A significant degree of hysteria is being whipped up in relation to vulture funds and the sale of loans by Permanent TSB, according to the head of an organisation that assists people in mortgage distress.
Founder of New Beginnings Ross Maguire SC said if the sale of loans such as the 14,000 being sold by Permanent TSB does not go through then the Irish banks will remain broken.
Permanent TSB has proposed selling the €3.7 billion portfolio of non-performing loans, which contains €2.7 billion of home loans including debts on which customers are making payments after reaching restructuring arrangements with the bank.
The proposed sale has attracted significant criticism.
Mr Maguire told RTÉ's Today with Sean O'Rourke programme that if the sale of such loans does not go through then the Irish banks will remain broken.
“Permanent TSB is effectively a broken bank. Almost 30 per cent of its loans are non-performing. The problem has been around for many years, the ECB is adamant that this problem be sorted out, for good reason. And one way of sorting it out is to take those loans off the balance sheets of these banks, leaving the banks free to get on with what they’re supposed to be doing.
“In order to do that somebody has to buy the loans. The only people who have the cash to buy the loans are funds. They are a solution,” he said.
Mr Maguire added that “on the other side you have to ask are borrowers going to be disadvantaged, really disadvantaged when that transfer takes place, if they are maybe we shouldn’t do it at all, but if they’re not it is a solution.”
Mr Maguire said that “there has been a whipped-up hysteria in the country. It is being done for obvious reasons: political reasons, media reasons, all sort of reasons. The consequences of it may be that these sales don’t happen; if they don’t happen we go on as is, with broken banks. The ordinary taxpayer loses and most importantly the new generation pay for it.”
On the same programme Social Democrat co-leader Catherine Murphy maintained that if there was hysteria it was because people don't trust the banks.
“People know full well that the banks have caused very serious problems. There is a culture in the banks, we can see it with the trackers.
“The figures for non performing loans – non performing against what? A significant number of them have entered into agreements, those agreements become temporary agreements if they’re sold on.”
“There’s no guarantee, the code of conduct for mortgage arrears is not compulsory. You can’t even find the people you’re supposed to be talking to.”
However, Mr Maguire disagreed with this point.
“I would stake my reputation as a senior counsel on it. If you have an arrangement with Permanent TSB and the loan is sold on, the fund is bound by that arrangement. It cannot step outside it,” he said. “If I have a split mortgage and it is sold on to Goldman Sachs or whoever, it stays a split mortgage. That is a fact.”
If there is a review, the contractual circumstances stay the same, he said.
Mr Maguire added that he is concerned that it is now 10 years since the problem with the banks emerged “and we still have broken banks. They are not performing properly.”
He said there was help out there for people in mortgage arrears through Mabs [Money Advice and Budgeting Service], Personal Insolvency Practitioners.
There is a bigger picture here. There are funds out there that do help, he added.