Loans ruling could affect billions

A decision by Justice Paul Gilligan over the non-payment of €51,000 could have significant consequences on the billions of euro of loans sold by Irish banks.

Anthony and Miriam Freeman have been granted permission by the High Court to challenge the validity of the appointment of a receiver by Bank of Scotland over several properties they owned.

Accountant Seamus Sutcliffe with Lansdowne Francs and Company, which has been advising mortgage holders on overturning receivers, said that the case could send shockwaves through the Irish financial landscape if the Freemans are successful.

The Freemans have been granted leave to challenge on the basis that Bank of Scotland Ireland may have breached the Central Bank code of practice on the transfer of mortgages and Central Bank of Ireland Asset Securitisation.

The code clearly states that the mortgage holder has to get leave from the borrower to sell their loans.

“A loan secured by the mortgage of residential property may not be transferred without the written consent of the borrower. “When seeking consent from either an existing or a new borrower the lender must provide a statement containing sufficient information to enable the borrower to make an informed decision. “The borrower must be approached on an individual basis and given reasonable time to give or decline his consent,” the code states.

If the Freemans win their case, which will be heard in September, it would set a precedent which could apply to the sales of loan books of Irish banks.

The Freemans deny having ever given written consent to the banks.

Mr Sutcliffe said: “If this Freeman case succeeds it will be extremely difficult for any of the loan management companies to prove that they have any locus standi when it comes to dealing with any of the debtors through the courts system.”

If a litigant cannot prove locus standi to the court they cannot take a case. In essence it would mean that the courts do not believe that loan management companies have a legitimate grounds to bring cases.

He said that just one such portfolio of loans, Project Pittlane was made up of almost 700 loans secured against around 500 properties and about 50 borrowers, including farmers, publicans, hoteliers and other small family businesses.

The portfolio which was once valued at €380m was sold by Bank of Scotland Ireland to CoVal for 10 cents on the euro. Mr Suttcliffe believes that CoVal could struggle to take any case to court if the Freemans are successful.

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