Fianna Fáil insists ‘vulture funds’ be regulated before mortgages sold

Fianna Fáil has insisted the Government has to accept "vulture funds" must be regulated before any sale of billions of euro worth of mortgages by Permanent TSB. The bank, which is 75 per cent owned by the State, plans to sell off a loan portfolio worth €3.7 billion.

Minister for Finance Paschal Donohoe will meet Michael McGrath, the Fianna Fáil finance spokesman, on the issue on Wednesday. Mr McGrath will table a Bill in the Dáil next week calling on so-called vulture funds to be regulated.

Taoiseach Leo Varadkar on Tuesday indicated the Government was willing to take his concerns on board. In a sign of a softening approach to Fianna Fáil, Mr Varadkar praised both the party and Mr McGrath personally for their work on the issue.

Government figures have said they are open to doing a deal with Fianna Fáil, but informed sources say there a number of concerns about how an arrangement may be arrived at.

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These include how people with split mortgages – where a portion of the debt is parked to a future date – with PTSB would be affected, as well as how to regulate funds that may be based in other jurisdictions such as Luxembourg or the UK.

The issue was also discussed at Cabinet on Tuesday, with Independent Alliance Ministers Finian McGrath and Shane Ross said to have expressed serious concern about how those with PTSB mortgages could be affected.

Repossession cases

In a statement the Independent Alliance Minister of State Kevin “Boxer” Moran said the heads of his Bill allowing courts to take into account a range of additional circumstances in repossession cases, including the impact of home-loss on children, were currently being drafted.

Speaking in the Dáil, Michael McGrath said the PTSB sale of non-performing loans could be worth €4.5 billion, and up to €3 billion of them relate to family home mortgages.

There is no reason Permanent TSB cannot work its way through its loan book, engage with customers, restructure loans and write off debts as necessary

"Close to €1 billion relates to buy-to-let properties. If such a sale proceeds those loans will inevitably be bought by vulture funds. Owing to the decision made by the previous government, those vulture funds are not fully regulated in Ireland.

“We have credit servicing legislation under which the intermediary has to be regulated but the fund itself does not need to be. The sale must not proceed. It is completely unacceptable that family home mortgages would be sold from under people’s feet in this manner to a vulture fund. This needs to be addressed as a matter of urgency.”

He said all TDS were aware that the European Central Bank was pressuring Irish banks to reduce the value of their non-performing loan books.

“There is no reason Permanent TSB cannot work its way through its loan book, engage with customers, restructure loans and write off debts as necessary. It is taking the easy option, however, and outsourcing its dirty work. That is exactly what will occur if the sale proceeds.”

Enough stress

Mr Varadkar said that PTSB’s loans may be sold to a regulated bank or another institution. He told the Dáil on Tuesday the bank had not yet sold any of the loans, and had not identified a prospective buyer.

He said it was an assumption by some people that the buyer would be an unregulated so-called vulture fund. “I think distressed mortgage holders are under enough stress, and we should not add to that unnecessarily by causing them undue concern.”

He said the bank would have to consult with the Minister for Finance on any advanced sale proposal. “No such proposal yet exists, and the Government, absolutely, will give open and constructive consideration to any proposals for additional protections that may be necessary so we ensure the rights and freedoms of borrowers and mortgage holders are protected.”