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The decision by Permanent TSB to sell a large mortgage book, including residential loans, has raised concerns about the implications for borrowers. The likely buyers are so-called vulture funds – international investors who are likely to be seeking to turn a profit in a reasonably short time-frame. The rights of consumers in these situations was extended in 2015, but the question now is whether there are gaps in the rules which could leave some borrowers vulnerable.
Borrowers do retain their existing contractual terms and those in difficulties should be treated the same way as those who are dealing with domestic banks. The Central Bank, however, regulates the companies who manage the loans in Ireland on behalf of the funds, and does not regulate the funds themselves. Fianna Fáil is arguing that this could create difficulties as those making the final decisions – on how to treat borrowers, interest rates, repossession policy and so on – are not regulated.
It may be that the greater fear of borrowers is that the funds, while acting within existing rules, will take a more aggressive approach to dealing with borrowers. In that context, it would now seem appropriate to get a formal view from the Central Bank on how it believes the legislation has operated since 2015 and whether changes are needed to protect borrowers.
The job of dealing with mortgage arrears after the economic crash has taken way too long. Banks have been allowed to let the issue drag – but also the political backdrop and the legal process has limited the options of financial institutions. Some progress has been made with new schemes in recent years and updated insolvency rules. There remain wider questions about how those in unmanageable arrears are dealt with – and how to respond to those who do not engage with their bank. Ten years after the crash, it is clear that this should have been dealt with more expeditiously. The sale of loans to vulture funds opens up new risks which could have been avoided if there had not been such a delay.