As vulture funds have been seen as taking over the market, the next question is, what do we do next? What happens after a vulture fund takes over your mortgage?
These funds first entered the Irish market at the end of the financial crisis and since, have remained a consistent factor in the mortgage game. Though many years have now passed since they were first introduced, there is still much uncertainty that remains with what exactly these funds are.
Vulture funds essentially entail the many forms of private equity firms and pension funds that exist with the goal of investing across many asset classes such as debt. Debt often acting in the form of mortgage arrears.
The question many are wondering is why? Why are these vulture funds deciding to buy the mortgages that are in arrears?
Due to post-financial crisis events, there was an extremely high number of mortgages that were in arrears as a direct effect, and many that will be in long-term arrears as well.
Because banks are generally not willing to write down any debt of any borrowers but do want to maintain as being perceived as a financially stable institution, they sell to vulture funds as a way to reduce their bad loan exposure.
When banks happen to have many long-term mortgage arrears in their portfolios they are often quick to sell to remain a powerful and capable institution in the professional world.
The downfall of a bank selling their mortgage to vulture funds is that this typically requires they sell at a high discount.
Typically, borrowers, do not want vulture funds to take over a mortgage because it enters them into years of chaos. Vulture funds are usually only good for a short term and then the faulty business model of these funds causes them to create implications for the borrowers.
After only a short while of the vulture fund having acquired a borrower’s mortgage at discount, it is typical that the mortgage will be restructured with the borrower, in a way for the vulture fund to profit from it. Or the alternative, the funds will seek to repossess the property.
Those who disagree with vulture funds argue that when re-negotiating with the borrower they put in little effort and have no real want to help. This, due to their primary selfishness goal to simply get their hands on the mortgage holders home and selling it at profit.
Some, however, argue that vulture funds are not all bad. They take these useless funds from banks hands when they can’t do anything more to help. Saying, they are simply a different nature from banks but they deal with non-performing loans in a better manner.
Overall, it is very likely that vulture funds are the best solution in such a crisis however in the viewpoint of the borrowers, it something to prevent from happening.
Vulture funds are simply more commercial driven, meaning they are quick to repossess. Lack of emotion. And driven solely for their best profit.