Government opens consultation on non-performing loans market

The government has taken first steps to create a market that would make it easier for vulture funds to buy and sell delinquent loans.

Treasury Secretary Michael McGrath on Tuesday opened a consultation on a new European Union directive to encourage a secondary market for banks’ bad loans.

The consultation concerns the regulation and supervision of the credit services that administer the loans.

The purpose of the directive is to create a common framework for the sale and management of bank loans – primarily mortgages – that are in default.

Such loans are often bundled into portfolios of non-performing loans and sold at a discount to large private equity funds, which outsource servicing to separate providers.

The process now takes place on an individual or bilateral basis between buyers and sellers in a private market for such assets and is therefore not very transparent to borrowers.

The EU directive on loan servicers and loan buyers, passed in 2021, is an attempt to counter this by formalizing a market for non-performing loans across the EU with similar rules in each country.

The idea is to create smoother trading in distressed assets and a consistent treatment of borrowers when selling their loans.

According to the directive, this would be the case EU-wide approval and regulations for such loans transferred or sold after December 29 this year. It would exempt all loans issued before December 30, meaning anyone currently in arrears would be unaffected.

It allows authorized companies to ‘pass’ services into Ireland. Government opens consultation on non-performing loans market

Fry Electronics Team

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