Warning ‘warehoused mortgages’ is next crisis

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.

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.

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”.

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