Vulture funds hold more mortgages in arrears

The amount of mortgages in arrears held by private investment funds has risen, figures released by the Central Bank have shown.

Home repossessions also rose at the end of last year. Nearly 77,500 mortgages were behind on payments at the end of December — a 2.6 per cent decrease compared with the end of September. The number of accounts in arrears of more than 90 days fell by 3.7 per cent over the same period to about 54,000.

Over the past few years many foreign-owned banks have left the Irish market and sold their loan books to so-called vulture funds. More than 12,000 family home mortgages with a total value of €2.4 billion are now owned and managed by these funds, which are unregulated. More than half of these are behind on payments by more than 90 days.

All financial firms regulated by the Central Bank must comply with strict rules on how they deal with mortgage arrears. Michael McGrath, the Fianna Fáil finance spokesman, said: “The government must act urgently to treat these funds like any other lender and bring them fully within the ambit of regulation.”

During the three months to the end of December 273 cases of mortgage arrears before the courts ended in repossession. According to the Free Legal Aid Centre, thousands of homes have been repossessed in the past four years.

“Since 2013 a total of 28,917 new repossession cases have been brought and 5,306 family homes have been repossessed through court orders or by voluntary surrender,” Paul Joyce, senior policy analyst, said.

“We also know that a substantial number of cases have been struck out or withdrawn but it is worrying that there is no figure provided for the number of repossession cases currently before Circuit Courts. What is clear is that many such cases have been in the system for some time and the households involved are at serious risk of repossession.”

About 33,500 mortgages were in arrears of more than 720 days at the end of December. The average amount owed on these accounts increased from €63,611 to €65,895 over the last quarter of 2016.

“Significantly, vulture funds are increasing their share of impaired mortgage accounts, particularly those which are in deep, longer-term arrears,” Mr Joyce said.

“Vulture funds now own over 15 per cent of the accounts in arrears over two years, up from 11 per cent in the previous quarter.”

Some 120,944 residential mortgage accounts were classed as restructured at the end of December — a reduction of 196 accounts in the quarter.

“The rate of failure in restructures is another worrying trend,” Mr Joyce said. “Almost 1,400 split mortgage arrangements are failing to meet the terms of the arrangement, and the failure rate for capitalisation of arrears is 22.5 per cent — almost a quarter. This indicates that unrealistic restructuring arrangements are being made, with most lenders continuing to avoid the write-down of the mortgage to a sustainable level.

“Lenders must consider all available restructuring options, including mortgage write-down where appropriate, if the aim is to keep as many people in their homes as possible.”