It has been reported in the media that ‘Pepper’, one of the largest servicers of vulture fund mortgages are “currently looking at a reduction in variable rates.” This has been described as potentially offering long-awaited mortgage relief to Pepper’s customers. This comes as the European Central Bank (“ECB”) base rate has effectively reduced by 0.6% as of mid-September 2024. It remains to be seen if these reductions will be passed onto customers by Pepper or other mortgage servicers.
As discussed in a previous article, we are seeing more and more clients contact us to enquire about their rights in the following situations:
1. where the loan has been sold to a so-called ‘vulture fund’ or another bank; and
2. when the rate being charged by the new-loan holder has skyrocketed. These increases have been in excess of the margins by which the ECB rate has increased. We have seen examples of variable rates of anywhere between 7% and 11% charged by these funds.
What are your options?
In most cases we come across, customers will receive a letter from the new mortgage servicer detailing how “the terms and conditions of your loan including the terms of your facility letter(s), offer letters, guarantee(s) mortgage, security and any restructure or alternative repayment arrangements are unaffected and continue to apply.”
Despite this, there are examples of instances where the rate with the new mortgage servicer has far surpassed the previous rate or other rates being provided more broadly, especially compared to the rates with the more established mortgage providers in the Irish marked like Bank of Ireland, AIB and PTSB.
These people have very limited options, often have a poor credit history and/or are in negative equity. They are left with a very high variable rate which for many, will inevitably lead to an arrears situation with no ability to negotiate or remortgage and no light at the end of the tunnel. These are the people who are being described as ‘mortgage prisoners.’
In many such cases, our advice is to contact a Personal Insolvency Practitioner as your first port of call.
Legal Challenges
We are aware of at least one ongoing Irish High Court Case where a customer has challenged the rate being applied by Pepper after the loan transferred to them from PTSB.
Similar cases are now also being taken in the UK with certain law firms seeking to recover compensation based on the difference between a ‘fair’ interest rate and the rate charged by some lenders.
We are currently taking instructions from a number of clients with a view to issuing similar proceedings. We have noted that potentially impacted customers may fall into one or more of the following categories:
- Your loan has been sold off as non-performing and you are now being charged a much higher interest rate.
In such scenarios, your previous mortgage provider is still operating in the State. We can review your circumstances to make sure your original terms and conditions are being adhered to by the new mortgage servicer. If not, Court proceedings may be appropriate.
- Your mortgage provider has left the State entirely
This is most likely in the case of previous Ulster Bank or KBC loans. It is more difficult to compare what rate you should be on as your old bank is no longer here to act as a direct comparison. Nevertheless, we argue that it is not appropriate for a vulture fund to charge whatever rate they deem appropriate with no bearing on your original terms and conditions or other market factors. These rates may also be open to Court challenges.
- You are in active repossession proceedings
If this is the case, we recommend contacting a Personal Insolvency Practitioner in order to try restructure mortgage in a sustainable way. However, this is not always possible. High Interest rates may have pushed you beyond breaking point and possibly as far as a repossession order having already been granted. It is important to seek legal advice as soon as possible if that is the case. Again, depending on the terms of your original mortgage, there could be a case against the bank or fund who pursued you for arrears while charging excessive interest rates. The sale of loans from one provider to another may also offer a technical defence in repossession cases where the correct steps have not been taken in respect of the transfer of your loan.
- You have already concluded a Personal Insolvency Arrangement (“PIA”)
The word ‘prisoner’ is even more appropriate in such cases. A Personal Insolvency Arrangement is a once-in-a-lifetime remedy. A change in the law would be required in order for anyone to put forward a second proposal.
We have seen many people who have successfully concluded their PIA only for the loan to transfer or for the variable rate to increase to an unaffordable level. These people are left with almost no solutions other than a voluntary “alternative repayment arrangement” with whoever is servicing their loan. In such circumstances, a legal challenge to the interest rate is potentially the only and final resort.
If you believe any of the above situations apply to you, please contact us for advice. We can also refer you to an experienced Personal Insolvency Practitioner for further assistance.
