 2016, they accounted for 5 per cent (47,409) of the total stock, and as much as 7 per cent of buy-to-let mortgages.

More loan books are set to be sold in the months ahead. Last May Ulster Bank announced it was developing plans to sell € 875 million of troubled mortgages, with 88 per cent of the loans in the portfolio in arrears of more than three years.

AIB has also been advnaced as another possible candidate to offload some of its troubled mortgages through a loan sale.

If Mr Hall could get the financing, he could compete with the vulture funds for heavily-discounted loans and then help move those who could not afford to pay mortgages into a long-term rental scenario.

He suggested he could buy up to about 2,000 loans early next year. People would lose their homes but would not be forced to move. They would be allowed to stay on as tenants, paying rents they could afford.

“The people we are talking about here are those who are not able to pay their loans no matter how they are restructured,” he said.

He said there would have to be political discussions in the autumn in order to advance his proposals.

“The question that will have to be answered is if the banks and the establishment will support a voluntary housing association or allow vulture funds have free reign to do as they will. My part in this is to develop a coherent credible option to buy the loans and manage them and leave people in their homes.”