March 2014        

Vulture capitalists eye Irish homes

A number of mortgage books have already been sold to unregulated private equity companies or hedge funds, mostly American; but in the proposed sales of the IBRC residential book (13,000 former INBS mortgages) we are looking at the largest sale ever of mortgages to unregulated vulture capitalists.
     What does this mean for mortgage-holders?
     Their mortgage will now be held by an unregulated entity whose sole purpose is to squeeze as much money out of the debt as possible. If it paid 30 cents for each euro of debt it will try to secure 50 cents or more back. As unregulated entities, mortgage-holders will not be covered by the Central Bank’s code of practice on mortgage arrears, which provides some minimal regulation and process for mortgage-holders who fall into arrears. Families will be completely at the mercy of these entities.
     The voluntary agreement, much trumpeted by the special liquidator of the IBRC, is worthless. it is not even written down, which he confirmed to the Finance Committee of the Oireachtas late in February.
     These vulture funds will base all their decisions on maximising the return for their investors. They are not vulnerable to political pressure or to negative publicity. If an asset becomes more valuable than a prospective return, they will evict families, seize the asset, and sell it on. They may securitise some mortgages further and sell these on to other entities. As most of the former INBS mortgages are on variable interest rates, they may increase the interest rates, especially on performing loans, if they feel this will increase their return.
     The list of options are there for these funds, none of which are good news for any families involved.
     One option not pursued by the IBRC, however, was that owners of the mortgage might be able to buy their own loan. Even if the mortgage-holder was willing to pay more for the loan than the vulture capitalist, they would not be allowed to buy it.
     This sale process has also exposed, once again, the circle of big business that continues to profit from the misery they were involved in creating. The special liquidators appointed to manage the winding down of IBRC are KPMG. But KPMG were also the auditors of INBS and approved their accounts, which were so horrifically skewed towards speculative lending.
     The legal advisers to the special liquidators are McCann Fitzgerald, who advised INBS on corporate governance; and a wonderful job they did.
     And the “independent valuation” of the IBRC loan books for sale was carried out by PWC, the firm that valued the Anglo-Irish book in 2008 and reassured the Government that they would only require recapitalisation of €300 million. Only off by a factor of 100!
     So it’s clear who this process has been designed to benefit, and what the Government means by a “recovery.” It’s a recovery of property inflation and profits for the wealthy, and a recovery of contracts and profits for big business.

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