Mortgage holders ‘not fully informed of their rights’

The Government has been criticised for failing to fully inform struggling mortgage borrowers of their rights and protections as concerns emerge over so-called vulture funds buying up Irish loans.

Mortgage holders ‘not fully informed of their rights’

The Master of the High Court, Edmund Honohan, made the comments as he said mortgage holders must be prepared to fight for their rights in the courts amid any moves to alter loan arrangements.

In an interview with the Irish Examiner, he addressed the sale of over 13,000 Irish Nationwide home mortgages which will be completed by the end of this month.

The brother of Central Bank governor Patrick Honohan, he said mortgage holders should look to their original contract, Irish law, and the courts for protection.

“A defaulting borrower who is in difficulties has to be prepared to deal with the new owners of the mortgage through the courts and utilising the new mechanisms available.

“Happily the borrowers can be reasonably certain that the courts are not going to unfairly benefit those that are simply on the market to extract money from the Irish economy.

“The overall good of the Irish economy and the long term interests of homeowners especially will not be lost sight of.”

The Nationwide book sale has led to fears the rights of borrowers may be ignored if foreign buyers take over loan contracts, as the Central Bank’s code of conduct on mortgage arrears would not apply to another jurisdiction. Finance Minister Michael Noonan says any fears are exaggerated and the new owners will be expected to comply with the code. However, Mr Honohan said there were question marks about the enforceability of the code after recent court rulings.

Recent legislation firming up alternatives to repossession could give borrowers a good defence, he advised.

“Apart from the code, borrowers need to remember that they have rights under their original contract. And under statute. A fund which purchases a loan book from the liquidators [for the Nationwide loans] is still bound by all the terms of the borrower and the lender. That’s not been torn up.

“Borrowers should go back to their original facility letters which set out the basis on which the loan was advanced, including the rate of interest.

“If a new owners, a vulture fund or whatever, requests an increase in repayments on the basis that the rate of interest being changed, he’s only entitled to it if the contracts allows him that option.”

Mr Honohan was critical of the lack of knowledge that borrowers had defending cases.

“The Government should be a lot more proactive in letting people know their legal entitlements both under the code and under the contract.

“The problem is that at the end of the day, the mortgage market concerns Irish land, Irish houses and the new, secondary market that is emerging where mortgages are being sold, they are being securitised, they’re being sliced and diced.

“There’s no central clearing house or registration authority which will enable a person to know whom he is dealing with as a borrower. Or indeed to enable the Revenue Commissioners to know who they should be seeking capital gains tax and other revenues.

“The seems to be something that is now urgently needed.”

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