Vulture funds own 25% of most indebted loans

Vulture funds now own the loans of more than a quarter of the country’s most indebted mortgage holders, in long-term arrears of more than two years.

New figures released by the Central Bank show that more than 13,000 mortgages in arrears of two years or more are now owned non-bank entities, more commonly known as vulture funds.

This represents 26% of all accounts in arrears of two years or more. Of the 13,000 loans, more than seven in 10 relate to owner-occupiers.

The incoming president of the Institute of Professional Auctioneers and Valuers Alan Redmond called for an urgent review of the role of vulture funds, if any, in Irish society.

“Many of these funds are simply driven by greed to ‘flip’ the properties as quickly as possible with existing tenants often needlessly forced from their homes.

"As we go forward, Irish society needs to look at the notion of selling many more tenanted properties, much in the same way that the commercial sector operates,” said Mr Redmond.

The arrival of these vulture funds in the midst of a housing crisis was “highly questionable”, Mr Redmond said.

The fact that so many homeowners in arrears of more than two years are now dealing with vulture funds rather than the banks that initially issued their loans is likely to increase the focus once again on the role of vulture funds here.

Fianna Fáil finance spokesperson Michael McGrath has already warned that the beneficiaries of the country’s economic recovery could be “quick-buck merchants … being allowed to ride roughshod over Irish people”.

A comprehensive framework of protection for mortgage holders, tenants and SMEs at risk from the actions of vulture funds is needed, Mr McGrath said.

The legislation introduced last year aimed at protecting customers whose loans have been sold to vulture funds has been criticised for failing to regulate the new owner of the loan in favour of regulating the company servicing the loan, that is, dealing directly with the borrower.

Despite a continuing trend of falling mortgage arrears, the number of those mired in the longest arrears of more than two years declined only gradually in the past three months.

There were 35,792 owner-occupier mortgages in arrears of more than two years at the end of March compared with 36,351 at the turn of the year.

Analysts have warned that most of these borrowers have little or no chance of ever repaying their mortgage. A total of 85,989, or 11% of owner-occupier accounts, were in arrears at the end of March.

This represented a decline of 2.6% on the previous quarter. The number of accounts in arrears over 90 days at end-March was 59,700 which is a 3.6% decline on the figure at the end of 2015.

The drop in the number of mortgages in arrears of more than 90 days was the 10th consecutive decline in the number of owner-occupier accounts in arrears.

Merrion Stockbrokers chief economist Alan McQuaid said the figures showed the consistent if gradual decline in mortgage arrears had continued in the opening months of 2016.

“As the economy continues to recover, we expect the number of mortgage arrears to decrease further over 2016. For the first quarter of the year, we are anticipating that the number of mortgage arrears fell to 84,000.”