There has been a lot of talk about loan book sales to non-banking entities or investment funds, sometimes called ‘vulture funds’ in recent months and years. But what does this mean for you?
Have you received a letter about your mortgage being sold? Are you worried that your mortgage will be sold because you’ve fallen behind on your repayments? Are you worried that recent loan sale announcements will affect you?
Keep reading to find the answer the above queries and more.
What to do if my mortgage is already sold to a Non-Bank Entity?
First things first, don’t panic – help is available.
If you have long-term mortgage arrears, there is an increased likelihood your mortgage account has been sold to a Non-Bank Entity. A recent Central Bank Report states these funds own 54% of accounts in long-term mortgage arrears.
The sale of your mortgage does not automatically mean you will lose your home. Non-engagement by a borrower in mortgage arrears with their lender is the leading factor for repossession orders being granted. So, with this in mind, it’s important to stay calm and not to bury your head in the sand. Engagement is key.
The idea of stepping forward and seeking help can feel daunting at first, but it can lead to a huge weight lifted off your shoulders. Who is there to help me? Abhaile, the free mortgage arrears support scheme, is here to help. The scheme provides access to independent and non-judgemental professionals who will work with you to find a resolution to your arrears situation.
We have compiled a list of the 5 most commonly asked questions borrowers have about funds. If you have a question that is not covered below, send us a message on our Abhaile Facebook, Twitter or Instagram page and we will get back to you as soon as possible!
1. What is a Non-Bank Entity?
A Non-Bank Entity, sometimes referred to as a ‘vulture fund’ or ‘investment fund’ buys Non-Performing Loans (NPLs) from lenders, normally at a discount on the loan’s worth. A Non-Performing Loan is a loan that the lender doesn’t think is sustainable or will be paid back in full. This term is usually used when referring to loans that are in arrears. Lapithus Management DAC and Link ASI Limited t/a Asset Services are two non-bank entities who currently operate in Ireland. You can read more about non-bank entities in the
We’ll be referring to them as ‘funds’ for the rest of the blog to keep it consistent.
Typically, the funds that buy non-performing loans do not have main street bank branches in Ireland and can be a hedge fund, investment, private equity fund or distressed debt fund.
The term ‘vulture fund’ is a metaphor used to compare some funds to vulture birds, ‘preying’ on debtors in financial distress by purchasing the loans at a discount to make a financial gain. Given its origins, the term ‘vulture fund’ can be alarming and distressing. However, it is important to understand what it means if your bank sells your loan to a fund, and it can lead to a positive outcome for you and your mortgage arrears.
2. How can I deal with a fund?
You do not have to deal with them alone. MABS Advisers and Personal Insolvency Practitioners (PIPs) can help you engage with a fund at every step of the way towards a possible arrangement.
MABS Advisers and PIPs can engage with the fund on your behalf, helping to remove some of the stress. They will work with you to complete your Standard Financial Statement (SFS) and will propose arrangements to the funds.
MABS and the Banking & Payments Federation Ireland (BPFI) have an agreement (mentioned above) to ensure that lenders (banks or funds) and MABS will work together. They will help to resolve mortgage debt problems in an effective and realistic manner. This gives borrowers further protection and is only one of the many benefits of the agreement.
3. Will a fund do an arrangement for borrowers?
Yes – funds do accept arrangement proposals for borrowers. Professionals working with Abhaile have experience in dealing with the funds and drawing up successful arrangements. Funds may sometimes be faster to offer an arrangement than lenders. Why is this? They may have bought the loan at a discounted rate. Therefore, they might not be looking to get the full value of the original mortgage loan. This puts the funds in a position to do deals that lenders may not be capable of. For an arrangement to be accepted, it is advised to be fully engaged with the MARP process.
4. Do funds operate in the courts?
Yes – funds operate in the courts. They must obey and follow the same laws that apply to other lenders operating in Ireland. This means your rights do not change when an entity/fund buys your mortgage account. These rights are detailed in the Central Bank’s Code of Conduct on Mortgage Arrears, also known as the CCMA.
If you have been summoned to court by a fund, Abhaile normally* has a court mentor and a duty solicitor present at all repossession hearings. The duty solicitor service is a limited service to provide help and support to borrowers in the court. The duty solicitor cannot act as a legal aid solicitor for the borrower or defend the repossession proceedings on a borrower’s behalf. Instead, they can answer questions you have and explain what is going on in court. For helpful tips on attending your first repossession hearing, watch our video here.
*The court mentor and duty solicitor service are still operating within public health guidelines; however, they may not be at every hearing to respect the public health guidelines. To see if there will be a court mentor or duty solicitor at your hearing, call the MABS Helpline on 0818 07 2000.
5. Can a fund appoint a receiver?
Yes – a fund can appoint a receiver, most commonly in cases where the secured property is not a family home, where the borrower has defaulted on the loan, where enforcement is required and where the mortgage contract provides such powers.
It is important to remember there are no guarantees. The earlier you engage with the process and the supports available, the better your chances of reaching a positive outcome.
Even in cases where a receiver has been appointed, MABS Advisers and PIPs have been able to stop the repossession and secure an arrangement in which the borrower retains possession of the property. The key piece of information to remember here is, it’s never too late. The earlier you engage, the earlier you can start working towards a positive outcome.
Would you like to get started on your mortgage arrears resolution journey? Call the Helpline on 0818 07 2000 or find your local office to arrange an appointment.
Disclaimer: Every effort has been made to make sure this information is current and correct. The details of each case can be unique and the outcome as a result can be different to what has been described in this blog.
Follow @AbhaileInfo & Abhaile Mortgage Arrears on Twitter and Facebook and Instagram for further updates.