Vulture funds are fuelling insolvency, warns practitioner who negotiated Cork publican's €58m write-off
Had As More Insolvency Arrangement Than Gaffney Off Of Negotiated A Was Part Last Approved John €58m Mcgee Which High Personal Alan Of Court Written Week, By Debts
Ireland is facing a cost-of-living insolvency problem as vulture funds pursue homeowners trapped by crippling mortgage interest rates.
That is the warning from solicitor and personal insolvency practitioner (PIP) Alan McGee, who negotiated a near €59m debt write-off for a Cork publican, approved by the courts last week.
While this was a legacy case from the financial crash, Mr McGee said PIPs are dealing with a new insolvency trend as they seek to restructure more and more distressed mortgages with Pepper Asset Servicing, Everyday Finance DAC, Cabot Financial, and Mars Capital — all servicing agents for the beneficial owners of the debts, generally foreign funds.
Vulture funds own the loans of an estimated 113,000 mortgage borrowers in the state — including some 80,000 primary dwellings.
Recent Central Bank figures show that 61% of mortgage accounts in arrears are controlled by ‘non-bank entities’, or vulture funds.
Mr McGee said there is a “lack of meaningful engagement” on the part of the vulture funds to find agreed solutions using the state’s established debt resolution mechanisms. He said:
The pillar banks embraced the personal insolvency process soon after it was introduced over a decade ago but they have sold most of the distressed loans to vulture funds.
Following an operational review of the legislation in 2017, a raft of amendments was proposed but nothing substantial has changed since.
Mr McGee said the incoming government must overhaul the legislation to level the playing field and tilt the balance more towards those in debt.
“The past government has sat on the substantial legislative changes required,” he said. “It is essential that any new government will introduce the changes that are required. If vulture funds are not going to embrace the process, something needs to be done to bring them to the table.
“In every case, no matter what we put to them, they will say one thing in one case to suit themselves but say something contrary in another case, just for the purpose of objecting.
“That’s one of the main difficulties we have — the lack of consistency.
Mr McGee said he has one case of a married couple with two teenage children living in a three bed semi-detached home in Cork, whose PTSB loan was sold to Pepper Finance Corporation in 2019, when the interest rate was 4.7%. Today, their rate is a staggering 8.5%.
“That loan is now in arrears,” he said. “The couple can’t sustain it, and Pepper want them to sell their home.”
It comes as figures obtained by the Irish Examiner show that while the number of protective certificates issued by the courts — an early step in the personal insolvency process to give debtors 70 days protection from their creditors — has increased from 992 in 2021 to 1,246 in 2023, the number of approved personal insolvency arrangements has almost halved in five years.
There were 1,055 approvals in 2019, but the figure has decreased steadily year on year to 925 in 2021, to 810 in 2022, and to 671 last year.
“The dropping in approval rates would appear to us to coincide with more funds having the mortgages and contesting the arrangements,” Mr McGee said.
“The funds should be embracing PIPs because we bring the people who are in long-term arrears to them to find solutions, instead of the funds going through the repossession courts which takes forever and a day.”
• You can read today's 'Irish Examiner' feature on the personal insolvency crisis in print, ePaper, or online here: Legislation must be overhauled to protect people from vulture funds.