Call for ‘friendly vulture fund' to help distressed homeowners

A "friendly vulture fund", which would buy distressed loans from home-owners and enable them stay in their homes, should be set up by the Government, the chairman of the Oireachtas finance committee has said.

John McGuinness, TD for Carlow-Kilkenny, will bring his proposal to the Fianna Fáil parliamentary meeting on Wednesday. He said there was considerable support within the party and that he hoped to bring the plan before the Dáil in the coming weeks.

His proposal comes amid growing concerns that large-scale repossessions by vulture funds will lead to the next wave of homelessness.

“The idea is to use an agency of the State, or to establish one, that would be allowed to buy the distressed debt from a bank at a rate they would sell it to a vulture fund. Once they get the loan they would either rent the house back to the borrower or work out a reduced rate on their mortgage,” he said.

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Mortgages on about 50,000 primary homes and buy-to-lets are now controlled by unregulated “vulture-funds”, which have typically bought the loans at 70 cent in the euro.

Mr McGuinness said the kind of “friendly vulture” agency he is proposing would be funded with Government-issued bonds and could be “off-balance sheet” and not a contributor to national debt.

“It would require government approval, sanction by the Minister for Finance, the Minister for Housing and the support of the banks,” he said.

Saving homes

“I don’t foresee any opposition to this. It’s very doable. It would be similar in structure to Nama, but people would stay in their homes. It would be a sort of friendly vulture fund and should be of interest to anyone who is interested in removing vulture funds from the equation.”

The current situation, where these funds were likely to seek possession of homes to maximise a speedy return, would continue to be “very costly”, said Mr McGuinness.

“It’s costing a lot of money in terms of legal services and in the courts. And it’s costing lives.”

He said it would be similar to the mortgage-to-rent scheme, but without the involvement of local authorities and housing associations.

“It would cut a lot of the bureaucracy out,” he said.

The mortgage-to-rent scheme, which is operated by the Housing Agency, is subject to several restriction and is regarded as overly cumbersome, involving several different bodies.

To be eligible for the mortgage-to-rent scheme, the home must not have a market value higher than €250,000, or €350,000 in Dublin, Kildare, Meath, Wicklow, Louth, Cork and Galway. In addition, the household's combined income must not exceed between €25,000 and €35,000, depending on the area of the country. It must also have a certain number of bedrooms and comply with all local authority housing regulations.

Mr McGuinness said this scheme would be structured in such as way as to exclude strategic defaulters and so-called “trophy homes”.