# RTE's programme on Vulture Funds



## Brendan Burgess (10 Jan 2017)

Did anyone watch this and Claire Byrne afterwards?

http://www.rte.ie/player/ie/show/the-great-irish-sell-off-30004491/10671887/

There was some balance in that they extensively interviewed John Moran    , who was Secretary General of the Department of Finance, when the foreign investors were encouraged to come into Ireland. They also interviewed the MD of I-Res who made no apology for charging market rents.

Ross Maguire was excellent on Claire Byrne pointing out that the protections for home owners in Ireland were excellent. He also pointed out that the Vulture Funds were no worse than the mainstream mortgage lenders, and in some cases they are better, as they are prepared to deals on writing off the mortgage shortfall.

But the main guy to feature in the programme and on Claire Byrne afterwards went into arrears on his home in 2010.  He had borrowed money for his construction business and secured it on his family home which was a large house on its own grounds. And he is still in it in 2017!  No one raised this. This would not happen in any other country in the World. He would have been repossessed back in 2011 and he would have moved on.


As usual, they trotted out Ashoka Modi who was described as "Head of IMF's Irish Mission" during the bailout. He may have been, but he had been involved in Ireland for some time before that.  This is what he wrote in July 2010,  a few months before the Bailout
*IMF Survey: After Deep Slump, Nascent Recovery for Ireland*
He is portrayed as God. He is not.

And the programme gave the impression that the charity loophole was developed to facilitate vulture funds. As John McManus has pointed out, it is the flipside of our very generous tax regime which canibalises the tax revenues of other countries.  But when they use the Irish tax incentives to canibalise Irish tax revenues,they become "loopholes".

http://www.irishtimes.com/opinion/j...tax-avoidance-rings-a-little-hollow-1.2739431

Of course, these incentives are wrong. But they are wrong for all the multinationals and not just the vulture funds.

Brendan


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## Delboy (10 Jan 2017)

I saw it. Much as I expected, nothing new for anyone who has been even half following the subject.

The Canadian MD of I-Res...let he be a warning to anyone who talks about having a more organised, concentrated rental market with just a few big players.

The Charity angle...loophole or not, the Dept of Finance was well aware that the Vulture funds coming in to purchase property at knock down rates were going to avail of the tax status. John Moran said as much. And by the time the loopholes are closed, they will have left the Irish market.
It's one thing getting to buy cheap property but its really a kick in the teeth to have them paying no tax as well.


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## demoivre (10 Jan 2017)

Brendan Burgess said:


> But the main guy to feature in the programme and on Claire Byrne afterwards went into arrears on his home in 2010. And he is still in it in 2017! No one raised this. This would not happen in any other country in the World. He would have been repossessed back in 2011 and he would have moved on.



AFAIK legal proceedings hadn't even commenced in this case which is the fault of the bank and subsequently the vulture fund. 



Brendan Burgess said:


> Ross Maguire was excellent on Claire Byrne pointing out that the protections for home owners in Ireland were excellent



I agree. Maguire also pointed out that borrowers weren't using the protections that were available and we see that time and again where DSAs or PIAs aren't even mentioned as part of a solution to a mortgage arrears problem. In that context maybe the guy mentioned above can save his house and imo a possession order should not be granted on a family home unless a PIA or the like is deemed unsuitable by the court.


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## Brendan Burgess (10 Jan 2017)

demoivre said:


> In that context maybe the guy mentioned above can save his house and imo a possession order should not be granted on a family home unless a PIA or the like is deemed unsuitable by the court.



His house appeared to me to be a very large detached house on its own grounds. 

If he is insolvent, he does not need to live in a house like that. But he might  not be insolvent so he won't get a PIA.

Brendan


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## trasneoir (10 Jan 2017)

Brendan Burgess said:


> Did anyone watch this?


Any sign of it on rte player?


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## Brendan Burgess (10 Jan 2017)

http://www.rte.ie/player/ie/show/the-great-irish-sell-off-30004491/10671887/


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## Brendan Burgess (10 Jan 2017)

Here is a transcript of the piece on Donal Burns - starts at 45 minutes 


Voiceover:  Even now hedge funds which buy funds operate without much regulation or oversight. And this impacts on real people

Dermot Burns ran a successful business.

Burns "In late 08 businesses collapsed all around us. That was the start of it.

We had a yard. We put the house up as collateral for that.

We had the mortgage with BoS .BoS were at that time in trouble themselves, so we thought that might be a good thing for us.

We thought we could do a deal with them.

Try and get the house back from them anyway."

Voiceover: Donal’s loan was sold to Tanager.

AS he began negotiations, his wife became ill and passed away 3months after the diagnosis.

It was something like €275k + there was arrears on that as way.

Donal’s brother offered to buy the house from Tanager."

"We got the house valued and we offered that value to Tanager and they refused.

We made a second offer and they turned down that as well. No reason.

They decided that they just want the house back. They put the gun to your head and ask you to pull the trigger."

This mortgage appears to have been in arrears for many years. It's not clear if it was in arrears since 2008.

He hoped to exploit Bank of Scotland's difficulties. 

He says that BoS just wants the house back. Eh no. They just want him to pay the loan which he took out to finance his business. 

Brendan


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## Gordon Gekko (10 Jan 2017)

Unfortunately populism makes it difficult to point out salient points such as the fact that the gentleman in question borrowed against his home to invest in his business which then (sadly) went belly-up.


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## Kine (10 Jan 2017)

Yeah, always fascinates me that. I admire people who can take that sort of risk, but you take the risk, you will happily have the upside but not pay any heed to the downside consequences. Which, in this case, is losing the family home.


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## Thirsty (10 Jan 2017)

taking risks?  really?

this person didn't  'borrow against their home'

http://www.irishmirror.ie/news/irish-news/bank-bosses-hounding-grave-dying-2670014

edit to add:





> in some cases they are better, as they are prepared to deals on writing off the mortgage shortfall.


Almost every single post I have seen here is that they *won't* do deals.


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## Jim Stafford (10 Jan 2017)

Brendan Burgess said:


> He also pointed out that the Vulture Funds were no worse than the mainstream mortgage lenders, and in some cases they are better, as they are prepared to deals on writing off the mortgage shortfall.



I agree with Ross Maguire.  Whilst Vulture Funds are very tough to deal with, they will engage in debt forgiveness.

It is simply surprising that so many borrowers in financial difficulty do not realise that they may be able to use a PIA to write down the mortgage on the family home to its market value, subject to certain conditions.

Jim Stafford


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## Brendan Burgess (10 Jan 2017)

Hi Jim

That guy was the director of a building company. I would say that he has had good advice.

The story doesn't really add up. "We had a yard. We put the house up as collateral for that." 
So he borrowed €275k to buy a yard?  It's a BoS mortgage so it's a cheap tracker. Even if he has paid nothing at all since 2008, he probably owes a total of €350k.  I would suspect that the house and yard are worth more than €350k. 

So what could a PIA do for him?  Sell the yard for €100k and write down the value of his family home? To what €250k? It must be worth that. 

If he has paid nothing at all in 9 years, then I suspect that he wouldn't qualify for a PIA.   Of course, his brother would come up with the money.

Brendan


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## Thirsty (10 Jan 2017)

> they will engage in debt forgiveness


Give me a true life example.



> Whilst Vulture Funds are very tough to deal with


Why should 13,000 Irish Nationwide mortgage holders be forced into such arrangements with 'tough' people?

I am dealing with a case at present where the home owner 

offered to maintain interest payments - VF rejected
offered to pay capital and interest payments in full - VF rejected
offered to redeem the mortgage in full (switching mortgage) - VF rejected
I have documentary evidence to support all the above.

The VF are pushing ahead with a court case to repossess the home; despite being offered full payment of their debt.


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## thedaddyman (10 Jan 2017)

Brendan Burgess said:


> Hi Jim
> 
> That guy was the director of a building company. I would say that he has had good advice.
> 
> ...



A house like that, out in the country in rural north Cork  is probably worth no more then €175k. As for a yard, you probably couldn't give it away if you tried. The so-called "recovery" hasn't reached much of rural Ireland. Banks were throwing money at people in the mid-naughties and it was not being done by prudent lenders but by sales-men on commission. After all, if they banks had done a true valuation on the collateral then they would never have got into trouble in the first place

Have we really become such a heartless and soulless country ?  These vulture funds bought these loans often for a pittance but no-one is asking what is a reasonable return on their investment and what is actually gouging.


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## Brendan Burgess (10 Jan 2017)

Thirsty said:


> offered to redeem the mortgage in full (switching mortgage) - VF rejected



Under the Consumer Credit Act,  a borrower is entitled to redeem their mortgage in part or in full without penalty at any time.  So the VF can't reject it. 

Just repay the mortgage in full and the court case will become moot.  They will probably seek their costs. 

Brendan


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## Brendan Burgess (10 Jan 2017)

thedaddyman said:


> These vulture funds bought these loans often for a pittance but no-one is asking what is a reasonable return on their investment and what is actually gouging.



The borrowers owe the money. If they can, they should repay it.  If they are insolvent they can avail of a PIA as Ross and Jim have pointed out.

No other country mollycoddles borrowers to the extent that we do in Ireland.

Which is part of the reason responsible borrowers are paying the highest mortgage rates in the Eurozone. 

Brendan


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## Thirsty (10 Jan 2017)

> the VF can't reject it


They refused to send a letter confirming the mortgage redemption figure to the Solicitor in question and without that the Solicitor could not draw down the new loan; so whilst we may have laws in place, these VFs are a law unto themselves.


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## odyssey06 (10 Jan 2017)

One could also say no other country mollycoddles irresponsible lenders to the extent that we do in Ireland...
The fault was on both sides and both sides should take the hit.


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## Brendan Burgess (10 Jan 2017)

Thirsty said:


> They refused to send a letter confirming the mortgage redemption figure to the Solicitor in question and without that the Solicitor could not draw down the new loan;



What reason did they give for refusing?   It's a clear breach of the Consumer Credit Act.  

Brendan


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## demoivre (10 Jan 2017)

Brendan Burgess said:


> His house appeared to me to be a very large detached house on its own grounds.
> 
> If he is insolvent, he does not need to live in a house like that. But he might  not be insolvent so he won't get a PIA.
> 
> Brendan



Personally didn't think much of his house, looked badly finished to me and Gorse Hill it ain't. Surly it's the numbers that should be looked at rather than the size of the house?  That aside The ISI themselves say that debtors like Burns should be looking at the various options there if they can't repay their debts when due. The main purpose of the ISI was to keep people in their homes but for some reason, alluded to by Ross Maguire, it isn't being used to any great extent.


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## Thirsty (10 Jan 2017)

> What reason did they give for refusing?


No reason has been given.


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## demoivre (10 Jan 2017)

Thirsty said:


> Give me a true life example.
> 
> Why should 13,000 Irish Nationwide mortgage holders be forced into such arrangements with 'tough' people?
> 
> ...



Will a judge grant an order under those circumstances? I can't see it happening myself.


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## Thirsty (10 Jan 2017)

> Will a judge grant an order under those circumstances


I have no idea; home owner not unreasonably doesn't want to end up in court.


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## Johnsoner (10 Jan 2017)

Did anyone else note that the presenter of the programme is the editor of the Sunday Business Post. The SBP is owned by Key Capital who are in themselves a "Vulture Fund" in so far as they have investments in various loan books and have bought distressed assets. I feel this should have been mentioned at some point by someone as it seems a bit hypocritical especially since the programme seemed to lack balance.


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## Brendan Burgess (10 Jan 2017)

Good point Johnson

Brendan


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## Palerider (10 Jan 2017)

Johnsoner said:


> Did anyone else note that the presenter of the programme is the editor of the Sunday Business Post. The SBP is owned by Key Capital who are in themselves a "Vulture Fund" in so far as they have investments in various loan books and have bought distressed assets. I feel this should have been mentioned at some point by someone as it seems a bit hypocritical especially since the programme seemed to lack balance.



I think this is not relevant,  indeed unfair. The program was fair and balanced. The presenter did a good job regardless of his day job or his position with the SBP. the wider group parentage are steps away from his actual employer.


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## Andy836 (10 Jan 2017)

Palerider said:


> I think this is not relevant,  indeed unfair. The program was fair and balanced. The presenter did a good job regardless of his day job or his position with the SBP. the wider group parentage are steps away from his actual employer.



Not having seen the program due to geo-blocking but I would hazard a guess it wasn't that balanced at all. 

How many people from the funds themselves were interviewed? How many people with industry experience actually contributed (e.g. asset servicers, tax lawyers/accountants, bankers). Wasn't the SBP "tax lost expose" calculation completed by a Social Policy lecturer rather than a Accounting expert?

All the reaction I've seen is these funds pay no Tax on huge profits. However I've yet to see a spreadsheet or detailed working from someone to validate that claim. While I've no doubt they'll make substantial profits from looking at Stephen Donnelly's work on this he basically completely misunderstood how they accounted for their funding. 

I've also not seen mentioned by any commentator that the removal of the Sec110 entitlement would have reduced ongoing cash flows and thereby reduced the up front bids from the Funds themselves. So the funds pay a higher price for the assets using Sec110 than they would if they were subject to full taxes. Money in the pocket versus money down the road.

I also find it annoying to read how funds pay no taxes on "xx amount of assets", or "x amount of revenues" or "x amount of interest & rental income". As if tax is liable on something other than "profit". Furthermore, it would appear most of these same commentators assume these funds have no operating costs in the management of their portfolios. 

Anyway, I'm sure I'll see it sometime in the next few months and be pleasantly surprised that I was wrong, and it was a well balanced, detailed examination of structured finance......


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## Steven Barrett (10 Jan 2017)

Thirsty said:


> edit to add:Almost every single post I have seen here is that they *won't* do deals.



You have to differentiate the "deals". If you have a performing loan, you owe €300,000 and have €250,000 in cash, they won't do a deal. 

If you are in arrears and you agree a level of expenditure with the bank, with the remainder of your income going to the bank for 6 years, they will write off huge amounts of debt.* You will have to make sacrifices in order to get the deal. 



*This is not my area. It is what I heard at a conference a couple of years ago.  



Steven
www.bluewaterfp.ie


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## Thirsty (10 Jan 2017)

> It is what I heard at a conference a couple of years ago.


Real live examples seem to be very rare.


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## AlbacoreA (10 Jan 2017)

All we've been hearing for years is the bank/Nama not doing deals with the occupier. But seems to have no problem accepting a lower offer from elsewhere. Makes no sense to me. Seem to want the deal that makes it someone else problem, regardless of price.


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## Brendan Burgess (11 Jan 2017)

Thirsty said:


> Real live examples seem to be very rare.



Hi Thirsty 

People like the guy in the programme who has the money to keep his house are happy to go on TV to rant about not getting their "fair offer" accepted. 

People who get deals don't usually get onto the media to talk about it. 

Having said that, they are rare enough. They almost always involve the loss of the family home or the investment.  

Brendan


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## Brendan Burgess (11 Jan 2017)

Palerider said:


> I think this is not relevant,  indeed unfair. The program was fair and balanced. The presenter did a good job regardless of his day job or his position with the SBP. the wider group parentage are steps away from his actual employer.





Andy836 said:


> Not having seen the program due to geo-blocking but I would hazard a guess it wasn't that balanced at all.



On reflection, and having watched the programme, I agree with Palerider. 

If the programme had argued that Vulture Funds were the best thing to happen to Ireland and he had not disclosed that he was working for a paper owned by a vulture fund, then that would have been inappropriate.

However, despite working for a vulture fund, he demonised them.  He was unfair to vulture funds. So the bias worked the wrong way, if you understand what I am saying. 

However, he should probably have noted that his employer is owned by a vulture fund. But it's only a minor criticism. 

Not pointing out that someone who has been in arrears for up to 9 years and still has their home was a much bigger failing of the programme. 

Brendan


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## Jim Stafford (11 Jan 2017)

Brendan

You are right in saying that people who get deals done do not get onto the media about them.  In the case of "informal" arrangements, the vulture funds usually insist on confidentiality clauses.  Whilst many cases will involve the compulsory sale of investment properties, the family home can usually be saved if the borrower can pay a mortgage for the "market value" of the property.

I have previously posted on this forum how Ireland now has one of the best personal insolvency regimes with a range of solutions for people in financial difficulty. Is it perfect? No. Has the Government taken every step to protect its citizens from the vulture funds? No. There are still real issues with the legislation, which I have highlighted on this forum previously. One of the big issues is that some PIPs are not authorised to implement informal schemes, and therefore some PIPs "force" debtors to down what can be a costly and stressful PIA/DSA route, which can lack the flexibility of an informal scheme.  Another big issue is the €3 million cap on people who wish to do a PIA.

The Irish Society of Insolvency Practitioners (who represent Personal Insolvency Practitioners, Corporate Insolvency Practitioners, accountants and solicitors advising the banks/vulture funds etc.) made a detailed submission to the Government a long time ago recommending two key changes in the legislation:


Allow PIPs to also do informal schemes.
Lift the €3 million cap on PIAs.
The Government have not followed the advice of the leading professionals (who provide expert advice on both sides of the fence: i.e. to borrowers and banks.)

The existing €3 million cap on PIAs is preventing many business people across the country from doing PIA's.  It is causing massive stress and anxiety, and there is now no logical reason to retain the cap.  The cap was initially put in as the government was concerned that the banks would be financially wiped out.  However, their balance sheets have now improved, and now €200 billion of their debt is now owned by the vulture funds.

PS: The €3 million cap on PIAs works like this.  A borrower who owes more than €3 million on "secured" debt cannot do a PIA unless *ALL *the secured borrowers consent to participate in the PIA.

Jim Stafford


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