LAST UPDATE | 31 Jan 2019

That voluntary code states that lenders looking to offload a mortgage must get the borrower’s permission before selling the loan onto a third party.

The deputy recently highlighted the code of practice with Permanent TSB bankers when they appeared before an Oireachtas Committee. He asked if PTSB would adhere to the code in relation to the transfer of over 6,000 of its customers’ mortgages to another financial entity.

The bank bosses told the committee that they would – however they later rolled back on that response.
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The Central Bank code of practice does indeed state that “a loan secured by the mortgage of residential property may not be transferred without the written consent of the borrower”.

It goes on to say that if a bank is to transfer a mortgage of one of its customers it must provide a statement containing sufficient information to enable the borrower to make an informed decision and give a clear explanation of the implications of a transfer.

“It must also set out how the transfer might affect the borrower. The borrower must be approached on an individual basis and given reasonable time to give or to decline to give his consent,” it adds. 

Homeowners get letters in the door 

December’s hearing of the Oireachtas Finance Committee also heard evidence that in the majority of cases, homeowners simply receive a letter from their respective bank informing them that their mortgage has already been sold or transferred to a vulture fund, and are given no say as to whether they agree with such a move.

Despite the code of practice being drafted by the Central Bank, the regulator has advised the government to oppose the Sinn Féin Bill.

It has “significant concerns on the terms of the Bill from a consumer protection, prudential supervision and financial stability perspective”, according to a government spokesperson, who added:

The banking industry also believes there would be many adverse outcomes attached to this Bill, including possibly reduced funding availability to banks, higher mortgage costs and a reduction in market attractiveness to potential new and existing participants.

It is argued each of these impacts would increase risks to financial stability and have major negative economic impacts.

The government believes the Bill would have “potential consequences for the mortgage market, financial stability and the economy” stating that they could be “so severe that they cannot be entertained”.

It adds that the likely consequence could be an increase in the number of repossessions by banks, adding that the Bill would also have implications for new mortgages, and “would increase the incentives to strategic default and, by increasing the risk levels of existing mortgages and the costs to the lenders, it would give rise to increased interest rates for those who hold Standard Variable Rate (SVR) mortgages”.

The government said it was opposing the Bill as it would make it almost impossible to facilitate securitisations which are used as a source of bank funding.

Backbenchers ‘squirming in their seats’ during today’s vote

A debate earlier this week heard from a number of politicians who appealed for the government to support the Bill.

Sinn Féin’s Eoin Ó Broin raised the personal case of one of his constituents to highlight its importance.

He said Maire and Sean are a married couple in his constituency in Dublin Mid-West.

“They both work, and they have worked their entire adult lives in modest wage jobs,” he told the Dáil.

“They get up early in the morning and they work hard, and they raised their now-adult son exceptionally well. In their entire life they had never missed a mortgage payment until Permanent TSB unreasonably hiked up their interest rates and put them into difficulty.

“What did they do? They did what any responsible mortgage holder would do. They engaged the banks immediately. They sat down with them, went through the mortgage arrears resolution process and came out on the other side of that with a split mortgage.

They have met every single payment under the terms of that agreement since it was reached. Their intention was always to return to full payments and eventually honour the full loan they took out to buy their family home. In November last, they contacted me at the time they were trying to see when they could return to full payments.

“They had received a letter from their lender to say their mortgage was due to be sold. They were not told to who, for how much or the consequences of that. That family have said to me repeatedly that they feel let down by their lender but also by the failure of the Government to protect them. They are now in a position where they simply do not know what will happen. Three months on, they still have not been contacted by their new lender and they are genuinely fearful that they could lose the home for which they worked so hard.”

Ó Broin said he had not heard any argument as to why the minister would not pass this legislation, adding he imagines many government backbenchers would be “squirming in their seats come today’s vote on the Bill. 

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‘Vulture lovers’

During the same debate, Independent TD Michael Fitzmaurice told the Dáil that Finance Minister Paschal Donohoe and Taoiseach Leo Varadkar are “vulture lovers”, adding:

Let us be very clear: if a bank sells on a mortgage, a vulture will not offer the borrower a split mortgage. That is the bottom line. Let no one cod themselves. They look for demand of money. Yes, a borrower who has one house and who is willing to get the hell out of it will probably get a write-down if the loan was bigger than the house is worth.  

Mattie McGrath also hit out against the government and those in Fine Gael, claiming “the very people the Minister was elected to protect, the families behind these loans, do not feature in Fine Gael land”.

Referencing the PTSB mortgage sale mentioned earlier, he said the State bank (PTSB is 75% owned by the State) sold over 6,000 family home loans to an unknown entity.

“These were loans belonging to families that had been engaging with the bank, some of whom had never missed an agreed payment but again, the government did nothing. It sat there smugly and turned a blind eye. The government continues to sit there while family home loans are being sold of to unaccountable vulture funds, ignoring the suffering of families. Government members ought to be ashamed of themselves. They are not ashamed, but they ought to be.”

Finance minister defends government position

In defending the government’s stance, the Finance Minister said many of mortgage-holders impacted by this issue are in his own constituency.

However, he said mortgage arrears in Ireland have reduced, and also referenced the government’s Abhaile scheme, which aims to help homeowners who find themselves before the court. This week, a report found the scheme was not working as it should.

Mentioning PTSB, he acknowledged that “more could and should have been done for some but after years of effort to try to reduce that level of non-performing loans that is where the bank stood – a multiple of the European average, way ahead of where many other banks in Ireland have stood”.

It has been pointed out that a number of mortgages sold on by PTSB were not ‘non-performing’ yet still found themselves to be sold on with the loan book.

He added that the government’s view that the Bill would likely affect the financial interests of the State, and stated a Money Message would be required – this means that even if the Bill is passed by the majority in the Dáil it would effectively be blocked by government.

Despite its opposition to my bill the government must listen to the will of the Dáil and allow this legislation to progress as speedily as possible.