Q&A: Vulture funds waiting in the wings to snap up poor-performing loans

Q&A: Vulture funds waiting in the wings to snap up poor-performing loans

Irish Examiner Question and Answer

Vulture funds waiting in the wings to snap up poor-performing loans

By Joe Leogue Wednesday, August 15, 2018 – 12:00 AM

Why are the banks selling off loans?

Banks are struggling with non-performing loans, particularly mortgages.

The European Central Bank is looking to the banks to clear their books of non-performing loans.

Which is where investment or “vulture” funds come in.

What is a vulture fund?

These are private equity firms and hedge funds that look to snap up non-performing or distressed loans off the banks at discounted prices, and then turn them around for a profit.

Even though they buy at a discount, these vulture funds are attractive prospects for the banks as they can clear non-performing loans off their books.

So, what are people’s problems with vulture funds?

The vulture funds are not typically in the game for the long haul. There is a fear that if mortgage-holders cannot meet the repayment requirements demanded by these firms, the vulture funds are more likely to trigger repossession proceedings.

Rising house prices only contributes to this fear.

Critics of vulture funds say they will see a better and faster return on their investment by evicting the houseowners and selling on the property.

All these reports indicate that thousands of mortgages have been sold on in all these deals. How do I know if mine is included?

Your bank should write to you to let you know.

Will the vulture fund be expected to conduct its business in the same manner as my bank?

This is a source of debate.

Fianna Fáil has introduced the Consumer Protection (Regulation of Credit Servicing Firms) Bill in the hope of regulating vulture funds.

They argue this prompts the need for greater regulatory reach as provided in their bill.

Speaking about that bill last March, Finance Minister Paschal Donohoe sought to reassure mortgage holders.

“They still have the same rights and obligations as they had before the sale,” he said.

However, David Hall, CEO of the Irish Mortgage Holders Organisation says that the Central Bank’s code of conduct is not binding.

The High Court and Supreme Court have ruled this is a voluntary code,” he said.