Mechanism for resolving disputes between lenders and distressed mortgage holders will extend to vulture funds

A new mechanism for resolving disputes between lenders and distressed mortgage holders will extend to vulture funds, following an agreement between two leading agencies.

MABS, the State-backed Money Advice and Budgeting Service, and the Banking and Payments Federation have announced the agreement, saying it will help consumers who are struggling with mortgage debt.

The mechanism agreed provides for MABS and lenders collaborating to resolve mortgage arrears for those borrowers who have already exhausted the Central Bank's Mortgage Arrears Resolution Process (MARP) and are entering the legal process.

It sets out rules of engagement between funds and MABS, when they are representing mortgage holders.

The agreement extends to vulture funds – otherwise known as credit servicing firms - which have been the subject of much controversy for how they handle home repossessions.

The funds buy distressed mortgages off the banks, at a knockdown price, in the hope of selling on at a profit.

A new consumer information leaflet, ' Protections if your mortgage is sold to a third party', has been published to accompany the Framework Agreement.

Among other points, this makes clear that, where a mortgage is sold by a bank to a third party, that party must appoint a credit servicing firm to manage it and the protections afforded by the Central Bank’s Code of Conduct on Mortgage Arrears still apply.

The Chief Executive of the Citizens Information Board says she "welcomes very much" the agreement between MABS and the Banking and Payments Federation.

Angela Black said it will provide better protection to MABS members, adding that most MABS members do not know who the lender is, once their loan has been sold off.

Speaking on RTÉ's Morning Ireland, she said concerns about the nature of the funds remain because "the character is they want to get in and out quickly and make a profit" and they may not have enough time to engage fully with members.

Given the unease over relations between both sides in recent years, it is a first step in trying to resolve difficult issues, by providing some fairness for borrowers, she said. Under the new agreement MABS will now have the authority to engage directly with vulture funds in the hope of coming up with terms that can be met by clients in mortgage distress.

The agreement is welcome, but it is “a bit late” added Ms Black. “This is still a huge problem.” She also said that she hoped banks “with their own internal problems” will not allow such issues to have an impact on the agreement.

The deal was given a guarded welcome by David Hall, CEO of Irish Mortgage Holders Organization. “I welcome anything which brings the possibility of hope, closure and certainty to the lives of those trapped in mortgage arrears,” he said. “Anything which acts as a constraint on the untrammelled exploitation by vulture funds of vulnerable people is also to be welcomed.”

However, Mr Hall cautioned that the new code agreed could unwittingly subvert the current legal framework.

Vultures are being hit hard by insolvency arrangements being approved by the courts and it would be deeply worrying if MAB’s accidentally became a party to replacing a legal framework with an unenforceable code.