# Regulation of Vulture funds



## witz1234 (14 Mar 2018)

I just saw an interview on the news which said that when mortgages are transferred to vulture funds, there will be no regulations and they are beyond the reach of the central bank.

Is this true? What is the implication of this for mortgage holders who are transferred to Vulture funds?


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## Andy836 (15 Mar 2018)

They're still subject to the exact same laws as every other lender in the state. 

They may not offer the same "solutions" as the state owned banks (mainly extend and pretend because the taxpayers and SVR borrowers are paying for that) but there are no laws applicable to the regular banks that don't also apply to funds.

Regardless of that fact, you should be afraid. Very afraid. So afraid you should vote for FF as they promise they'll regulate them. FF's proposal may be very vague, it may appear wishy washy or without substance, it may seem like it's only purpose is to get them on the tv or radio but remember, deep down they're the champions of the People.

In summary, legally it makes no difference


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## newtothis (15 Mar 2018)

Andy836 said:


> They may not offer the same "solutions" as the state owned banks (mainly extend and pretend because the taxpayers and SVR borrowers are paying for that)



If I reach an agreement with a bank to "extend and pretend" as you put it, how are taxpayers and other borrowers paying for it, if my repayments have always at least covered the interest? It's actually the opposite: I’ll probably end up paying far more interest over the lifetime of the loan.

By contrast, who do you think is funding the profits the vulture funds intend to make? That is, who picks up the tab for the write-down the loan is sold for in order to attract to funds in the first place? Oh, yes, that would be the taxpayer and other borrowers....

To the OP: whilst it's true tha the terms and conditions on the loan don't change, the bahviour of the lender may change, perhaps very significantly. As regulated entities, the banks can't just do what they want: they are subject to oversight and regulations from the Central Bank (however inadaquate they might be). Funds are not subject to that regulation and can do pretty much what they want within the normal constraints of the law that apply to anyone. So, yes, there is a very big difference.


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## IdesofMarch (15 Mar 2018)

Andy836 said:


> They're still subject to the exact same laws as every other lender in the state.
> 
> They may not offer the same "solutions" as the state owned banks (mainly extend and pretend because the taxpayers and SVR borrowers are paying for that) but there are no laws applicable to the regular banks that don't also apply to funds.
> 
> ...



Balderdash, of course it makes a difference. Ed Sibley of the CBI stated on the record (8th December 2016) in front of the Joint Oirechtas Committee investigating the tracker mortgage scandal, that the CBI had lobbied very hard for these funds to be regulated like banks, but the FG led Government of the time opted (ludicrously), to regulate the intermediate credit service provider instead (albeit, after been intensly lobbied by the vulture funds not to be regulated). So,from the vulture funds prospective, you can bet your bottom dollar, it does make a difference to them, otherwise why did they lobby Government so intensely not to be regulated.


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## Protocol (15 Mar 2018)

My Danske mortgage has been sold to Proteus, owned by PIMCO / Goldman Sachs.

Are these buyers "vulture funds"?

We should be aware of the use of language.

AFAIK, every Danish mortgage is sold on by the originating bank.

Does the selling of a mortgage automatically mean that the buyer is a vulture?


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## Sarenco (15 Mar 2018)

IdesofMarch said:


> Ed Shipley of the CBI stated on the record (8th December 2016) in front of the Joint Oirechtas Committee investigating the tracker mortgage scandal, that the CBI had lobbied very hard for these funds to be regulated like banks


Well, his boss seems to be of a different view...

_Philip Lane, Governor of the Central Bank, has also signalled his discomfort with the [FF] bill, according to Goodbody stockbrokers. _

_Last Friday, at a speech to the Institute for International and European Affairs in Dublin, Professor Lane claimed that borrowers whose loans are sold are afforded the same regulatory protection they had prior to the sale._

_In a note to clients yesterday, Goodbody claimed these remarks represented a "veiled reference" to Fianna Fáil finance spokesperson, Michael McGrath, and indicated that Professor Lane believes "there is no need for ...[the] proposed new bill to regulate non-regulated funds"._

https://www.independent.ie/business...back-in-favour-as-banks-deliver-36698641.html


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## newtothis (15 Mar 2018)

Protocol said:


> My Danske mortgage has been sold to Proteus, owned by PIMCO / Goldman Sachs.
> 
> Are these buyers "vulture funds"?
> 
> ...



I don't think anyone presents themselves to the market as a "vulture fund": it's an informal pejorative term people use. Much as you may dislike banks, when you take out a mortgage with them you do so on the basis of understanding who they are (and the fact they operate in a highly regulated market) and what they are likely to do. In particular, their interest is in seeing the agreement through as a long-term arrangement. Vulture funds have absolutely no interest in long term arrangements: they are there to turn a quick profit. They are not regulated: if it's a SVR rate mortgage they could for example raise the interest rate to 20% overnight unless there's something in the agreement that says otherwise. I'm not suggesting they would, or that banks don't have questions to answer too, but it is a very different kettle of fish in dealing with them.


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## Andy836 (15 Mar 2018)

newtothis said:


> If I reach an agreement with a bank to "extend and pretend" as you put it, how are taxpayers and other borrowers paying for it, if my repayments have always at least covered the interest? It's actually the opposite: I’ll probably end up paying far more interest over the lifetime of the loan.
> 
> By contrast, who do you think is funding the profits the vulture funds intend to make? That is, who picks up the tab for the write-down the loan is sold for in order to attract to funds in the first place? Oh, yes, that would be the taxpayer and other borrowers....
> 
> To the OP: whilst it's true tha the terms and conditions on the loan don't change, the bahviour of the lender may change, perhaps very significantly. As regulated entities, the banks can't just do what they want: they are subject to oversight and regulations from the Central Bank (however inadaquate they might be). Funds are not subject to that regulation and can do pretty much what they want within the normal constraints of the law that apply to anyone. So, yes, there is a very big difference.



The credit servicer who manages the loan for the fund is subject to the exact same regulatory oversight as regular lenders.

there is no difference

The fact you are covering the "interest" does not mean it is profitable. If you are on a tracker rate and the loan is impaired, and thus subject to a capital provision, then the interest received probably wouldn't cover the cost of capital for the loan. Add to that the fact you're a problem borrower so you consume much more operating expenses (bank employee time) than a regular borrower so that reduces any potential profitability.


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## Andy836 (15 Mar 2018)

IdesofMarch said:


> Balderdash, of course it makes a difference. Ed Shipley of the CBI stated on the record (8th December 2016) in front of the Joint Oirechtas Committee investigating the tracker mortgage scandal, that the CBI had lobbied very hard for these funds to be regulated like banks, but the FG led Government of the time opted (ludicrously), to regulate the intermediate credit service provider instead (albeit, after been intensly lobbied by the vulture funds not to be regulated). So,from the vulture funds prospective, you can bet your bottom dollar, it does make a difference to them, otherwise why did they lobby Government so intensely not to be regulated.



Right, but if the funds were regulated can you name anything specific that would be different or of additional a benefit to defaulted borrowers?


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## Sarenco (15 Mar 2018)

newtothis said:


> I'm not suggesting they would, or that banks don't have questions to answer too, but it is a very different kettle of fish in dealing with them.


That's not the experience of Ross Maguire SC of New Beginnings - he is quite clear that honest distressed borrowers are not disadvantaged when their loans are assigned to unregulated purchasers:-
https://www.irishtimes.com/opinion/...e-little-to-fear-from-vulture-funds-1.3399155


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## IdesofMarch (15 Mar 2018)

Andy836 said:


> Right, but if the funds were regulated can you name anything specific that would be different or of additional a benefit to defaulted borrowers?



Andy,

Quite simply, the funds lobbied Government very intensively not to be regulated, so much so, that the Government of the time, disregarded the Governor of the Central Bank of Ireland, Mr Patrick Honohan's concern regarding this issue.


http://www.thejournal.ie/honohan-vulture-funds-ibrc-warning-1441483-Apr2014/



In reply to your question, I believe section 28(f) of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 provides the answer, it states


“(2) For the purposes of this Part ‘credit servicing’ does not include—

(a) the determination of the overall strategy for the management and administration of a portfolio of credit agreements,

(b) the maintenance of control over key decisions relating to such portfolio, or

(c) taking such steps as may be necessary for the purposes of—

(i) enabling the undertaking of credit servicing by another person, or

(ii) enforcing a credit agreement,

A key decision relating to a portfolio would include the setting of the variable interest rates for the portfolio.

In other words these functions are still unregulated and the vulture funds can do what they wish with regard to those exemptions listed.

These  exemptions were put in at the specific request of lobbyists for the vulture funds to the Dept of Finance and Dept of Taoiseach.

Andy, what I can say is that vulture funds are going to be regulated (FG and FF have already agreed to this) and political expediency triumphs everything else, no matter what any other posters might say or quote.


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## Andy836 (15 Mar 2018)

How does the CBI regulate interest rates? They don't.

Or are you suggesting that the CBI would stop a fund raising rates? Have they ever stopped a regular bank raising rates? 

Basically you've come up with nothing. Nothing would change.


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## IdesofMarch (15 Mar 2018)

Wrong again. A fund could double variable interest rates overnight, while a regulated entity would (if enquired by the CBI) have to give full reasons for the interest rate increase. A vulture fund does not have to provide books for the CBI regarding prudential supervision, so there is no way of knowing whether the said variable rate increase by the fund was justified or just plain price gouging. The fund, if regulated by the CBI, would probably have to provide a full suite of alternative repayment arrangements just like the other regulated entities.


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## Sarenco (15 Mar 2018)

IdesofMarch said:


> the Government of the time, disregarded the Governor of the Central Bank of Ireland, Mr Patrick Honohan's concern regarding this issue.


Patrick Honohan expressed those concerns back in 2014 - prior to the passing of the Consumer Protection (Regulation of Credit Servicing) Act 2015.  That Act amends the Central Bank Act 1997 to provide for a regulatory regime in respect of Credit Servicing Firms, bringing such firms within the Central Bank’s regulatory remit.

Dr Honohan's successor as Governor, Philip Lane, has recently confirmed that this legislation is effective in ensuring borrowers whose loans are sold are afforded the same regulatory protection they had prior to the sale.

The Central Bank has no statutory power to stop a credit institution from raising any variable interest rates where it has the contractual power to do so.

The Minister for Finance did certainly initially indicate that, in principle, he was supportive of the FF Bill.  However, more recently he expressed concerns that the proposed legislation could impede loan securitisations, which would have a negative impact on our economy.

If the Central Bank doesn't think the legislation is necessary - and a respected debtor advocate like Ross Maguire SC doesn't think the legislation is necessary - you really have to wonder what is the point?  Is it anything more than optics and political opportunism?


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## IdesofMarch (15 Mar 2018)

I suppose with the vast tranches of residential property loans on the cusp of being sold to vulture funds, it would be politically expedient to regulate these funds, especially when you and others contend there is no difference between being regulated and unregulated anyway.

As a by the way, Ed Sibley and Bernard Sheridan of the CBI did note on the record to the Joint Oireachtas committee that they were concerned with the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 and the CBI's  "Lack of teeth" in dealing with these funds. These comments were made in 2016, after the Act was passed into law.


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## Andy836 (15 Mar 2018)

The main banks don't have to justify their SVRs to the CBI for apprpval.

The CBI also has no say in the repayment options the main lenders provide to defaulted borrowers. 

All of you're examples are false.


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## IdesofMarch (15 Mar 2018)

Aah Andy, what would Mr Ed Sibley, Head of Prudential Regulation at the Central Bank of Ireland and Mr Bernard Sheridan, Head of Consumer Protection at the Central Bank of Ireland know about consumer protection, you and Sarenco are right as usual. Now wait and see, the funds will be regulated. Ha, Ha. Andy, you must be a banker, and Sarenco you must be a  solicitor of some sort, two great consumer advocates on a consumer forum.


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## witz1234 (15 Mar 2018)

Going back to the original post. Suppose I have a mortgage and am paying what I can towards to the bank by agreement.  If it is now transferred to Vulture funds, will they still have to go through the courts to get possession of the house.  

Put another way, if I am making reasonable payments, am I likely to lose my house.


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## Andy836 (15 Mar 2018)

Yeah, we are both right. And you're wrong. 

If the CBI could block or adjust interests rates set by the Banks why then were FF proposing a bill in 2016 that would give the CBI the ability to cap SVR rates? 
Let me dumb it down, if they had these powers as you stated they wouldn't need to be given them. 
Why did Mr Ed Silby (who you've quoted & referenced above) publicly oppose that bill?

Don't take my word or Sarenco's

Take Mr Silby's word himself:
http://www.thejournal.ie/variable-mortgage-rates-bill-central-bank-2-3127851-Dec2016/

So, in summary - you're wrong on absolutely everything you've said.


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## Andy836 (15 Mar 2018)

witz1234 said:


> Going back to the original post. Suppose I have a mortgage and am paying what I can towards to the bank by agreement.  If it is now transferred to Vulture funds, will they still have to go through the courts to get possession of the house.
> 
> Put another way, if I am making reasonable payments, am I likely to lose my house.



You are no less likely to loose your house to a repossession order if the loan is owned by a vulture fund than owned by a normal bank.

This has nothing to do with Central Bank regulations. This is purely down to the courts. 

As Brendan has pointed out on numerous occasions, the courts will not give an order for repossession if you're making a genuine meaningful effort.


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## witz1234 (15 Mar 2018)

So repossession is only in the case where the courts agree that there is no reasonable effort to pay at least part of your mortgage payments.

Is this not a good thing? If I am not making a reasonable effort to pay my mortgage, then there should be some means for repossession.  If I am making a reasonable effort, the courts will protect me.

Otherwise, why should I bother paying anything?


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## IdesofMarch (15 Mar 2018)

Andy836 said:


> You are no less likely to loose your house to a repossession order if the loan is owned by a vulture fund than owned by a normal bank.
> 
> This has nothing to do with Central Bank regulations. This is purely down to the courts.
> 
> As Brendan has pointed out on numerous occasions, the courts will not give an order for repossession if you're making a genuine meaningful effort.



witz1234,

Take the last two posts with a pinch of salt and a Hail Mary, you are more likely to lose your house if the entity that owns the legal charge over your home is a vulture fund rather than a regulated credit institution. These vulture funds fought hard not to be regulated and paid big bucks to the lobbyists in this regard. If there was no difference between being regulated and unregulated, the funds themselves would not have bothered to intensively lobby the Dept of Finance to be unregulated. You need to do some research regarding other Countries where vulture funds have been allowed a free hand. It will swiftly answer your question. The thing to remind yourself is, vulture funds are not here for the long term, it is short term turnaround and profit that they are after, in other words, if you are in arrears, for you to refinance somewhere else or for them to take possession of the security, YOUR HOME, that is their business model, end of.


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## IdesofMarch (15 Mar 2018)

Andy836 said:


> Yeah, we are both right. And you're wrong.
> 
> If the CBI could block or adjust interests rates set by the Banks why then were FF proposing a bill in 2016 that would give the CBI the ability to cap SVR rates?
> Let me dumb it down, if they had these powers as you stated they wouldn't need to be given them.
> ...



Andy, why pray tell, does the CBI have a requirement that all regulated entities have a "variable interest rate policy statement"  on their respective websites as per the CCMA 2017.


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## IdesofMarch (15 Mar 2018)

witz1234 said:


> I just saw an interview on the news which said that when mortgages are transferred to vulture funds, there will be no regulations and they are beyond the reach of the central bank.
> 
> Is this true? What is the implication of this for mortgage holders who are transferred to Vulture funds?


This is true.


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## Sarenco (15 Mar 2018)

IdesofMarch said:


> Andy, why pray tell, does the CBI have a requirement that all regulated entities have a "variable interest rate policy statement"  on their respective websites as per the CCMA 2017.


Good question - those statements are completely meaningless.

Niall Brady (Sunday Times, 15 November 2015) put it very well –

_“Transparency can only be a good thing in financial services but what if the information you get is worthless? 

The Central Bank’s latest contribution to the mortgage pricing row is a proposal that lenders should have to explain how variable rates are set. This is unlikely to reveal anything new. _

_In research published last May, the Central Bank told us why Ireland has some of the highest variable rates in the eurozone: bad debts, difficulties repossessing properties when loans go bad, tracker mortgages that are barely profitable, a lack of competition, the high cost of funds. _

_Lenders would simply recycle this list, probably without referring to the absence of competition, if required to justify the cost of variable mortgages in writing. Knowing why you are paying over the odds does not sweeten the pill — no matter how sound the explanations.”_


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## Sarenco (15 Mar 2018)

IdesofMarch said:


> This is true.


No, it's not true that there are no regulations in place, as we have already pointed out to you. 

The Governor of the Central Bank has confirmed that borrowers whose loans are sold are afforded the same regulatory protection they had prior to the sale.


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## IdesofMarch (15 Mar 2018)

Sarenco said:


> No, it's not true that there are no regulations in place, as we have already pointed out to you.
> 
> The Governor of the Central Bank has confirmed that borrowers whose loans are sold are afforded the same regulatory protection they had prior to the sale.



Vulture funds are *NOT *regulated at the moment.


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## Sarenco (15 Mar 2018)

IdesofMarch said:


> Vulture funds are regulated at the moment.


Nope.  In general, the entities that are used to purchase distressed debt portfolios are unregulated but the entities that service those loans are very much regulated.

Hence, borrowers whose loans are sold are afforded the same regulatory protection they had prior to the sale.


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## IdesofMarch (15 Mar 2018)

Sarenco said:


> Good question - those statements are completely meaningless.
> 
> Niall Brady (Sunday Times, 15 November 2015) put it very well –
> 
> ...



Thank you so very much for highlighting this to readers, foreseeability, with regard to variable rate clauses employed by Irish banks within their contractual clauses, is a big issue in this Country. When it is raised within affidavits against possession in Irish Courts, guess what, the cases are settled and the actions struck out. I hope to open a thread on the issue shortly.


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## Sarenco (15 Mar 2018)

IdesofMarch said:


> C 143/13 Bogdan Matei v Volksbank S.A. the answer lies there, philistines.


Already discussed in detail on this thread:-
https://www.askaboutmoney.com/threa...used-to-challenge-high-variable-rates.195197/


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## Brendan Burgess (15 Mar 2018)

Guys, I have removed personalised posts and am closing the thread temporarily to allow you all cool down.

I fully appreciate that it is frustrating if the other person does not agree with your interpretation of the facts, but you should be able to discuss a factual issue without making personalised comments. 



Brendan


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