All you ever need to know for dealing with vulture funds

by Padraig Conlon

Part 2 of 3 such articles drafted for us by a panel of legal and debt advocacy experts

More about the hearing in court.

Start by accepting that the Judge is not on the side of the Plaintiff’s barrister. That’s not how the system works.

If you’ve applied to the Legal Aid Centre for legal aid (you didn’t? why not?) ask the Court to postpone the Hearing until you receive a reply.

You might think you’ve got a good point about non-compliance with some Court rule, but you probably haven’t.

Because if you’re there, you’ve got all the other side’s documents, the case can go on straightaway (unless the Mediation Act hasn’t been complied with).

If you’ve only just received new documents from them, ask for an Adjournment to prepare a reply.

If you’re offered a three-month Adjournment to consult a Personal Insolvency Practitioner (PIP) (the Court is supposed to offer this) take it, and consult a PIP.

Then file an Affidavit setting out what he/she told you. Exhibit correspondence.

Did the Plaintiff’s barrister read out your Affidavits? All of them? That’s his or her job (He’s not giving evidence!).

But what if the Judge says “I’ve read your Affidavits,” and you doubt it? Be polite; ask whether the Judge has any questions you can help with.

Don’t feel you have to make a speech without notes. Write it out beforehand if you want to. If the Judge interrupts you, say (politely) that you haven’t finished.

Lost the case? Appeal? (Why not?) Ask for a “Stay” pending Appeal. Don’t miss the deadline (10 days, starting there and then)

Fight or Deal?

It’s not an “either, or”: you can do both.

Good lawyers always come prepared for both. And remember: you can win!

The best deals are struck after a fair fight. If you propose a deal it will be “without prejudice” to your fight arguments.

WRITE or SPEAK? Slightly more complicated.

Don’t go to Court without an Affidavit (or Affidavits).

Just the bare facts, no law. You get your chance to debate the law on your feet in Court.

So the answer to the question “write or speak?” is you must do both. Do your best.

(TIP: List your fight points under the heading “Defence” and your deal proposals under the heading “Proportionality”).

DEFENCES OF THE LEGAL VARIETY

The Courts are tired of hearing arguments about technical or paperwork issues. But they still may be valid points.

You do not lose the new “Boxer’s Proportionality” option by arguing these legal defences, such as in regards to the Plaintiff’s Title, the Jurisdiction of the Court, the Compliance with CCMA/MARP (including progressing a Mortgage-to-Rent solution) and, of course, whether any of the Terms of the Original Loan Facility were “unfair” – spell it out:

The FACTS go in the Affidavit(s).

Where equities are equal, the law prevails.

Don’t forget this legal principle.

Were You or Are You a “strategic defaulter?” The law presumes that you are. You have to explain if that is not the case. Is the Vulture Fund evicting you to get a windfall (probably untaxable)?

Legal possibly, but certainly not ethical!

Prove that you’re not a strategic defaulter (FACTS: why you stopped paying; LAW: social force majeure) and equities are not equal.

You’ve a headstart when it comes to “proportionality.”

MORE UNETHICAL BEHAVIOUR

Already restructured with the previous Lender?

Warehousing capitalised arrears “subject to review“ or some such arrangement?

Good for you. You can enjoy the benefits of all of the assurances, undertakings and representations made to you at the time. They remain enforceable (even if not in writing).

The Vulture Fund cannot ignore them.

But be honest with the Court – don’t make it up. If you genuinely think the Fund’s behaviour is not as you expected the previous Lender to act, say so.

(The facts go in the Affidavit(s))

Harassed? Treated like a nobody? Problems talking to the “credit servicers”?

Tell your story!

(The facts go in the Affidavit(s))

The Court will want answers from them.

Send emails and “exhibit” hard copies.

Their behaviour is no longer “irrelevant” when it comes to Proportionality.
(The facts go in the Affidavit(s))

Make an offer; Make two!

Example: you can’t go far wrong if you follow the Insolvency model. But call this one:

THE PERSONAL SOLVENCY ARRANGEMENT

Over the next six years, you can pay the Vulture Fund interest and principle at the rate a retail bank would fix for a 25-year-mortgage securing a loan amount in the sum paid to the original Lender to buy your loan.

(Ask the Judge to ask the Vulture Fund how much they paid, that’s the Vulture Fund’s “investment”).

And after six years? Renegotiate. Nothings off the table.

More sample “Offers” next week!

JUDGE MARY LAFFOY has said that a Possession Order should only be made “where the Application was made bone fide with a view to realising a Plaintiff’s security.” – (EBS v Gillepsie 2012)

Ask the Judge to ask the Vulture Fund how many unexecuted Possession Orders (or empty houses) they have on their files. These were Orders given on the strength of the Plaintiff’s undertaking to sell the houses.

But they haven’t. Aren’t these Orders now void? Was the Court deceived?

Boxer Moran’s proportionality test.

A new box to be ticked! From this year, judges have to factor “proportionality” into repossession decisions.

This is because Independent T.D. Boxer Moran finally convinced the Government to pass his Bill amending the 2009 Act to make this major change in the law.

Problem is: there’s no user’s manual for the judges. Working out what’s proportionate and what’s disproportionate is going to be a work in progress for some time to come, and your ideas are as valid as the next person’s.

When you set out to achieve some aim, “X”, and you find that unavoidably you cannot avoid collateral damage to “Y”, you should minimise that side effect by measured and “proportionate” action.

“X” and “Y” cannot co-exist. “Y” must give way, but only to the extent necessary to give effect to “X”.

If the law requires a “proportionate” outcome, that’s not an open discretion, it’s actually calculable.

Here’s the thing: Boxer’s Bill doesn’t actually say what “X” and “Y” are ! The courts have to work that out by statutory interpretation techniques.

Perhaps “X” is the borrower staying in his home. The borrower will make an offer – his plan for “X” – having regard to all his circumstances.

The court has to consider whether this offer cuts into the Vulture Fund’s rights, “Y”, to a disproportionate extent and whether a different solution might achieve “X” but be less damaging to “Y”.

This balancing exercise is well known in Constitutional Law, for example in the area of compulsory purchase which eats into “Y”, the right to private property, in the interests of “X”, the Common Good.

Or it may be that in Boxer’s Bill the “X” is the (ECHR Article 8) Human Rights of the Person and his dependants (which, of course, they already have since 2003).

Or perhaps “X” includes BOTH the societal objective of keeping people in their homes, AND their individual Article 8 Human Right for the dignity of the individual.

And what is the Vulture Fund’s “Y”? Its demand is simple: it is to recover its money.

But the Fund has no entitlement to a (probably untaxed) windfall. And it must behave with due regard to Corporate Social Responsibility.

In a proportionate outcome, the Vulture Fund can have no expectation of a green light for eviction and supernormal profits.

But, that said, here is the most important argument about interference with the rights of secured lenders and the economic role played by rigorous enforceability of mortgage contracts underpinning the solvency of the banking system.

The argument is that once the bank has sold the loans to the vulture fund there is no such need to underpin the solvency of the Vulture Funds!

UNFAIR CONTRACT TERMS?

No point in questioning the fairness of terms in your facility/mortgage deed Ts and Cs without being specific.

Which terms? Why unfair?

But on the other hand, if you are now in a restructured facility, that’s a new contract. Were the new terms fair? Did you promise more than you could afford?

Were you at that point a “vulnerable” consumer? Rebut the presumption against “non-est factum” (no informed intention to contract) by citing EU Law (the “Unfair Commercial Practices Directive” Article 5 or the proposed “Common European Sales Law” Article 51).

And did the Mortgagee comply with Directive 2014/17/EU “Consumer Mortgage Credit Agreements” (now in force in Ireland under S.I. 142 of 2016) at the time of the Loan Restructure Agreement?

THE LAW MAY BE ON YOUR SIDE!

You have forfeited your home by not paying the mortgage, but you are not alone in this predicament.

All societies which use credit markets to sustain standards of living also have safety nets to allow for a fresh start after credit default.

It’s a re-set button: the original lender sees it’s investment written down; the borrower must either lose his altogether or start afresh on a “can pay, will pay” basis.

Until Boxer’s Bill was enacted in August, we had no re-set button set out in the Law. Now the button (marked “Proportionality”) must be used by any Court dealing with Repossession cases.

But the Court hasn’t been instructed as to what factors it must consider: it’s a discretion. Your case will be one of thousands. Over time a picture will emerge.

When a Court has an “unfettered” discretion, it doesn’t mean it controls the dialogue. It’s open to you to put forward your ideas and proposals. You must give the Court the facts it should consider, in your view. You can’t be denied that. But please be realistic.

THE EXTENDED REDEMPTION OPTION (“ERO”)

Think ten years. Affordable monthly payments are not credited to your mortgage loan account, but instead held in escrow, and at the end of that period the total paid is returned to you as your deposit when you go to get a mortgage from a bank to buy back (“redeem”) the house at it’s market value.

The deposit lump sum “rests in your account” briefly, and is then paid again to the vulture fund as part of a “full and final” redemption.

(You can assign your right to redeem at this point.)

Residual arrears (if any) on the mortgage account are written off.

The ten year deposit period will be cut short if you default at any point, and your savings will be forfeit.



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