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. But what does this mean for you?
Have you received a ‘goodbye’ letter from your lender? Perhaps you’ve received a ‘hello’ letter from a new loan owner. This could mean that your mortgage loan is now owned by a fund.
Are you worried that your current lender will sell your mortgage because you’ve fallen behind on your repayments?
Are you concerned that recent loan sale announcements will affect you?
Keep reading to find the answer to 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 chance that a Non-Bank Entity (NBE) has bought your mortgage loan. 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 granting repossession orders. So, with this in mind, it’s important to stay calm and not 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 resolve your arrears situation.
We have compiled a list of the 5 most commonly asked questions borrowers have about funds. If you have a question 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, generally 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 typically refers to loans that are in arrears. Lapithus Management DAC and Link ASI Limited t/a Asset Services are two non-bank entities currently operating in Ireland. You can read more about non-bank entities in the BPFI and MABS loan sold to a third party guide.
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, which 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 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 resolve mortgage debt problems practically and realistically, which gives borrowers further protection and is only one of the many benefits of the agreement.
3. Will a fund make an arrangement for borrowers?
Yes – funds do accept arrangement proposals for borrowers. Professionals working with Abhaile have experience 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, and therefore, they might not be looking to get the total value of the original mortgage loan. This puts the funds in a position to do deals that lenders may not be capable of doing. For an arrangement to be accepted, it is advised to engage with the MARP process fully.
4. Do funds operate in the courts?
Yes – funds operate in the courts, and 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. The Central Bank’s Code of Conduct on Mortgage Arrears, also known as the CCMA, provides more detail on these rights and protections.
If you have been summoned to court by a fund, Abhaile typically* has a court mentor and a duty solicitor present at all possession 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 your questions and explain what is going on in court. Watch our video here for helpful tips on attending your first repossession hearing.
*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. In most 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 support available, the better your chances of reaching a positive outcome.
Even if a receiver has been appointed, MABS Advisers and PIPs have been able to stop the repossession and secure a positive arrangement for the borrower. The critical information to remember here is that 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 ensure this information is current and correct. The details of each case can be unique. As a result, the outcome can be different to what has been described in this blog.
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