Vulture fund interest rates may be unenforceable

I wouldn't pay much attention to anything Honohan says.

Having said that, it's worth investigating.

Mr Honohan said that, having studied mortgage contracts offered by Ireland’s lenders, he is of the opinion that mortgage holders have two arguments against rate increases — the first that they should only pay the rate they would have paid to their bank and the second that a contract for service should not change even if the service is sold to another vendor.

He said when discussing interest rate variance, those contracts “insofar as they refer to anything at all, it is to the cost of funds”.

Cost of funds is dictated by money markets and combines with a bank’s margin to give an overall rate.

However, many vulture funds are backed by private investment and are not dependent on the money markets. Hence, they should not use those markets to dictate their rates, said Mr Honohan.

Brendan
 
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I think that people, who for whatever reason are unable to change mortgage provider, being charged excessive rates by vulture funds is utterly wrong.

People took out loans from established retail banks, banks which had a reputation and were could reasonably be expected to continue selling mortgages into the future, and so need to protect that reputation.

These banks were in business to make a profit, but they were constrained by the need to continue to do business and that many of their existing borrowers were free to remortgage elsewhere, from maximising interest rates.

The vulture funds took over mostly non-performing loans, their 'customer' base is heavily tilted to those who would struggle to remortgage. They have no desire to sell further mortgages into the market. There is nothing to constrain them from maximising the interest they charge customers.

Politically and morally the present situation is unsustainable.

(I have a tracker (phew !) mortgage with a vulture fund)
 
I attach the extract relating to interest rates from Honohan's letter to TDs about vulture funds generally.

I think that he is arguing that the rates charged by vulture funds must be justified by reference to their increased costs.

Brendan
 

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  • Honohan's comments on interest rates.pdf
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Brendan Burgess said:
I attach the extract relating to interest rates from Honohan's letter to TDs about vulture funds generally.

I think that he is arguing that the rates charged by vulture funds must be justified by reference to their increased costs.

Brendan
Click to expand...
The Funds purchased the various Loan Books at massive discounts so their cost argument is very weak at best .
 
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