# My submission on vulture funds to the Oireachtas Finance Committee



## Brendan Burgess (21 Mar 2018)

AIB and ptsb are presenting to the Oireachtas Finance Committee tomorrow, I have sent this letter. 

Dear Mr McGuinness 

I have been campaigning on the issue of mortgage arrears and mortgage interest rates for many years. 

In the interests of those responsible borrowers who are paying the highest mortgage rates in the Eurozone, we have to either allow lenders to repossess houses from those who have paid nothing for years or else let the lenders sell those loans to vulture funds. 

The experience of the Dublin Circuit Court last Friday is a clear indication of why this is necessary.



As you can see there is a minority of borrowers deliberately paying nothing and the lenders can do nothing about it. 

I attach a summary of the points I would like to make. I would submit a fuller presentation before the meeting. 

I think it might also be useful to invite Ross Maguire, Karl Deeter and Séamus Coffey to present. While we disagree on some points, we have a broadly similar view. 



Brendan Burgess


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## Brendan Burgess (21 Mar 2018)

*Responsible borrowers will benefit from Vulture Funds *
Brendan Burgess summary of submission to Oireachtas Finance Committee 21st March 2018

*What the Oireachtas Finance Committee should recommend *
Ø  Prioritise the great majority of borrowers who are responsible, many of whom have to make great personal sacrifices to pay their mortgage – They should be paying a much lower mortgage rate.

Ø  Prevent lenders from taking legal action where the borrower is paying at least the interest on the mortgage

Ø  Allow the lenders to fast track repossession against the minority of borrowers who have been paying nothing for some time. Their mortgages are being paid for by the responsible majority.

Ø  If we don’t allow the lenders to repossess the homes of those who won’t pay their mortgage, then we should not complain if those lenders sell those loans to vulture funds.

Ø  Reintroduce Mortgage Interest Supplement for those borrowers who would be dependent on the state for their housing – this would be much better than repossessing the house and much cheaper for the taxpayer than the cumbersome Mortgage to Rent Scheme 


*If we don’t allow lenders to repossess houses, they have no choice but to sell them to vulture funds. *
*Three repossession orders were granted by the Registrar in the Dublin Circuit Court last Friday.*




In case 1, the first missed payment was in 2009. Since 2012, she has paid €1,870 in total. The arrears are €92k which is the equivalent of 7 ½ years repayments. KBC initiated proceedings in 2014. It took KBC 4 years to get an order for possession. Even then, the Registrar put a stay of one year on it.  KBC applied for legal costs but were refused.  The woman appears to be living on her own without a partner or children in a three bed house.  This woman will have the equivalent of 8 ½ years free accommodation. Of course, while this accommodation, will be free to her, the other responsible mortgage holders will be paying it for her.

This is the reality of what is happening in our courts.  Some borrowers are simply not paying their mortgage and it takes the banks years and huge legal expense to recover the home.

The lenders cannot devote this amount of time and resources for a period of years trying to recover the houses where the borrowers simply won’t pay. They are right to sell these mortgages for whatever they can get and move on.

*The majority of responsible borrowers are paying for the small minority of borrowers who won’t pay *



We have the highest mortgage rates in the Eurozone. Not just a little bit higher, but almost 1.5% higher.

On a mortgage of €300,000, a borrower is paying €370 more per month than she would be paying in the average Eurozone country.

And many borrowers are paying 4.5% by default.

No foreign lender will enter the Irish market until the system is changed to allow them to repossess properties where the borrower is not paying.

This dysfunctional possession system suits the Irish banks.  While it frustrates them on a case by case basis, it keeps overseas competitors out of the most profitable mortgage market in the eurozone.

*The Tracker Mortgage Scandal was really the Very High Mortgage Rates Scandal*
If a borrower who lost their tracker rate of 1%, paid the eurozone average of 1.8%, they would have paid around €200 more in interest each month, which they could cope with. But those who are paying 4.5% instead of 1% are being charged an extra €900 a month, which is life-changing.

If the Irish banks were charging fair mortgage rates, the lenders would have been less determined to deprive borrowers of them and any borrowers so deprived would have been impacted much less.

*Mortgage Interest Supplement should be reintroduced for those who can’t pay *
In the UK, the government pays the mortgage interest for those who would be dependent on the state. But it is a loan secured on the home which is repayable when the borrower dies or sells the house. 

This would be so much cheaper and quicker to implement than the extremely cumbersome Mortgage to Rent Scheme. All it would require would be the normal Social Welfare means test and an assessment of housing needs from the local authority. Despite the high mortgage rates in Ireland, it would be much cheaper for the taxpayer to pay the interest on a borrower’s mortgage than to pay their rent for them.


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## Webster (21 Mar 2018)

Brendan, 

I like your point of not allowing lenders to take legal action if the borrower is paying at least the interest potion of the loan, how would that apply to Vulture Funds, if the lender has sold on the mortgage ?


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## demoivre (21 Mar 2018)

Brendan Burgess said:


> As you can see there is a minority of borrowers deliberately paying nothing and the lenders can do nothing about it.



What I see is that orders were granted in 3 of the 5 cases you quoted !


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## Andy836 (21 Mar 2018)

I don't think it's accurate to state it's SVRs who are paying for those who refuse to engage or pay. 
SVRs are also paying for those who can't pay the full amount. Those NPLs need to be addressed also. Just because someone is covering the interest portion doesn't mean it's covering operating expenses, capital costs (which are elevated on NPLs) etc.

Whether you like it or not, if you don't pay your mortgage in full (no matter the reason nefarious or through job loss or medical conditions or whatever) it is other Borrowers who end up paying for it. 
All NPLs need to be allowed be repossessed. It is not the Bank's job to provide social housing. It is the governments and it has failed to do so. And this failure is impacting SVR Borrowers.


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## cremeegg (21 Mar 2018)

Brendan Burgess said:


> We have the highest mortgage rates in the Eurozone. Not just a little bit higher, but almost 1.5% higher.



A rate of 3.28% is 1.48% higher than 1.8%.

1.48% is 82/100 of 1.8%

In other words the Irish average rate is 82% higher than the Eurozone average rate.


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## Brendan Burgess (21 Mar 2018)

cremeegg said:


> 1.48% is 82/100 of 1.8%



Good point. I should have said 1.48 percentage points. But by showing the actual interest charged, it should be clear. 



Brendan


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## IdesofMarch (21 Mar 2018)

Brendan Burgess said:


> Good point. I should have said 1.48 percentage points. But by showing the actual interest charged, it should be clear.
> 
> View attachment 2681
> 
> Brendan



4440 divided by 5400 multiply by 100 equals 82.2%, this means that the difference between  Irish mortgage average rate and the Eurozone mortgage average rate is that the average Irish mortgage rate is approx 82% higher than that of the average Eurozone mortgage rate. Cremeegg is correct.


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