# LTV Tracker



## qs222 (18 Oct 2011)

Firstly apologies if this query has been asked before but I have done a search and could not find a full answer

We have a tracker mortage with First Active (now Ulster) that states "lifetime tracker ECB + x% for term 80% LTV", also states "as the ltv is less than or equal to 80% but the rate of interst will never be higher than ECB rate + x%".

LTV is in excess of 80% now - prob >150% due to negative equity - am I at risk of losing the tracker?


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## Swyper (18 Oct 2011)

TKS said:


> Firstly apologies if this query has been asked before but I have done a search and could not find a full answer
> 
> We have a tracker mortage with First Active (now Ulster) that states "lifetime tracker ECB + x% for term 80% LTV", also states "as the ltv is less than or equal to 80% but the rate of interst will never be higher than ECB rate + x%".
> 
> LTV is in excess of 80% now - prob >150% due to negative equity - am I at risk of losing the tracker?


 
Only your mortgage contract will tell you that. IIRC, those FA mortgages were great value at the time. I switched a mortgage from fixed rate to a tracker that was based on LTV at the time, but it was with AIB. Back then, you had to pay for a valuation to prove the LTV, and once you it was accepted by AIB, you got the deal. That was 5 years ago, and nothing has been challenged since. I don't think any of those mortgage contracts were written with the risk of falling house prices in mind, so I doubt there is a clause that deals with that circumstance. And if there isn't a clause dealing with it, I don't see how the bank could invoke anything to retract your deal.


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## wbbs (19 Oct 2011)

Extremely doubtful, a drop in values was not foreseen when those LTV mortgages were offered.  Have a look through your loan offer conditions but I seriously doubt it mentions anything about it.


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## chippengael (19 Oct 2011)

I expect the bank could in principle ask the house owner to provide a new valuation and adjust the tracker rate accordingly, and I am surprised they haven't tried this already. I doubt there is a clause explicitly ruling it out. It would be an extremely unpopular move.


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## Swyper (19 Oct 2011)

chippengael said:


> I expect the bank could in principle ask the house owner to provide a new valuation and adjust the tracker rate accordingly, and I am surprised they haven't tried this already. I doubt there is a clause explicitly ruling it out. It would be an extremely unpopular move.


 
I would think that in legal terms, someone trying to enforce an action under a contract has to show that the contract allows them to take such an action, rather than show that the contract doesn't disallow them from doing so.

I doubt if popularity is coming into it at all, especially as this is effectively Ulster Bank, not one of the state banks.


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## DME (21 Oct 2011)

TKS I just checked my letter of confirmation / offer from AIB for my traker dated Nov 2007. Firstly I have been presuming it refers to LTV - it does not. It simply confirms a Tracker Rate was applied to my mortgage (The letter was in response to my written request of Septembner 2007 to move from SVR to Tracker in which I submitted a  valuation for my house). 

The letter of confirmation is just 4 paragraphs and states I was being offered ECB+.6% and lacks detail other than "*Your agreed margin as set out above will not change, even if the Bank subsequently introduces a different Tracker Mortgage offering, at a margin whihc may be either higher or lower than your agreed margin. This margin is guaranteed for the full term of the loan unless there is a material change in the terms of the loan*".

I have been really worried about the LTV issue - now I think I am going to enjoy my good fortune: it will be a matter for the Banks to argue to get me off the Tracker rate as I fully intend to meet all payments, pay mortgage protection adn home insurance promptly so as not to give them any easy targets. 

I dont think the Banks will want to find the true value of property because their balance sheets / share values will take a further hammering.


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## marksa (22 Oct 2011)

for those credit agreements where it mentions specific LTV then the bank may come to a decision to review the LTV condition being met. For those such as DME they have no issue. I know the NIB LTV product actually specifies that if the LTV goes above 80% in the life of the mortgage then the contract is in breach. I've never heard of them looking to use this though... maybe they have and we just haven't heard of it, which seems unlikely.


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## ang1170 (31 Oct 2011)

marksa said:


> for those credit agreements where it mentions specific LTV then the bank may come to a decision to review the LTV condition being met. For those such as DME they have no issue. I know the NIB LTV product actually specifies that if the LTV goes above 80% in the life of the mortgage then the contract is in breach. I've never heard of them looking to use this though... maybe they have and we just haven't heard of it, which seems unlikely.


 
I've an LTV mortgage with NIB. The agreement includes the clause "In the event your LTV increases above 80% at any time during the term of your LTV mortgage, we reserve the right to convert your LTV Rate to our then applicable Home Loan rate." That had me kind of worried. However, despite there being a fairly extensive clause giving me the right to request a renegotiation of the LTV, there's no provision for the bank to do the same.

I can't see how they'd insist on getting new valuation, given there's no provision for it in the agreement. My guess is that if they thought there was such a possibility, they would have tried it before now. They can’t be making much out of me at the moment (my rate is ECB + 0.5%).


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## aristotle (1 Nov 2011)

There was a report in one of the papers about 2 years ago where NIB stated they would not try to push LTV mortgage holders onto home loan rates as a result of the LTV ratio not being met. But who knows what they intend to do in the future.

If they try this I am in no doubt that mortgage holders will fight it. Plus they should\will withdraw all their deposits from NIB and take their custom elsewhere.


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## ang1170 (1 Nov 2011)

aristotle said:


> If they try this I am in no doubt that mortgage holders will fight it. Plus they should\will withdraw all their deposits from NIB and take their custom elsewhere.


 
Well here's one who'll fight it, for sure!

Not sure they'd miss my deposits, though.....


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## twofor1 (1 Nov 2011)

ang1170 said:


> I can't see how they'd insist on getting new valuation, given there's no provision for it in the agreement.


 
I have the same LTV Tracker with NIB, I think they could look at LTV’s with a view to getting the large number of low trackers that they have onto their home loan rate. Their T&c’s clearly allow for this.

The latest CSO statistics are;


At a national level residential property prices in the year to March 2011 fell by 11.9%. Prices in Dublin fell by 13% in the year while outside of Dublin prices fell by 11%. 
Residential Property Prices, at a national level, reached their highest level in mid 2007 and in Dublin somewhat earlier, at the beginning of the second quarter of 2007.
Since reaching their highest level, Residential Property Prices have fallen by almost 40% nationally, with Dublin experiencing the largest decline (-47%), while in the rest of Ireland prices fell at a somewhat lower rate (-35%).
The largest price decline was for Dublin apartments where prices have fallen by 52% since February 2007.
At a national level, houses have fallen by 11.5% in the year to March and by 38% since they reached their highest level in 2007. Nationally, apartments fell by 15.2% in the twelve months to March and by 51% since February 2007.
http://www.cso.ie/newsevents/pr_rppi_mar2011.htm


Do they need a new valuation? I don’t think so. You provided NIB with a valuation on your home when you got your LTV Tracker, using the above statistics or similar, they know your LTV today. 

I hope this never happens, as already stated, a few years ago they said they would not do this but I don’t think it can be ruled out. 

As regards fighting them if they were to look at LTV’s, of course people should do so, but one of NIB’s best weapons is complacency, the few who fought NIB here won their battles but without doubt NIB won the war as the few cases the Ombudsman mentions would suggest the vast majority of affected customers just accepted the changes.

http://www.askaboutmoney.com/showthread.php?t=104951


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## ang1170 (1 Nov 2011)

twofor1 said:


> Do they need a new valuation? I don’t think so. You provided NIB with a valuation on your home when you got your LTV Tracker, using the above statistics or similar, they know your LTV today.


 
They can quote all the statistics they like. The LTV is based on a valuation that we both agreed to at the time the mortgage was taken out. I don’t believe they’d have much of a leg to stand on if they suddenly switched to using some other method.


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## twofor1 (1 Nov 2011)

ang1170 said:


> I don’t believe they’d have much of a leg to stand on if they suddenly switched to using some other method.


 
They did not have a leg to stand on in the case I mentioned either, and still don’t, but that did not stop them applying these changes and only the small few who fought them got what they were entitled to.

No doubt if they were to look at LTV’s again, you would fight them and hopefully win.


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## aristotle (2 Nov 2011)

ang1170 said:


> The LTV is based on a valuation that we both agreed to at the time the mortgage was taken out.


 
Not really though, it was an independent valuation carried out by usually an auctioneer.


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## ang1170 (2 Nov 2011)

aristotle said:


> Not really though, it was an independent valuation carried out by usually an auctioneer.


 
Absolutely, it was independent, OK - my point was that we were both happy to sign the agreement based on that valuation.

There's a large and detailed clause describing what I have to do if I want to change the LTV rate (the rate is a sliding scale), including getting an independent valuation (which they are not obliged to accept).

There's nothing on how it is supposed to work in the other direction. As I said, they'd be on shaky ground trying to impose some new way of valuation or trying to impose one sided agreements to change.

I'd assume if it were easy for them, they'd have tried it before now. It's well known the banks are loosing out on these, and banks are not exactly known for being shy with maximising their profits.


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## serotoninsid (2 Nov 2011)

aristotle said:


> Not really though, it was an independent valuation carried out by usually an auctioneer.


It was 'independent' ...BUT (and i'm open to correction on this - as my recollection is not 100% clear) from what I can remember, only NIB approved valuers could be used?  ...was that not the case - and if so, does that not have a bearing on things?

In any case, it's going to be a headache for them to try and implement.  They would have to get their own valuations done again - and with literally €1,000's at stake, a sizeable proportion of customers surely would be well motivated to challenge it.  To not do so would be idiot tax - plain and simple (and I can't believe those people who _didn't_ challenge that other stunt that NIB pulled that 'twofor1' referred to).


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## twofor1 (3 Nov 2011)

We have seen how NIB operates.* IF* they decided to look at LTV’s there would be no consultation. Customers would receive a letter informing them that their LTV was now below XX%, in line with your T&c’s the applicable interest rate will now be the home loan rate of XX%. Your new repayment will be €XXXX.XX from the XX/XX/XXXX.

The new increased payment would be taken from your account thereafter. Your only option would be to follow the complaints procedure which would eventually end up on the Ombudsman’s desk.

The Ombudsman would look at the facts which are the T&c’s clearly allow for this change, the only thing the T&c’s make no reference to is how NIB would determine a LTV at a future date.

Given the CSO and numerous other surveys all stating much the same thing, Surely the Ombudsman would have to accept that for example a 3 bed semi in Dublin that had a comfortable LTV of <70% in 2007 is now probably in negative equity, but definitely has a LTV far short of what the T&c’s require.

Even if the Ombudsman was to insist on an independent valuation at NIB’s expense, the cost and administrative hassle would be nothing compared to the probably tens of thousands of Euros NIB would gain over the remaining life of a typical mortgage.

I don’t think the above scenario can be ruled out.


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## aristotle (3 Nov 2011)

NIB would have to factor in loosing a large chunk of their deposit base as disgruntled customers move their bacnking (except for the mortgage) to other banks? Well, I hope customers would do that anyways.


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## serotoninsid (3 Nov 2011)

twofor1 said:


> Even if the Ombudsman was to insist on an independent valuation at NIB’s expense


I can't see how at the very least, they could pull it off without having a valuation carried out.  Afterall, they would only accept clients on their LTV mortgage deals on the basis of a valuation having been carried out by someone from their panel of valuers.



twofor1 said:


> The cost and administrative hassle would be nothing compared to the probably tens of thousands of Euros NIB would gain over the remaining life of a typical mortgage.


True - although it does help to fudge the issue - and make things a little bit more complex for them.  



twofor1 said:


> I don’t think the above scenario can be ruled out.


 For sure - and on that basis, I'd welcome any insight anyone reading this may have on how NIB tracker holders can protect themselves from such a potential threat.  In the worst case scenario, is it possible for the client to retain the tracker by making a one-off capital payment against the mortgage to bring the LTV ratio back in line with a new revised valuation?


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## twofor1 (3 Nov 2011)

serotoninsid said:


> . In the worst case scenario, is it possible for the client to retain the tracker by making a one-off capital payment against the mortgage to bring the LTV ratio back in line with a new revised valuation?


 
You can make payments of any amount at any time off your NIB LTV Tracker, if this brought you under the required LTV, then you are complying with the T&c’s and have nothing to worry about.

I would guess though, the vast majority would not be in a position to do this.


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## ang1170 (3 Nov 2011)

twofor1 said:


> We have seen how NIB operates.* IF* they decided to look at LTV’s there would be no consultation. Customers would receive a letter informing them that their LTV was now below XX%, in line with your T&c’s the applicable interest rate will now be the home loan rate of XX%. Your new repayment will be €XXXX.XX from the XX/XX/XXXX.
> 
> The new increased payment would be taken from your account thereafter. Your only option would be to follow the complaints procedure which would eventually end up on the Ombudsman’s desk.
> 
> I don’t think the above scenario can be ruled out.


 
I don't think that could be ruled out either, but the fact remains they don't have a sound basis for establishing the new LTV, especially as they spell out in some detail how any valuation is to be arrived at if the ball was on the other foot.

With so much at stake, I would think it highly unlikely someone wouldn't go all the way with the legal route with them. I would imagine that would not be too attractive for them.


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