# Vultures: repossession tsunami myth



## RedOnion (23 Jun 2019)

Something that floated under the radar over the past while, that I've been meaning to start a thread on.
While the 'vulture funds' were buying up mortgages, I argued they weren't all in it for a quick turnaround. The sale of the performing Danske book to Goldman Sachs who immediately securitized the portfolio was an example.

Now, even for less performing mortgages the funds have found a way for a quick return, without repossession. Lone Star recently sold a portfolio of 336 million euro worth of mortgages to Morgan Stanley, who in turn are funding via RMBS bonds.

There are 1,711 're-performing' mortgages. By agreeing restructuring of the mortgages, Lone Star have increased their value and made a quick profit here.

There is some interesting details of the kinds of deals that the 'vultures' are making with borrowers. For example _"Additionally, 4.4% of the loans in the mortgage portfolio (aggregate current balance of EUR14.8 million) have been restructured where EUR 5.9 million of the outstanding balance can be written off if the loan is not in arrears for longer than three months on or before a specified date."_

Covered in the Irish Times:








						Morgan Stanley buys restructured Irish mortgages from Lone Star
					

US investment bank currently refinancing Irish loans in bond markets




					www.irishtimes.com
				




More detail on the make up if the portfolio:
The provisional mortgage loans were originated by Irish Nationwide Building Society (INBS; 47.4%), Bank of Scotland plc and Bank of Scotland (Ireland) Limited (33.4%), Start Mortgages DAC (16.5%)(Start) and NUA Mortgages Limited (2.6%), and are secured by Irish residential properties.


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## AineMahon (25 Jun 2019)

I would tend to agree with you RedOnion.

I have found that 'vulture funds' like any business do just want to make money. They hold a distinct advantage over Banks as they bought the debt at a discount. As such in order for them to make a profit they require less money than the outstanding balance. This leaves them and their debtors more leeway in order to negotiate. I have found that 'vulture funds' just one of two things; (1) they want the balance cleared/settled and (2) long term payment plan put in place. 

(1) The balance cleared/settled
- 'Vulture Funds' are more open to a DPO (debt purchase offer), they will (when reasonable) accept a reduced balance to clear the outstanding balance (this will affect your credit rating but a great option for those in negative equity and means to settle)
- Voluntary Surrender full and final settlement - an option not entertained by many banks (sets a bad precedent) but allows a person in bad debt to walk away debt free. This saves the Vulture Fund the time and expense of a receiver or legal proceedings.
- Mortgage to Rent / Icare / Third party - you surrender the property to the 'vulture fund' and they sell it at a discounted price to allow you to rent it back (an option offer by many 'vulture funds'

(2) Long Term Payment Plan
- Entering into a long term payment plan is definitely an option 'vulture funds' want. This guarantees them a profit. They will obtain the full balance outstanding from the debtor. Many 'vulture funds' are happy to keep these performing loans on their books or alternatively they will package their performing loans and sell them to another fund or even a bank.

The real reason 'vulture funds' and indeed any financial institutions get a 'bad name' is thhe asset. While I take sympathy for those with bad de person who who won't engage constructively. Really a person who does not (or can not) pay the sustainable monthly installment and does not want to settle the matter by surrendering the asset. While I understand not wanting to surrender your home, it just is not sustainable to keep it and not have a performing loan. I see many articles saying 'I can pay if they would just write off the arrears or at least the interest on the arrears'. There is no obligation on any debt owner to reduce or write off the arrears. In fact for a 'vulture fund', they purchased your debt with the arrears and late charges in the outstanding balance.  

I could go on for miles, so I will see what other people add to the thread or think of the above and I will respond to any questions.


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## demoivre (26 Jun 2019)

AineMahon said:


> There is no obligation on any debt owner to reduce or write off the arrears



The courts can force a write down on the debt owner under Section 115A of the Personal Insolvency Act.


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## lff12 (26 Jun 2019)

demoivre said:


> The courts can force a write down on the debt owner under Section 115A of the Personal Insolvency Act.



True but this is still currently a very small few people.


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## AlbacoreA (26 Jun 2019)

AineMahon said:


> I...While I understand not wanting to surrender your home, it just is not sustainable to keep it and not have a performing loan. I see many articles saying 'I can pay if they would just write off the arrears or at least the interest on the arrears'. There is no obligation on any debt owner to reduce or write off the arrears. In fact for a 'vulture fund', they purchased your debt with the arrears and late charges in the outstanding balance. ...



The vulture fund got a discount that made it viable.  
People feel hard done that they don't get offered the same discount, which might have made it viable. 
often the lender delays so long that it makes it far worse for the original borrower, then it needed to be. 

Obviously its the scale of the fund that gives them the power to negotiate the discount. 
Also people can not be as proactive as they should. Head in sand etc.


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