Ireland is often held up as the poster boy for mortgage delinquency following the legacy of the aftermath of the housing bubble bursting. The latest figures from the Central Bank indicate that over 20,000 homes are in arrears in mortgage repayments for over 90 days – with over 17,000 in arrears of over a year.
Context is important: during the Celtic Tiger as many readers will remember, Irish people were incentivised and encouraged to take out loans by the banks, not just 100% – and 110% – mortgages, but additional loans for cars, holidays and more.
In addition, as highlighted in recent research, many of those households now in difficulties found that their supposedly non-performing mortgages were transferred over to vulture funds when the criteria for a non-performing loan was expanded by the European Banking Authority.
Indeed, some people whose mortgages were transferred were making full payments with their commercial bank.
According to the Oireachtas research, some 6,000 Irish customers who were meeting the terms of their mortgage agreement had their loans sold to a vulture fund due to the new definition.
That has led to Irish mortgage holders now being tied down to loans – and sky-high interest rates – managed by non-banks including vulture funds who often impose excessive costs on customers making repayments difficult.
In theory, a failure to pay mortgage costs could lead to high rates for homeowners across the board – and those who take out mortgages should obviously be expected to make repayments.
But the experience of many Irish customers is that they have become prisoners of vulture funds, subject to sky-high interest rates and unable to move to other lenders to avail of lower repayments.
VULTURE FUNDS GOT LOANS AT DISCOUNT
In fact, the vulture funds were able to buy Irish mortgages at knock-down rates or at a discount as is the case for most Asset Management Companies (AMCs) with NAMA playing that role in the Irish case with the taxpayer picking up the bill for the discount received by the vulture funds.
Indeed, when the fund bought the mortgage loan at a discounted price they were still entitled to chase the mortgage holder – the homeowner – for the full amount owed.
In truth, if homeowners are unable to meet repayments given the exorbitant interest rates charged by the vulture funds, and are forced to sell their homes, then the fund will not only have bought the loan at a discount but will profit handsomely from the forced sale as the high interest rates set by the fund will increase the proceeds accruing to the fund.
In many ways, NAMA facilitated the entry of vulture funds into the market charging excessive mortgage costs due to their unorthodox funding strategies.
As the former head of the Irish AMC Brendan MacDonagh said in 2015, “NAMA’s market activity and deleveraging has contributed to the strong inflows of foreign capital” aka foreign investment funds.
So how do these funds operate, why did their credit service vehicles have charitable status enabling them to avoid tax for so long, and what should the government consider as a possible solution for the thousands now trapped in the clutches of vulture funds.
WHAT ARE VULTURE FUNDS?
Vulture funds and their metaphorical counterpart cuckoo funds are funds outside the regular banking system. The latter buys up properties in bulk meant for first-time buyers but instead generates a high-yield for investment funds, while the former purchases distressed assets – non-performing loans – from banks.
These entities have risen exponentially since the onset of the banking crisis of 2008 when so-called toxic loans compounded the main pillar banks and required saving in the form of these opaque entities who swooped in on residential and commercial property assets alike.
Many homeowners found that the bank they thought their mortgage was owned by was in fact transferred over to a faceless structure known as a credit servicer which acts as middlemen in evictions and enforcing debt obligations, but often operates under the radar.
The housing crash of 2007-08 and the response to that crisis contextualises the current dilemma of an entire generation priced out of the housing market along with mortgage holders beholden to vulture funds and non-bank entities.
The steps taken by the Irish government to revalue property prices after the sudden plunge in residential and commercial values simply continued the policy of financializing the housing market with little regard to the systemic issues that caused the crisis in the first place. The invitation of vulture funds, the gifting of public land to private entities, the cessation of domestic bank lending, and selling of property assets to private equity firms via NAMA, all contributed to unaffordable housing and the creation of a new class of absentee so-called credit servicers masquerading as mortgage owners.
THE 2008 CRASH
Following the Global Financial Crash (GFC) in 2008, Ireland was hit particularly hard. Property prices had been rising by close to 10pc per year. Bank lending rose from 60pc of GNP in 1997 to 200pc in 2008 with a resultant surge in housing supply of circa 30,000 in 1995 to close to 90,000 units in 2006. Construction accounted for just over 10pc of employment and 15pc of total tax revenue from property taxes.
But by 2009, house prices fell by over 20% and almost 50% from their peak in 2007. The edifice that the late stage Celtic Tiger economy was reliant on was hanging by a thread with property – once the cornerstone of the public finances – now proving its Achilles Heel. As a major source of tax revenue and economic growth, falling property values proved deleterious for the wider economy which required swift intervention.
The State responded in part by bailing out the banks that had recklessly lent to developers with a €64bn banking guarantee on their deposits. The State also bailed out reckless developers by getting the banks to sell over €70bn worth of commercial and residential loans off their balance sheets to a government-backed ‘bad bank’ called the National Asset Management Agency (NAMA).
Indeed, as mentioned by Niamh Uí Bhriain, citing a paper written by senior parliamentary researcher Barry Creighton, the broadening of what constitutes a ‘non performing’ loan by the European Banking Authority (EBA) heaped even further pressure on Irish banks to dispose of ‘toxic’ loans.
From 2014-16, NAMA sold over €50bn worth of distressed loans to investment funds. Irish loans accounted for over one-third of all distressed loan sales in Europe in both 2013 and 2014 with Dublin at the epicentre of these transactions. According to the United Nations, over 90pc of these loans were sold to US hedge funds, private equity and/or vulture funds.
Leading financial firms bought these properties when they were cheap, taking advantage of the tax-free incentives offered by the Irish State. NAMA’s role was to package these distressed loans into multimillion- dollar portfolios containing a mixture of commercial, residential and retail, to sell to investors.
CHARITABLE STATUS OF SPVs
These funds, collectively known as private credit entities, established what are known as Special Purpose Vehicles (SPVs) allowing them to claim charitable status and avoid Irish tax such as VAT or other duties.
SPVs were established under the Irish Taxes and Consolidation Act 1997 as vehicles set up by companies that hold non-Irish assets and declare themselves ‘tax neutral’. While initially set up to allow for a flow of international funds into the International Financial Services Centre (IFSC), this allowed firms to acquire billions in distressed assets.
In 2012, investment funds used these pre-existing structural arrangements to warehouse their Irish property assets in the IFSC which is currently the third-largest shadow banking centre in the world. Any private fund could register a Section 110 company if it was resident in Ireland and had qualifying assets of at least €10m ranging from shares to bonds.
This enabled funds to invest almost €6bn in equity and debt and avoid €20bn in Irish taxes.
While this specific loophole was closed in 2016, then Independent TD Stephen Donnelly claimed accountancy firms were still advising property managers on how to ”get around” the amendment. Indeed, a report by the Oireachtas budgetary committee found the attempt to close the loophole as ineffective.
With the transfer of such large tranches of loans over a period, many of those whose mortgages switched from a bank to a non-bank entity or vulture fund without their consent – or in some cases their knowledge – found they had little to no security over interest terms among other things.
Hundreds of thousands of households now realised that the bank they thought their mortgage was tied to had been allegedly purchased by a so-called credit service provider acting on behalf of a vulture fund.
While the names of vulture funds like Cerberus or Lone Star feature prominently in debates and discussions on the topic, the servicers receive minimal attention. The set up of these credit servicing entities vary but the most active in the Irish market include Start Mortgages, Pepper Finance, and Mars Capital.
WHAT IS A CREDIT SERVICE PROVIDER?
But what exactly is a credit servicer and what role do they play in the deeply politically and socially unpopular vulture fund phenomenon?
As mentioned, when a bank wishes to dispose of toxic loans off their balance sheet they will turn to US private equity companies who in turn will set up an SPV.
The sale of the loans is normally done via a true sale in which the seller transfers the asset to the SPV which becomes entitled to the cash flows generated by the asset. A true sale enables the asset to become ‘bankruptcy remote’ so that if the original bank goes bankrupt the assets cannot be seized. However, because the SPV is unable to service the mortgage, a servicing agreement is done with the original bank with the transfer of legal rights of that loan given to a credit servicer allowing them to initiate a court hearing even though the courts are left in the dark regarding the true sale.
According to the Master of the High Court and ‘debtors’ champion’ Edmond Honohan, (thus described on account of his leniency for those who fell into arrears), this allows the credit servicer to deceive the courts.
He argues that: “These companies are little more than cash collectors. The banks / vulture funds sell the portfolio to an SPV, the vulture fund then goes bankruptcy remote, they have sold the assets, the SPV having securitised the loans gives the collecting agent (Vulture Fund) the legal title to manage the mortgage account and sue where necessary.”
Master Honohan, who grabbed national attention when the President of the High Court Peter Kelly transferred the final judgment of debt enforcement hearings from the Master to Judges of the High Court in January 2019, added that: “When the likes of Mars Capital take you to court, they do so as the owners of the loan; they conceal the fact that they are not the owners; just the collection agent for the true owner. Likewise, if there is already litigation by the likes of the EBS, Mars buys the litigation and applies to the Court to have the paperwork changed to their name”.
To dig a bit deeper let’s examine the history and dealings of the three main credit servicers and the vulture funds they work for.
Start Mortgages
Let’s take one example of a vulture fund named Lone Star.
Lone Star is a private equity firm based in the US State of Texas. The firm invests in global real estate, equity, credit and other financial assets through a number of private equity funds. When the Irish government sought to lure investment funds into the country, then Minister Michael Noonan held several meetings with Lone Star Capital from 2013-2014.
Often, the firm will utilise their private equity arm to ‘purchase’ loans from a bank. Lone Star would become the largest buyer of loans from the successor of the defunct Anglo Irish Bank the Irish Bank Resolution Corporation (IBRC). The Texas fund thus acquired billions in Irish assets including an over €1bn portfolio of 4,000 non-performing Irish mortgage loans from U.K. lender Lloyds in 2014 which were taken out by customers of Bank of Scotland in Ireland, before the institution shut its branches in 2010, under the Halifax brand from 2006. More recently, in 2018, the fund purchased several loans from the now-exited Irish Ulster Bank.
As mentioned, when these loans are purchased, Lone Star, or any fund, will hire a ‘credit servicer’ that will act on behalf of the fund in terms of debt collection. In the case of Lone Star, the credit-servicer is Start Mortgages.
Start was formed by four former General Electric (GE) Capital employees David Ingram, Paul Murphy, Dermot Nutley and Niall Corish in 2004. GE Capital is the financial services arm of the American multinational conglomerate General Electric which specialises in the financing of loans and mortgages to businesses and households alike.
In 2004, the consumer director of Irish Financial and Stability Regulatory Authority (IFSRA) – the precursor of the Irish Fiscal Advisory Council (IFAC) – prescribed Start as a “Credit Institution” which enabled it to issue loans.
Start invested heavily in what would become infamous in the aftermath of the US housing bubble, as shown in the blockbuster film The Big Short, the subprime mortgage market during the housing bonanza’s height. By 2007, this lucrative and volatile lending was worth around €1bn and rising in Ireland having provided mortgages for over 6,000 customers. With 100 workers, Start sold its product through brokers.
In 2007, The Irish Independent reported that in early 2006, Start had closed two mortgage-backed securitisations – at €370m in April 2006 and the second closed €525m the following November – with both described as “non-conforming residential mortgages in Ireland” which means mortgagors that do not qualify for such loans from banks and building societies i.e. Subprime.
However, once house prices fell and the facade of the Celtic Tiger was revealed, Start Mortgages role changed fundamentally. Having provided customers with loans they couldn’t afford, Start reoriented itself from a provider of loans to a servicer of loans.
In 2009, following the housing crash, it no longer provided any new loans, however, it maintained its license as a retail credit firm involved in the servicing of loans. As such, Start would engage in evictions as homeowners struggled to pay off their loans.
Start’s subsidiary company was initially the Kensington Group who were the biggest providers of non-conforming loans in Britain having pioneered the practice in the 1990s.
For its part, Kensington securitised over £10b in residential mortgages as part of its Residential Mortgage Securities (RMS) programme launched in 1996 as well as the inaugural Money Partners Securities (MPS) deal with the latter partly owned by Kensington.
In 2010, the Anglo-South African wealth management company Investec acquired Start through Kensington. Following the purchase, Ingram, Nutley and Cornish stepped down from the board and received a €1m ‘golden handshake’ payment.
That same year, Judge Peter Kelly granted an application for the Irish Central Bank to fast-track a challenge to the State’s entitlement to grant Start’s entitlement to issue loans following a homeowner’s action against his eviction. At the time, well over 200 actions for repossession were before the Master of the High Court with a further 71 added to the High Court’s list with 115 being granted and 89 evictions carried out.
The homeowner, named Robert Gunn, had sought to challenge Start’s repossessing of his home in Co Kerry. Having obtained the mortgage of €210,000 from Start in 2007, following the downturn in 2008 he lost his job and fell into arrears.
With a view to repossessing the property with intent to sell, Gunn claimed Start was never legally authorised in the first place to initiate the loan to him because it is not a state-regulated entity. As previously noted, the IFSRA provided Start with its loan servicing remit, but Gunn argued only the Irish Central Bank has the authority to do so. He claimed that passing this authorisation to the regulatory authority was in violation of the provisions of the 1942 Central Bank Act.
In 2011, the presiding Judge overseeing the verdict, Ms Justice Elizabeth Dunne, ruled that the 2009 Land and Conveyancing Reform Act had failed to preserve the terms of older legislation from the 1960s regarding the transfer of property rights.
According to the Irish Times: “Ms Justice Dunne ruled that borrowers who went into arrears before December 1st, 2009, and received demand letters from lenders before that date, could still be repossessed under the old legislation”. However, borrowers who took out a loan before that December date and went into arrears following it could not be repossessed under the old legislation.
In 2014, Investec sold Start’s portfolio of over €500m worth of loans to Lone Star vulture fund including over 3,000 mortgages as part of the private equity company’s “bid for loan portfolios worldwide”. This was approved by the Competition and Consumer Protection Commission (CCPC) after concluding “that the transaction would not have an adverse impact on competition in the relevant markets.”
Many of those whose mortgages are managed by Start face excessive mortgage costs. Indeed, in 2022 the firm announced variable rate hikes from 3.9% to 5% despite the vulture funds financing the purchase of the loans for as low as 1% with no fixed rate mortgage options available.
In 2022, Start announced it was exiting the Irish market.
Pepper Finance
Another credit servicer who engages in the work of vulture funds is Pepper Finance.
Pepper’s foundations speak to the very risky nature of these credit servicers bearing all the hallmarks of the last property bubble. Founded in Australia in 2000 as Pepper Money, the servicer was originally operated by Merrill Lynch a key player in the US subprime mortgage market. Pepper entered the Irish market in 2012 as a servicer of residential and commercial mortgages via Pepper Advantage.
In 2014, it took on 14,000 loans from Danske Bank following the Danish lender’s exit.
In 2017, it was sold to the mega US private equity firm Kohlberg Kravis Roberts or KKR for over $600m. In 2018, the State-backed non-bank lender Finance Ireland acquired €200m of Irish residential mortgages including close to 900 performing mortgages from Pepper.
In 2018, it reportedly had close to 400 staff in Ireland and up to €16b of assets under management (AUM) but by 2022 this rose to an additional 100 extra staff and €20b in assets. It currently manages over €30bn worth of assets with over 600 staff based in Dublin and Shannon. According to its website Pepper “service loans and mortgages which includes processing loan payments.”
Pepper is also quick to brandish its ‘woke’ credentials. On its website the company brags about their commitment to Diversity and Inclusion (DI) mentioning that they ‘are proud of their diverse and inclusive culture’ which includes “a diverse workforce” which brings them the ‘benefit’ of “different ideas, abilities and backgrounds” with an emphasis on “gender diversity” and closing the supposed ‘gender pay gap’.
Yet no amount of ‘woke washing’ hides the impact their financing mechanisms have on customers locked into their mortgage rates. Given its status as a non-bank, meaning it does not fund itself via customer deposits but rather via debt capital markets, customers are more vulnerable to excessive rate hikes. Indeed, in 2023, Minister Michael McGrath wrote to the governor of the Central Bank Gabriel Makhlouf expressing concern about the scale of rate rise being forced on homeowners by credit servicers.
One example, previously highlighted by Dr Matt Treacy, of a couple who faced high mortgage costs shows how vulnerable homeowners are to excessive repayments when their mortgage is serviced by these credit vehicles. Cork couple Darren Hennessy and Emer Barrett, whose mortgage was sold from their bank PermanentTSB (PTSB) to Pepper Finance, saw their mortgage rate spike to 8.5pc with an annual hike of over €7,000. Had their loan stayed with the originating bank they would have been offered a much lower rate of 4.3pc.
The couple claimed the hike was “unfair” and “out of proportion”. Having taken out the 35-year mortgage in 2005 the loan was transferred to the credit servicer in 2019 with a variable rate kicking soon thereafter.
Currently, no vulture fund offers a fixed rate.
The couple claimed the high rate was done in order to obtain “the maximum amount it can extract from its consumer base with a view to making a profit”.
In 2022, Pepper was responsible for 10pc of repossessions with ‘ownership’ of 80,000 private mortgages in the State.
Mars Capital
The final credit servicer in the triumvirate of vulture fund middlemen includes Mars Finance, known as Mars Capital in Ireland
Mars is part of a conglomerate of European asset managers with over €90bn in AUM known as the Arrow Global Group Limited.
Mars Capital Finance Limited was established in 2008 to administer mortgages purchased from British lenders.
In 2015, it entered the Irish market as a Regulated Credit Servicing Firm with authorisation by the Irish Central Bank enabling it to service loans secured against properties. It currently has 200 employees.
In 2017, the U.K.- based specialist in distressed investing that entered the Irish market following the GFC Arrow Group purchased Mars having backing from Oaktree. Oaktree is a capital management company which following the GFC invested in distressed property with the hope of earning profit partnering with the Irish State and the National Pension Reserve in providing over €100m to the company’s so-called Opportunities Fund V11 which bought distressed assets both commercial and residential at low prices. Oaktree was just one of many purchasers of distressed residential, commercial and retail debt sold to them by NAMA facilitated by government-backed tax dodging schemes.
In 2014, the bank PTSB sold its so-called Springboard subprime mortgage portfolio to Mars consisting of over €400m of around 2,200 mortgages.
According to the Irish Times, that same year, Oaktree through its affiliate Mars acquired several residential mortgages from IBRC in a transaction backed by funds managed by Oaktree Capital in the United States. Indeed, before the successful bid, Oaktree’s managing director Alex Forrester requested a meeting with the then Secretary General at the Department of Finance John Moran. Moran had previously served as CEO for Zurich Capital Markets which was fined $16m for aiding and abetting hedge funds in illegal activity. As a board member, Moran ‘lobbied for, and achieved, a significant change to Irish banking rules, which for the first time allowed a bank to operate within an insurance group and to engage in very lucrative hedge fund lending in Dublin.‘ He is currently the Mayor of Limerick.
Like other credit servicers, Mars services the mortgages once sold to an investment fund. Indeed, when Allied Irish Banks (AIB) sold a portfolio of 4,000 mortgages to the US investment fund Apollo for a discount of €400m Mars serviced the loans.
Last year, Start transferred €2bn of mortgages to Mars after the former announced its exit from the market impacting over 10,000 customers thus increasing Mars’ AUM to more than €10b.
EXAMPLES OF MORTGAGE HOLDERS IMPACTED
News reports and legal cases give an insight into individual cases impacted by the transfer of a mortgage to vulture funds.
One RTÉ report focused on “a hard-pressed homeowner” Jimmy Byrne, who appeared before an Oireachtas committee in 2032. “He and his wife bought a house in 2006, which they re-mortgaged the following year with PTSB, bringing the loan to €350,000. Following the financial collapse, they got a split mortgage and warehoused €197,000,” the report said.
They have reduced that amount by two thirds, leaving €66,000 now warehoused, and have been making “full payments on the remaining €273,000”. Despite this, Mr Byrne told the Joint Committee on Finance, “someone in PTSB judged that as a non-preforming loan”.
“By the time we received notification it was already a done deal,” he recounted. Mr Byrne said the vulture fund, Pepper, took over the mortgage, and refused to fix the interest rate.
He and his wife are currently paying 7.5% interest on their repayments. This does not include the latest interest rate hike.
Similarly, Anthony Joyce Solicitors, in a post last week, say the “stories we hear from clients paint a grim picture of how these funds operate”.
“[T]wo of our clients purchased their family home in Dublin in 2014, never imagining they’d face a financial crisis years later, not because of missed payments, but because their mortgage was sold off without their consent. Originally, they were paying a manageable 3.5% interest rate. But after their loan was transferred to a vulture fund, that rate skyrocketed to 9% overnight. With three children and rising living costs, they are now paying thousands more per year, money that should be going toward their family’s future.
Another client, a self-employed entrepreneur in Galway, ran into financial difficulty during the pandemic, leading to temporary mortgage arrears. He worked hard to stabilise his income, and today, his finances are solid. But when his mortgage was sold to a vulture fund, he found himself locked into an 8.5% interest rate, far above what traditional bank customers pay. Worse still, he’s been told he cannot switch lenders due to the nature of his loan, leaving him financially trapped.
THE ROLE OF THE LAND REGISTRY
But while the role of vulture funds and credit servicers are often highlighted and scrutinised when examining the post-crash housing market, the role of the Land Registry known as Tailte Éireann is often not considered or placed under the microscope to the same degree.
Indeed, Tailte Éireann is a critical aspect of how vulture funds are allowed to use credit servicers to carry out evictions and debt enforcement when they wish to sell or flip a property they have purchased.
According to Edmond Honohan, Tailte Éireann enables credit servicers to access folios on land registry even though they are not the official owners but, as mentioned, mere “cash collectors”. He says “Land Registry is allowing the vulture funds onto the folio given they have ‘legal title’ and the Central Bank of Ireland makes no inquiries as to the true owner of the Mortgage Portfolio.”
In several cases where credit servicers have sought an eviction enforcement they have presented heavily redacted documentation ‘proving’ they are the ‘owners’ of the title via land registry.
In a recent case involving the repossession of land in Kildare the presiding Judge Garrett Simons refused to grant possession of the land to Start Mortgages as they, “failed to establish the first essential proof for the application, namely, that they are the registered owner of the charge.”
Judge Simons directly called out the practice of presenting redacted documentation before the courts: “It is simply not possible for this court to determine, from reading these heavily redacted documents [my emphasis] whether Start Mortgages has, in fact, taken a valid transfer of the debt outstanding in respect of the loan originally advanced by the governor and company of the Bank of Scotland.”
When reporting on the case, The Irish Independent quoted Master Honohan who repeated his claim that service providers such as Start, Mars and Pepper are engaging in “legal fiction” as they claim before the courts ‘to be the beneficial and legal owners of charges on homeowners’ land folios.’
Speaking to an experienced Senior Counsel, who wished to remain anonymous, at the time they mentioned to me that the true owners of these loans are, in fact, overseas bondholders and not the credit servicers: “The bottom line is that all of this uncertainty stems from the fact that the mortgages in question, tens of billions worth of them, had been securitised and the true ownership now rests with a US Bondholder (mortgage- backed securities) which means, in plain English, neither the Loan Originator (bank), the alleged Loan Purchaser (vulture fund) nor the Loan Servicer (Pepper, Start, Mars etc) are in fact the Legal & Beneficial owners of the Charges (as registered at Tailte Éireann) which are being wrongly accepted as “conclusive evidence” in our Courts.”
SOLUTIONS
The problems facing homeowners are myriad, but solutions – including allowing freedom to move the loan to another entity; changes and deferrals; and tackling tax avoidance in relation to servicers – must be examined.
Following the publication before members of the Oireachtas of this writer’s report on these dynamics and others titled the McDonald Report, I made a number of recommendations including ways to tackle credit servicers head on.
Citing the report before a hearing on the Finance Bill, TD Mattie McGrath put forward an amendment to reclassify SPVs as “investment undertakings” which would allow for “credit servicers to deduct tax at source and serve as local agents for SPVs in their interactions with Irish Revenue” and would “prevent these entities from evading tax responsibilities”.
McGrath added that: “Vulture funds often use credit services to avoid paying taxes by operating through these intermediaries. They can shift profits offshore to minimise their tax liabilities. This deprives our country of much-needed revenue that could be used for badly needed public services.
“The ordinary people of Ireland, for whom the men of 1916, 1921, 1922 and 1923 fought in order to have democracy in Ireland, have been abandoned. People’s lives are being lost,” he said before then finance minister Jack Chambers.
While this amendment was defeated, the Irish government’s feeble attempts to discourage investment funds via stamp duty on bulk purchases and other methods is water off a duck’s back for such cash-strapped funds.
However, by addressing the nub of the issue which is tackling credit intermediaries, the State would go a long way in righting the wrongs of the attempts to recapitalise Irish banks post-crash.
MOVING THE LOAN
A recent attempt by a new entity named Núa Money, the brokerage start-up backed by the Allen beef barons of Wexford, launched what it now calls Núa Freedom to allow ‘vulture prisoners’ trapped by excessive rates of interest to move.
Núa’s product allows customers to transition without the criteria that they have to be making full capital and interest payments for two years beforehand as most mainstream lenders require before taking on vulture mortgages.
Núa, which received its license from the Irish Central Bank last year, offers terms of up to 40 years on its mortgages with a maximum loan to value ratio of 75pc.
Núa, which began mortgage lending last year, dropped its main lending rate to 0.75pc.
But while Núa is a non-bank meaning it does not fund itself using customer deposits it should, in theory, offer higher mortgage rates. However, since its entry into the market it has cut rates providing competition in the overall market.
Attempts have also been made under the EU Directive on Credit Servicers and Credit Purchasers to offer forbearance to homeowners not insolvent but in arrears and maybe facing eviction by offering certain concessions including an extension of the loan term, a change of the type of credit agreement, a payment deferral and partial repayments.
This directive was transposed into Irish law in December 2023 – two years after it came into force within the EU. However, it has yet to be tested with the Central Bank now permitted to regulate Credit Servicers.
The Oireachtas Library research paper also referenced a report by the London School of Economics in 2023 on those facing difficulties with vulture funds which suggested interest-free equity loans to clear the unsecured element of the loans, and government equity loans on the model of Help to Buy, interest-free for the first five years as possible solutions.
A section of Ireland’s homeowners are trapped in a grim spiral, fleeced by vulture funds and their tax-dodging credit servicers. Initiatives like Núa Money and the EU directive offer potential respite, but taxpayers and homeowners continue to suffer while vultures pursue vulnerable households.
Until the government begins to seriously clip the wings of vultures and the enabling credit servicers , this vicious cycle will only continue.