Warning ‘warehoused mortgages’ is next crisis

Warning ‘warehoused mortgages’ is next crisis

Pádraig Hoare

Some €1.5bn worth of so-called “warehoused mortgages” — where some regular payments are agreed and the rest of the sum is parked to the end of the term — will become the next controversy involving Irish customers.

That is according to one of the main players who exposed the tracker mortgage scandal, financial advisor Pádraic Kissane, who told TDs and Senators at the Oireachtas Finance Committee that split mortgages were another potential crisis kicked down the road for thousands of homeowners.

Split mortgages became popular in the years following the financial crash to alleviate pressure on homeowners struggling to make repayments.

A homeowner agrees to make repayments on part of the loan, with the other chunk of the loan sum then “warehoused” until the end of an agreed term or when their financial position improves.

Mr Kissane said the “full circle had not been drawn” on warehoused mortgages.

“As night follows day, the next area that will be looked at is warehoused loans because they are now the next non-performing loans. Nobody is asking what is going to happen with all these warehoused loans at the end -- are you going to have all these 70-year-olds out of their homes because they are going to have to sell?

“Some will absolutely take the view that they will have to trade down and move to a smaller home and so forth, but nobody is asking the question...I do not know as a financial advisor today what is going to happen with warehousing,” Mr Kissane said in response to Fianna Fáil finance spokesman Michael McGrath.

Warning ‘warehoused mortgages’ is next crisis

Mr McGrath said it was a concern as to what would happen with warehoused loans: “There is €1.5bn of warehoused mortgaged debt in split-mortgages, in the average of €50,000. They pay the active part of the mortgage and 15 years down the line, when the mortgage comes to an end, the debt is sitting there. This is untested because these agreements have not come to an end yet. It’s about €1.5bn debt parked,” he said.

Mr Kissane said there was now an added pressure on homeowners who warehoused part of their mortgage with the arrival of vulture funds.

“What is even more serious is that most of these (warehoused) arrangements have three-year reviews on them, which are now currently in play to the vulture fund. (Homeowners) are back in with their contracts in three years after being told it was going to be reviewed with a pillar bank, but it is now in the hands of a vulture,” he said.

Mr Kissane said vulture funds buying distressed loans in the Republic in recent years had also contributed to the rental crisis throughout the country, leaving many properties vacant.

“The contributory effect to the rental market because of vulture funds is the amount of properties that are empty because receivers are appointed. I am at meetings with clients and the bank cannot tell me who has the keys, nobody knows who has the keys, and the property is empty. It is astonishing,” he said.

The Irish Farmers’ Association (IFA) and SME lobby group Isme told the Finance Committee that vulture funds had put untold pressure on farms and businesses.

IFA president Joe Healy accused vulture funds of “preying” on families, and “killing off farm businesses”.

More in this Section

€250m expected to be spent on Black Friday sales with annual online spending forecast to reach €16bn€250m expected to be spent on Black Friday sales with annual online spending forecast to reach €16bn

Bank chief: Mortgage providers relying on failure to switch to keep rates highBank chief: Mortgage providers relying on failure to switch to keep rates high

Deliveroo want change in employment law so they can offer riders sick payDeliveroo want change in employment law so they can offer riders sick pay

Stop right now: Tesco removes Mel B advert in UK following Spice Girl’s complaintStop right now: Tesco removes Mel B advert in UK following Spice Girl’s complaint


Lifestyle

The Cosmetify Index reveals the cosmetics companies that are generating the most buzz online – and Dubai-based Huda Kattan has the top spot.Huda Beauty tops the 10 ‘most popular’ beauty brands this year

Read the script of Kya deLongchamps’ kitchen-sink drama to set the scene to make an informed choice when selecting this home essentialTake the plunge: Read this checklist before you splash out on your new kitchen sink

SOMETIMES, the journey is more important than the destination. And sometimes, we just want to sit at home eating a bag of jelly beans, while thinking about more jelly beans. Life is only as significant or special as we make it.GameTech: Death Stranding is a divisive, beautiful journey packaged in a cool world

Former Oasis drummer Tony McCarroll tells Richard Purden about the mad times when five Manc-Irish lads became one of the biggest rock bands in the worldNot looking back in anger: Former Oasis drummer looks back at the mad times of one of the biggest rock bands in the world

More From The Irish Examiner