Mortgages and Vultures

Fascinating programme on Radio 4 last night - about how the Mortgage Protocol is mince.

The woman who was about to be evicted from her home is an HBoS employee in arrears with an HBoS mortgage - the court (in Bristol) was powerless in spite of her proposing a repayment plan. Her solicitor reasoned that the only reason she got a deal eventually was that it was simply a response to pressure on the bank in the form of an email from Radio 4. The power of journalists ...

The web story has her home being saved 'days' before eviction. I think, though, that if you use the 'listen again' function you'll hear them say it was the evening before eviction.

Vulture funds
Something else that was touched on in the programme is that hedge funds and vulture funds have started buying up mortgages which carry a higher risk of default than average.

You may recall vulture funds from the Jubilee Debt Campaign highlighting their activities or from DfID's response to the Jubilee requests or from journalists pointing out that the activities of the vultures meant that international aid money was coming straight back to the developed world as profit on debt owed (interest paid, seldom any capital paid off) or from the odd politician expressing concern.

It's a lucrative business, one not easily dissociated from the UK.

There are some who put forward arguments in favour of the vulture funds, though, and it's worth reading what they say. Even when they don't say much. There are others who don't defend the funds but do point out that it's not necessarily easy to tell the good guys from the bad. There are always different stories to be told.

Vultures descending on property mortgage markets wouldn't be an original occurrence, and some banks have already tried to offload some debts at the beginning of this year's chaos (not that it did Lehman much good), and when we save HBoS from the takeover there will be a job to do in cleaning up the bank. US funds have already been eyeing up European assets.

It's often the same people doing the dirty deed and foreclosing who did the equally dirty deed in mis-selling. Selling banks will write off the debts at a substantial loss, the funds buying the debts (which may even be owned or partly owned by the selling banks allowing them to write it off the balance sheet but still keep repackaged debt as an asset whether it came originally from them or not) will demand full repayment.

For the people struggling to make the repayments it's very bad news. The vulture fund has little, if any, interest in looking at ways to keep you in your home and have you finish paying off your mortgage. It may actually be in their interest to repossess, sell for more than they bought the debt for (whether that's on the open market or at auction), and still have you owe them the rest of your mortgage. Banks get out from under the bad debt, the funds make money, it's a win-win-lose situation - and guess who the losers are?

There may be some good news. There was a chap who was interested in making sure that action was taken - strong action - to curb the activities of vulture funds. He's been vociferous, certainly, if not very effective. He was talking about vulture funds as they were attacking the poorer nations of the world, but surely Gordon Brown will want to stop the vultures wherever they attack?