Vulture fund managers to follow banks in offering loan payment breaks

Lone Star and Pepper Ireland among firms joining plan for customers hit by Covid-19

The State's main credit-servicing companies, which manage tens of thousands of loans for so-called vulture funds, plan to follow mainstream banks in offering loan payment breaks and a deferral of court proceedings for three months to customers affected by the Covid-19 crisis, according to Banking & Payments Federation Ireland (BPFI).

The firms include US private equity giant Lone Star’s Start Mortgages unit, Mars Capital as well as Pepper Ireland, which manages Irish loans for clients such as Goldman Sachs and CarVal, and Link Group. Dilosk and Finance Ireland are also among the firms that have committed to following the lead of the banks.

Almost 90,000 owner-occupier loans and about 21,000 buy-to-let mortgages are in the hands of non-bank lenders, according to Central Bank data.

This is mainly a result of banks such as Danske Bank and Bank of Scotland retreating from the Irish market in the wake of the crash and selling their loan portfolios, the liquidation of Irish Nationwide and, more recently, moves by surviving Irish banks to shift non-performing loans off their balance sheets.



BPFI said, however, that the non-bank lenders, in committing to follow the banks’ lead in offering payment moratoriums, will need guidance on a number of issues. These include customer documentation and process, the operation of the Central Credit Register, which records borrowers’ credit scores, and the possible impact of securitisation deals.

Many of the loans that have been snapped up by overseas firms following the crash have been refinanced on the bond markets through securitisation vehicles.

The chief executives of the country’s five retail banks agreed to an industry-wide accord on Wednesday with the Minister for Finance to allow for payment breaks and a say on legal proceedings for customers affected by the current crisis.

Meanwhile, the banks and BPFI officials met Central Bank governor Gabriel Makhlouf and other top regulators on Thursday to discuss how the industry is handling the economic shock caused by Covid-19.

The Central Bank of Ireland said afterwards that it is working with lenders “to develop practical measures” to ensure that the credit records of borrowers who avail of a payment break amid the economic crisis caused by Covid-19 will not be affected.

‘Credit reports’

“The Central Credit Register produces credit reports for lenders and borrowers on request. The Central Credit Register does not produce a credit score; it simply records the information that is submitted by lenders on a monthly basis,” the regulator said.

“The Central Bank and lenders are working to develop practical measures so that the credit record of those who avail of a payment break will not be adversely affected during this extraordinary time.”

Mr Makhlouf said that the Central Bank recognises the challenges that regulated firms face in maintaining business continuity and the provision of services to customers during the crisis.

“We will also maintain appropriate regulatory oversight throughout this period. The resilience of banks has been built up over the last decade. We want to ensure they remain resilient through this challenging environment in order to safeguard the financial system in the public interest,” he said.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times