Five "Vulture Fund" FAQs
26th February 2020
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Financial institutions buying non-performing loans do not have bank branches on our main streets and are classed as Non-Bank Entities, sometimes referred to as ‘vulture funds’. A vulture fund is a hedge fund, private equity fund or distressed debt fund, which invests in debt considered to be weak or non-performing.
The term "vulture fund" is a metaphor used to compare some funds to vulture birds “preying” on debtors in financial distress by purchasing the loans at a discount to make a large monetary gain. Given its origins, the term "vulture fund" can be alarming and distressing, but it is important to understand what it means if your bank sells your loan to a fund.
What to do if my mortgage is sold to a Non-Bank Entity ("vulture fund")?
First things first, don’t panic – help is available.
If you have long-term mortgage arrears, there is a growing likelihood your mortgage account has been sold to a Non-Bank Entity. A recent Central Bank Report states these so-called "vulture funds" own 48% of accounts in long-term mortgage arrears.
The sale of your mortgage does not automatically mean you will lose your home. Non-engagement by the borrower with the lender is the leading factor for repossession orders being granted. With this in mind, keep calm and don’t panic or bury your head in the sand.
The idea of stepping forward and seeking help can feel daunting, but, the weight it lifts from you is huge. Who is there to help me? Abhaile, the free mortgage arrears support scheme is here to support and help you find a resolution to your arrears situation.
We have compiled a list of the five most commonly asked questions borrowers have about vulture funds. If you have a question that’s not covered below, send us a message over on our Facebook account, and we’ll get back to you.
1. What is a Non-Bank Entity?
A Non-Bank Entity, commonly referred to as a "Vulture Fund" buys Non-Performing Loans (NPLs) from lenders at a discount on the loan's worth. Lapithus Management DAC and Link ASI Limited t/a Asset Services are two Non-Bank entities who currently operate in Ireland.
2. How can I deal with a Non-Bank entity?
You don’t have to deal with them alone. MABS Advisers and Personal Insolvency Practitioners (PIPs) can help you deal with a Non-Bank Entity at every step on the way towards a possible arrangement.
MABS Advisers and PIPs can engage with the Entity/fund on your behalf, helping to remove some of the stress. They will work with you to complete your Standard Financial Statement (SFS) and propose arrangements to the funds.
MABS and the Banking & Payments Federation Ireland (BPFI) have an agreement to ensure lenders (banks or funds) and MABS will work together to help resolve mortgage debt problems in an effective and realistic manner. This gives borrowers further protection and is only one of the many benefits of the agreement.
3. Will Non-Bank Entities do arrangements for borrowers?
Yes – entities/funds do accept arrangement proposals for borrowers. Professionals working with Abhaile have experience in dealing with the funds and drawing up successful arrangements. Entities/ funds may sometimes be faster to offer an arrangement than lenders. Why is this?
They have bought the loan at a discounted rate. Therefore they may not be looking to get the full value of the original mortgage loan. This puts the funds in a position to do deals that lenders may not be capable of.
For an arrangement to be accepted, you must be fully engaged with the MARP process.
4. Do Non- Bank Entities operate in the courts?
Yes – entities/funds operate in the courts. They must obey and follow the same laws that apply to native lenders. This means your rights do not change when an entity/fund buys your mortgage account. These rights are detailed in the Central Bank’s Code of Conduct on Mortgage Arrears, also known as the CCMA.
If you have been summoned to court by an entity/fund, you may choose not to bring a solicitor. Abhaile normally has a Court Mentor and a Duty Solicitor present at all repossession hearings. The Duty Solicitor Service is a limited service to provide advice and help to borrowers in the courthouse. The Duty Solicitor cannot act as a legal aid solicitor for the borrower, or defend the repossession proceedings on a borrower’s behalf. We’ve created a video that gives helpful tips if you’re attending your first repossession hearing.
5. Can a Non-Bank Entity appoint a receiver?
Yes – an entity/fund can appoint a receiver, most commonly in cases where the secured property is not a family home, where the borrower has defaulted on the loan, where enforcement is required and where the mortgage contract provides such powers.
Even in cases where a receiver has been appointed, MABS Advisers and PIPs have been able to stop the repossession and secure an arrangement in which the borrower retains possession of the property. The key piece of information to remember here is, it’s never too late.
Would you like to get started on your mortgage arrears resolution journey? Call the Helpline on 0761 07 2000 or find your local office to arrange an appointment .