Warning ‘warehoused mortgages’ is next crisis

Some €1.5bn worth of so-called “warehoused mortgages” — where some regular payments are agreed and the rest of the sum is parked to the end of the term — will become the next controversy involving Irish customers.

Warning ‘warehoused mortgages’ is next crisis

Pádraig Hoare

Some €1.5bn worth of so-called “warehoused mortgages” — where some regular payments are agreed and the rest of the sum is parked to the end of the term — will become the next controversy involving Irish customers.

That is according to one of the main players who exposed the tracker mortgage scandal, financial advisor Pádraic Kissane, who told TDs and Senators at the Oireachtas Finance Committee that split mortgages were another potential crisis kicked down the road for thousands of homeowners.

Split mortgages became popular in the years following the financial crash to alleviate pressure on homeowners struggling to make repayments.

A homeowner agrees to make repayments on part of the loan, with the other chunk of the loan sum then “warehoused” until the end of an agreed term or when their financial position improves.

Mr Kissane said the “full circle had not been drawn” on warehoused mortgages.

“As night follows day, the next area that will be looked at is warehoused loans because they are now the next non-performing loans. Nobody is asking what is going to happen with all these warehoused loans at the end -- are you going to have all these 70-year-olds out of their homes because they are going to have to sell?

“Some will absolutely take the view that they will have to trade down and move to a smaller home and so forth, but nobody is asking the question...I do not know as a financial advisor today what is going to happen with warehousing,” Mr Kissane said in response to Fianna Fáil finance spokesman Michael McGrath.

Mr McGrath said it was a concern as to what would happen with warehoused loans: “There is €1.5bn of warehoused mortgaged debt in split-mortgages, in the average of €50,000. They pay the active part of the mortgage and 15 years down the line, when the mortgage comes to an end, the debt is sitting there. This is untested because these agreements have not come to an end yet. It’s about €1.5bn debt parked,” he said.

Mr Kissane said there was now an added pressure on homeowners who warehoused part of their mortgage with the arrival of vulture funds.

“What is even more serious is that most of these (warehoused) arrangements have three-year reviews on them, which are now currently in play to the vulture fund. (Homeowners) are back in with their contracts in three years after being told it was going to be reviewed with a pillar bank, but it is now in the hands of a vulture,” he said.

Mr Kissane said vulture funds buying distressed loans in the Republic in recent years had also contributed to the rental crisis throughout the country, leaving many properties vacant.

“The contributory effect to the rental market because of vulture funds is the amount of properties that are empty because receivers are appointed. I am at meetings with clients and the bank cannot tell me who has the keys, nobody knows who has the keys, and the property is empty. It is astonishing,” he said.

The Irish Farmers’ Association (IFA) and SME lobby group Isme told the Finance Committee that vulture funds had put untold pressure on farms and businesses.

IFA president Joe Healy accused vulture funds of “preying” on families, and “killing off farm businesses”.

more courts articles

Man (25) in court charged with murdering his father and attempted murder of mother Man (25) in court charged with murdering his father and attempted murder of mother
Man appears in court charged with false imprisonment of woman in van Man appears in court charged with false imprisonment of woman in van
Man in court over alleged false imprisonment of woman Man in court over alleged false imprisonment of woman

More in this section

FILE PHOTO The Competition and Consumer Protection Commission has cleared the purchase of Goodbody Stockbrokers by AIB END Goodbody Stockbrokers fined over €1.2m by Central Bank over rules breaches
Nottingham City Centre Stock Irish staff at the Body Shop wait for wages as retailer shuts stores in the Republic
Ryanair comments on Norwegian Ryanair boss O'Leary's spat with Transport Minister over Dublin Airport escalates
IE logo
Devices


UNLIMITED ACCESS TO THE IRISH EXAMINER FOR TEAMS AND ORGANISATIONS
FIND OUT MORE

The Business Hub
Newsletter

News and analysis on business, money and jobs from Munster and beyond by our expert team of business writers.

Sign up
ie logo
Puzzles Logo

Play digital puzzles like crosswords, sudoku and a variety of word games including the popular Word Wheel

Lunchtime News
Newsletter

Keep up with the stories of the day with our lunchtime news wrap.

Sign up
Cookie Policy Privacy Policy Brand Safety FAQ Help Contact Us Terms and Conditions

© Examiner Echo Group Limited