Photographer: Aidan Crawley/Bloomberg

A Decade-Old Real Estate Crisis Is Still Causing Chaos

  • Opposition parties seek to block Permanent TSB portfolio sale
  • Lenders face ECB pressure to reduce their bad loan levels

For political activist Carly Bailey, the controversy in Ireland over so-called vulture funds hits rather too close to home.

Bailey, 37, is applying for bankruptcy as Cerberus Capital Management LP chases 56,000 euros ($69,000) in mortgage arrears after buying her loan from Royal Bank of Scotland Group Plc’s Ulster Bank unit. She also lost the house she built with her husband.

“They were very aggressive from the start,” said Bailey, who is vice-chairwoman of the Social Democrats, a small opposition party. “It was hard to contact them, and when we got through, all they were interested in was what we could pay them now.”

It may be almost a decade since the worst real estate crisis in western Europe engulfed Ireland, but the shakeout is still going on. While in Greece, the political attention is on bribery allegations and taxation as the country tries to emerge from its economic meltdown, in Ireland it’s all about the private equity firms that bought bad mortgages.

A state-owned bank’s plan for the largest single sale of home loans led the country’s biggest opposition party to threaten to bring down the government. Prime Minister Leo Varadkar is still trying to calm the storm.

“If they are an unregulated vulture fund, they are not accountable to anybody,” Michael McGrath, finance spokesman for opposition party Fianna Fail, said in parliament on Tuesday. “We cannot stand over a situation in which up to 20,000 mortgage holders are sold to unregulated funds.”

Bad Loans

The issue erupted when Permanent TSB Group Holdings Plc laid out its plans to sell about 18,000 mortgages, including 14,000 linked to private homes.

Many have made no payments for years, according to the bank, which is under pressure from the European Central Bank to reduce bad loans. At about 28 percent, PTSB’s bad loan ratio is five times higher than the euro-region average.

“We are now almost ten years on from the start of the crisis,” the bank said on Tuesday. “A new generation of home buyers needs to be able to engage with healthy, competitive banks.”

Bailey’s party has been campaigning for more protections for mortgage holders and making housing more affordable.

There’s no doubt she’s been at the sharp end of Ireland’s debt crisis. She said she took a mortgage for 212,000 euros from Ulster Bank, which become part of the U.K. government’s bailout of RBS in 2008, one of the biggest in the world. After her husband lost his job in the construction industry, they fell into arrears and their loan was sold in 2014.

The Baileys sold their home, but Cerberus is pursuing them for the 56,000 euros they still owe. The Baileys offered the New York-based company 7,000 euros but have not received a response, she said. Cerberus declined to comment.

The finance ministry said mortgage holders keep the same protections as before a sale. The government owns 75 percent of PTSB after bailing it out during the crisis, and Varadkar promised lawmakers he’d consider adding extra protection for mortgage holders whose loans are being sold. The company’s shares dived 4.6 percent.

For Bailey, any changes will be too late.

“The banks say they’re under pressure from the ECB but their policy is to just sell the loans off and wash their hands of them,” said Bailey. “Any chance we had of getting another mortgage in our lifetime is basically zero. It’s hanging over us and it’s never ending.”

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