GOVERNMENT MUST STEP in and legislate to cap the interest rate on family homes that non-bank entities, known as vulture funds, are charging mortgage holders.
Interest rates being charged by some vulture funds are as high as 8% or more, the Joint Oireachtas Committee on Finance and Public Expenditure heard today.
David Hall from the Irish Mortgage Holders Organisation told politicians today that some mortgage-holders that took their loans out with retail banks were later sold to vulture funds, and went from paying a mortgage interest rate of 3.2% to over 8%.
Leas-Chathaoirleach Fine Gael’s Edward Timmins said he is aware of some cases where homeowners were being charged 8.5% interest rates.
‘Destroying people’
It is “horrific” and “not sustainable”, he said, stating that the interest rates have “destroyed” people.
David Hall of the Irish Mortgage Holders Organisation Oireachtas.ie
Oireachtas.ie
Hall questioned why the Central Bank is not stepping in and why loans were allowed to be sold to vulture funds in the first place, stating that it is common practice for mortgage loans to be sold to vulture funds, with no consent from the customer.
He called for a dedicated court to be set up to deal solely with banks and debts.
Hall went on to state that in some cases, mortgage-holders are getting older, yet their mortgage situation is not being resolved.
This could impact inheritance issues, if resolutions are not found.
Many children think they are going to get inheritance, but all the money is going to a vulture fund who pay no tax here, Hall said.
Hall said the people behind the numbers in mortgage arrears are human beings, with families.
Interest-only loans pushed during Celtic Tiger
Highlighting one issue coming down the tracks, Hall spoke of around 5,000 to 6,000 mortgage-holders who took out a mortgage with Bank of Scotland many years ago. These were sold as interest-only loans, where a person would pay around €900 per month.
However, these interest-only loans are going to “crystallise” shortly and nothing is being done, said Hall.
These “predatory products” were sold to fuel the Celtic Tiger, he added, stating that these people, many of whom are older now, are in line to suffer “and there is nothing in place to comfort the fall”.
Sinn Féin’s finance spokesperson Pearse Doherty said “mortgage prisoners” do not have the same rights as those that have their mortgages with ordinary retail banks (something that was highlighted by Doherty in a previous committee).
According to Central Bank figures from September last year, around 1.39% of mortgage-holders are on an interest rate of around 8%, while 15.5% are on an interest higher than 6%, Fianna Fáil’s Shay Brennan said today in committee.
Hall said those are the figures given to the Central Bank by non-bank entities stating that a customer who took out a mortgage with a state-owned bank at 3.4% and ends up paying 8.4% when sold to a vulture fund has a right to know why this was allowed.
Cap interest rates for non-bank entities
The questions he said should be asked are: What do the non-bank entities borrow at to justify that interest rate and who do they borrow from? Hall said there is no transparency around those questions.
Mortgage-holders being charged double and triple the interest rate that they originally signed up to needs to be explained, said Hall.
In a time when there are calls for more transparency in finance, Hall said it is “immoral” that many people do not know who actually holds or owns their mortgage when it is sold on.
Sinn Féin’s Pearse Doherty in committee today Oireachtas.ie
Oireachtas.ie
“Behind each mortgage lies human beings under pressure ,now older, with less certainty,” he said.
Doherty said that the vulture funds are merely the “shopfronts of international investment funds”, with Hall agreeing that the “puppet masters” should be invited before the committee to answer questions on the Irish mortgages they own and profit from.
Fine Gael’s Colm Burke raised the issue of repossessions by financial institutions that results in the property being left empty.
Hall agreed there are cases where the banks “throw you out of your house, repossess it, hold it empty, let it go to wrack and ruin, devalue it by €50,000 and charge you, where in the world is that sensible?”
