The sale of a book of non-performing mortgage loans by Permanent TSB has reignited the debate about the risks to borrowers arising from such disposals. In particular, the possibility that the loans could be purchased by so-called vulture funds – unregulated international investment players – has raised significant fears. Under pressure from Fianna Fáil, the Government has promised not to oppose legislation on the issue. Fianna Fáil's Bill would mean that unregulated funds that buy Irish loan books would be subject to direct regulation by the Central Bank.
Extending regulation in this manner may close some gaps, but it is essential that this is underpinned by a proper, wider analysis of the protection in place for consumers. Among the key issues will be how people who have existing forbearance deals with Irish banks are dealt with. As well as examining the rights of mortgage borrowers, the Government should also review the rights of tenants in cases where buy-to-let loans are sold.
The sale by PTSB, with other banks including Ulster and AIB likely to follow, result from pressure on them from ECB regulators to finally get non-performing loans off their books. The interests of consumers must not be ignored in all this. One fear is that these new owners may move much more rapidly in dealing with borrowers, sometimes pushing cases towards repossessions. In some cases – where, for example, borrowers have not engaged with their bank for years – this may be inevitable. Many borrowers may also be a long way off affording even a restructured arrangement, despite genuine efforts on their part.
Against this backdrop, the job for the Government is to ensure that borrowers are given every reasonable chance and that options such as the morgage-to-rent scheme become much more widely available. Increased repossessions will also put more pressure on social and affordable housing, where availability is already a big problem. With 50,000 loans still in arrears of three months or more, there is a big public policy challenge here.