Regulated banks may have sold large amounts of soured mortgages last year to unregulated loan owners — the so-called vulture funds — but only after the loans were restructured, a leading debt expert has said.
Paul Joyce, senior policy analyst at the Free Legal Advice Centres, Flac, said that the latest Central Bank mortgage arrears figures suggest the vulture funds unexpectedly acquired large amounts of good quality loans because the mainstream banks who were selling the loans struck restructuring deals with their distressed customers before the sales. The Central Bank figures show that the number of loans held by vulture funds more than doubled to almost 25,470 at the end of December from September and they now control over €4.1bn in mortgages in the Republic.
Other non-bank entities, or credit firms which are regulated, hold 59,189 loans worth almost €9.8bn.
Permanent TSB and Ulster Bank launched loans sales last year and they and other lenders have not ruled out major sales of non-performing loans this year.
The banks have repeatedly said that they must sell troubled mortgages to meet the demands of their ECB regulators to reduce the large amounts of crisis-era loans on their books.
Mr Joyce said the figures suggest that after buying the loans from the regulated banks that the vulture funds own fewer troubled loans than expected.
It is likely that many loans were restructured under the terms of the Central Bank’s Code of Conduct on Mortgage Arrears by the main lenders ahead of the sales, Mr Joyce said.
“It raises the question whether the vulture funds will stick to the restructured deals,” he said.
The Central Bank figures show that a total of 63,246 residential mortgages were in some sort of arrears at the end of the year, down from 64,510 in September.
Of those, the number mortgages in arrears for over two years fell slightly, to 27,551 from 27,998.
By the end of the year, a total of 111,504 mortgages had been restructured.
A third of all restructured mortgages involve “arrears capitalisation” deals where lenders put the arrears onto the outstanding loans, the figures show.
David Hall, head of the Irish Mortgage Holders Organisation, said he feared many of the restructured deals struck with borrowers were “unrealistic” and that “a future time bomb is being created”.