# In MARP but my arrears are still rising?



## Wishes (14 Dec 2011)

My year in MARP has come to a conclusion and the bank have not come to an agreed solution as to were my mortgage should go from here.  The inevitable I presum is iminient.

I somehow believed that when you entered a MARP ageement that your arrears stopped mounting and you paid what you could afford off the capital of the loan

When I got a final demand yesterday the arrears on the statement vastly out numbered what I believed I owed.

So the arrears resolution process is not actually tackeling the arrears problem but actually adding to the problem that is already there.

Have I got this right?


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## Brendan Burgess (14 Dec 2011)

That does not seem correct to me. 

Arrears would be classified as the repayments due but not paid. 

So let's say that in November 2010, you were 2 payments of €3,000 each behind, your arrears should be €6,000.

If you reached agreement to go interest only, then the payment due should have been reduced to, say €2,000 per month. If you made these payments as they became due, your arrears should still be €6,000. 

Can you outline the facts of your case in more detail? 
The bank's name
The amount you were in arrears when you came to the agreement.
What was agreed. 
What was paid
What the latest letter says.

Brendan


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## Wishes (14 Dec 2011)

Brendan Burgess said:


> If you reached agreement to go interest  only, then the payment due should have been reduced to, say €2,000 per  month. If you made these payments as they became due, your arrears  should still be €6,000.



Hi Bendan, this is exactly what I thought.  I was in approximately 4k  arrears when I entered MARP.  The bank now claim that I owe approx. 20k.

I have two properties -* my home with a foreign provider based in Ireland  *and an investment property based in the UK with a mortgage on it from a  UK provider.  

Investment property is in negative equity and the UK provider will not allow me sell it because of the shortfall.

This fexed my home loan provider here in Ireland and they were initially  not going to offer me a MARP agreement because of my inability to sell  the UK property and also because they envisaged that the propery would  lie idle at times because of its location, and I would have to stump up  the cash to pay for it, while that cash could have gone to pay my  mortgage on my main residence.

After spending a small fortune on valuers to prove to the bank here that  I was not sitting on a fortune in the UK; did they finally agree to the  MARP.

I signed that MARP and heard no more.  Roll on a year and they have all the 'arrears' added up 

I called them this morning and I have a meeting tomorrow.


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## Wishes (14 Dec 2011)

Brendan Burgess said:


> The amount you were in arrears when you came to the agreement.
> 4K
> 
> What was agreed.
> ...


I got back a final demand for the arrears plus what they perceived to be arrears i.e. if there were no MARP in place.


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## corkgirl1 (14 Dec 2011)

I also had a moratorium in MARP and got into a right panic when we got a letter re arrears. I rang local branch who assured me that there wasn't a problem. He explained that their books show missed or reduced payments as arrears which can trigger automatic arrears letters (I know this is not an issue here Wishes).

Local branch manager said that once we had sorted ourselves out and made 3 regular scheduled payments *then* they would capitalise the arrears but until then they did show as arrears.

Wishes, I assume that the 20,000 is the original 4,000 plus whatever element of payments you missed? I suspect that if you can't get them to agree to another period of MARP .....


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## Brendan Burgess (14 Dec 2011)

Hi Wishes

Then their statement on the arrears is incorrect and you should ask them to fix it. 

You still owe the same total figure, it's just that only €4k is overdue at this point in time.

Did you get the agreement from them in writing?

Brendan


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## Rudolph (14 Dec 2011)

I think the figure is probably correct. The 'true' arrears position is the amount you are behind based on what repayments you should have made, to date, under your original repayment schedule.  So you were 4k behind when you entered the marp and you must have fallen another 16k behind in scheduled capital repayments since you reverted to interest only. I know you adhered to your marp arrangement but one of the things the bank is required to do under the marp is to send you out updated statements included in which is the 'true' extent of your actual arrears i.e. the amount you are behind on your actual loan agreement.


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## Brendan Burgess (14 Dec 2011)

Rudolph said:


> one of the things the bank is required to do under the marp is to send you out updated statements included in which is the 'true' extent of your actual arrears i.e. the amount you are behind on your actual loan agreement.



Hi Rudolph

I was not aware of this and it seems perverse to me. What is the source for this? 

If a lender agrees with a borrower to reschedule their mortgage and that borrower meets the rescheduled payments, they are not in arrears. I find it weird that the CB would require a statement of arrears to be issued, although it would explain the experience of  Wishes and CorkGirl.


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## wbbs (15 Dec 2011)

A borrower is in arrears by the amount of the payments missed regardless of paying reduced payments or interest only or any other amount.   This has to be the case as the original scheduled payments are what would be required to clear the loan within the original term, when reduced payments of some sort are made then the amount outstanding can no longer be cleared within the original term without some change to the mortgage such as extending the term, capitalising the arrears outstanding and increasing the payments.   Even though you agreed to pay a certain amount and paid it the systems clock up the amount that should be paid each month and when this is not met then it shows as arrears.


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## Rudolph (15 Dec 2011)

> I was not aware of this and it seems perverse to me. What is the source for this?


 
Under the MARP, arrears is defined as where somebody has not made a full or only makes a partial mortgage repayment as per their *original *mortgage contract. Seperately you have to write to arrears customers every three months providing specific information included in which is 'the monetary amount of the arrears to date'. 

So even if they are keeping up with their revised arrangements they are still, unfortunately, falling further behind their original repayment schedule. I presume the intention is that they are fully aware, on a quarterly basis, of how much behind their original agreement they are.


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## Wishes (15 Dec 2011)

Hi all, I met with them today to discuss the drastic jump in arrears from 4k to 20k.  I can confirm that Roudolf and Wbbs are correct.  I would have posted here earlier but it has took me the day to digest this information.  I truely am lost for words.

There is absolutely no way I can afford to pay the 20k arrears and yet they will not capitilise them.  In other words the debt will keep increasing and increasing if I cannot work my way out of MARP.


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## Rudolph (15 Dec 2011)

Hi Wishes
I'm a bit confused when you say the bank refused to capitalise your arrears. In essence a customers monthly mortgage repayment is made up of two parts, the first of which reduces the outstanding capital balance and the second of which pays for that months interest. When you entered the MARP you paid the relevant interest for each month but your capital balance went untouched and wasn't being reduced. So, in effect, the arrears covering the period of the MARP is reflected in your capital balance which hasn't reduced as it was scheduled to under your original mortgage agreement. The only element that they could capitalise is the interest element of the 4k arrears you had built up before going into the interest only MARP arrangement, whatever amount that is.
So the vast bulk of the 20k you are in arrears is already in your outstanding capital balance as this hasn't reduced in line with your original repayment schedule. Its not so much that your debt is increasing its more that your outstanding capital balance is falling further behind where it should be vis a vis your original repayment schedule.


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## Brendan Burgess (16 Dec 2011)

Rudolph said:


> Hi Wishes
> I'm a bit confused when you say the bank refused to capitalise your arrears.



Hi Rudolph

I explain what "capitalising the arrears" means in this post



> *Write off the arrears and pay increased monthly payments over the remaining period*
> Let’s say you lose your job in the above example, but you get a new  job in July and you are able to service your mortgage again, but you are  not able to pay the arrears.
> 
> The bank may agree to write off the arrears – this is also known as *“capitalizing the arrears”.* This does not save you anything and it does not cost you anything. At the end of June, you will still owe €61,200.
> ...


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## Brendan Burgess (16 Dec 2011)

I see the definition of arrears from the [broken link removed]



> Arrears: Arrears arise on a mortgage loan account where a borrower has not made a full mortgage repayment, or only makes a partial mortgage repayment, as per the original mortgage contract, by the scheduled due date.



This is clearly incorrect and I will take it up with the Central Bank. 



> When arrears arise on a borrower’s mortgage loan account and remain outstanding 31 days from the date the arrears arose, a lender must:
> a) inform each borrower and any guarantor on the mortgage, unless the mortgage loan contract explicitly prohibits such information to be given to the guarantor, of the status of the account in writing, within 3 working days. The letter must include the following information:
> i) the date the mortgage fell into arrears;
> ii) the number and total amount of full or partial payments missed;
> iii) the monetary amount of the arrears to date;


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## Brendan Burgess (16 Dec 2011)

I have sent the following email to the Central Bank



> *The definition of arrears in the MAC is incorrect*
> 
> "Arrears: Arrears arise on a mortgage loan account where a borrower has  not made a full mortgage repayment, or only makes a partial mortgage  repayment, as *per the original mortgage contract*, by the scheduled due date."
> 
> ...


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## Brendan Burgess (16 Dec 2011)

Wishes said:


> Hi all, I met with them today to discuss the drastic jump in arrears from 4k to 20k.  I can confirm that Roudolf and Wbbs are correct.  I would have posted here earlier but it has took me the day to digest this information.  I truely am lost for words.
> 
> There is absolutely no way I can afford to pay the 20k arrears and yet they will not capitilise them.  In other words the debt will keep increasing and increasing if I cannot work my way out of MARP.



I think it's probably worth your while to read A Guide to mortgage repayment calculations

The total amount you owe is not increasing if you are paying the interest on your mortgage. 

But the amount due for payment immediately is increasing. I don't think that the Mortgage Arrears Code has dealt with this issue adequately and I have brought this to the attention of the CB. 

In practice though, the "arrears" figure is a notional figure. If you can pay 66% of the interest, you qualify for the Deferred Interest Scheme and have at least 5 years to get back on track. 

The bank's refusal to capitalilse your arrears isn't costing you anything extra in interest.


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## Rudolph (16 Dec 2011)

Hi Brendan
I understand what you're saying but I'm not sure that I agree with you. The 'arrears' amount reflects the full amount that the customer is behind in their originally scheduled repayments, which is (unless the bank decides to write some if it off) the actual amount the customer is beind that they still need to pay before the mortgage is fully paid off.
Put it another way if they didn't categorise the 16k as arrears in Wishes case but just said he was in arrears by 4k then he would possibly think he only has to make up the 4k during the remaining life of the mortgage to pay it off in full. If, after his one year in the MARP, he was able to revert to his scheduled capital and interest repayments for the remainder of his mortgage he would still have this shortfall of 16k to pay off before the mortgage is redeemed.


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## corkgirl1 (16 Dec 2011)

Just wondering - we are told that we are in arrears and we are making MARP arrangements, but we are still several years ahead of our "Original mortgage contract" due to a lump sum payment we made a few years ago. Should we be contact the bnak and tell them that we are not in arrears according to this definition and will not make any more payments until we are back on schedule?


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## Wishes (18 Dec 2011)

Brendan, much appreciated you bringing this to the attention of the CB.  I would say there are a lot more people out there that are unaware of this.  

Rudolph, your posts are a true reflection of what the bank said to me also.  I was truely unaware of this and shocked when I received the final demand for the 'true arrears'.  I somehow thought that the system would park these arrears to be dealt with at a later date.  How wrong I was.  I don't know what I was thinking.  They did say at the meeting that they would not be capitilizing the arrears.  I have until after Christmas to decide what I am going to do about the 20k arrears problem.  I get the feeling the bank are not happy to keep me in MARPS as the one year is coming to an end.  How long will the repossession take after I am ejected from MARP?

Corkgirl1, I am not sure but it would definitely be worth pursuing with a letter to the bank.


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## Brendan Burgess (18 Dec 2011)

corkgirl1 said:


> Just wondering - we are told that we are in arrears and we are making MARP arrangements, but we are still several years ahead of our "Original mortgage contract" due to a lump sum payment we made a few years ago. Should we be contact the bnak and tell them that we are not in arrears according to this definition and will not make any more payments until we are back on schedule?



Cork Girl

That's absolutely brilliant. 

I better withdraw my letter to the Central Bank immediately. 

Brendan


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## Rudolph (18 Dec 2011)

Corkgirl1
I actually don't know where that leaves you in terms of the MARP, this is one of those situations which would not have been considered when the Code was being devised. The fact that you have made an out of course, lump sum payment was something that you voluntarily did yourself. With some mortgage providers I think this lump sum payment can be taken back out again at any stage in the future.
Under your existing contract you are scheduled to make monthly repayments for 20/30 years etc. and the fact that you have not made these payments for a number of months means that you are in arrears as each month you have not made a full monthly repayment. Even though your balance at this stage is less than it was scheduled to be, due to your lump say payment, you are not honouring your scheduled monthly repayments. Because they have not agreed to a moratorium they will treat this as being an arrears case and you may be reported to the ICB as such.


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## Kerrigan (18 Dec 2011)

Good point. I had a car loan some years ago with AIB that I would make extra payments too evey so often. I was able to move those extra payments as they were outside of the scope that was my contract and place them in my current account if I was ever stuck for money.

Corkgirl, lets say you paid the bank a lump sum of 10k and your arrears are 3k. Maybe you could ask them to deduct the 3k from the 10k and reissue you with the remainder. It is definitely worth a try.


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## corkgirl1 (19 Dec 2011)

Brendan Burgess said:


> Cork Girl
> 
> That's absolutely brilliant.
> 
> ...



Sarcasm


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## Brendan Burgess (19 Dec 2011)

Hi CorkGirl

The point you make about the Central Bank's definition of arrears means that you are not in arrears, is absolutely brilliant. 

I won't withdraw my letter to the Central Bank, but I did bring your post to their attention as it shows how wrong their definition is. 

brendan


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## corkgirl1 (19 Dec 2011)

Thanks Brendan, my sarcasm detector may be set a little high.

I will be writing to them on this point and requesting suspension of all payments until we are back on schedule. I'd say we have 2 chances, but still worth a try.


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