# Pepper has bought Dankse's performing mortgage book



## MrEarl

Hello,

Surprised to have received a letter from Danske this morning to say that Pepper have bought my Homeloan.  Whatever about them being likely to have secured the service contract for whoever bought it, never thought of them as a likely purchaser.

They must have seen it as a chance to get a book of good, low risk customers, who they can potentially sell new top up loans to and then try to reprice the original debt as part of any new agreement.

The deal completes on 15th December or shortly thereafter.


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## Codogly

Hi MrEarl,

That is a surprise ... where you a cheap tracker ? ... cant see why they want to takeover a bunch of rate return mortgages unless Danske gave them a discount.?


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## Teachhilda

Got one of them letters too, for buy to let mortgage... Who are Proteus Funding??? That's who pepper are apparently managing this for


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## Brendan Burgess

Mr Earl 

Who actually bought the book?  Pepper or Proteus Funding? 

This is very important. Pepper managed mortgage books on behalf of others.  Proteus Funding might well be open to offers for the early repayment of a tracker.

Brendan


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## Buddyboy

Fingers Crossed!


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## Brendan Burgess

I checked on the CRO website and this is a new company set up by Maples & Calder solicitors. 

I can't figure out the ownership from their documentation. 

Brendan


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## Teachhilda

The letter says:
Pepper Finance Corporation (Ireland) DAC will be the new lender in respect of your account(s) from the transfer date and your obligations in respect of your account(s) will be owing to them from that date. Pepper Finance Corporation (Ireland) DAC will hold the benefit of your account(s) on trust for the benefit  of Proteus Funding DAC (the Beneficiary).

Pepper Finance Corporation (Ireland) DAC is regulated by the Central Bank of Ireland.

Make of that what you can, cos I'm confused.

Btw I used to be jimmyjoe on this site a long time ago...


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## RedOnion

It's one way of keeping Central Bank happy!

The customers legal contract is with Pepper, a regulated entity, but the beneficial owner is an SPV. Saves the purchaser having to set up any operations here.


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## coman06

I thought Goldman Sachs was the front runner for Danske's loan book?


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## Gordon Gekko

It was supposed to be a joint venture between Goldman Sachs and Pimco; perhaps that’s what this entity, Proteus Funding, is?


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## Eureka101

Received the same letter today.

As im stuck on their high svr im hoping this will have a positive outcome...


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## MrEarl

Hello,

I am very sorry, I did not read the entire letter this morning as I was in a hurry, I only read the opening paragraph.  When I turn over the page, it does indeed refer to Proteus on page 2.  

The letter refers to Proteus in the section on Page 2 entitled *Who is Pepper Finance Corporation (Ireland) DAC ?*  It describes Pepper as the new lender and my obligations will be owing to them.  It then goes on to say that Pepper Finance Corporation (Ireland) DAC will hold the benefit of my Account(s) on trust for the benefit of Proteus Funding DAC (the Beneficiary).



RedOnion said:


> It's one way of keeping Central Bank happy!
> 
> The customers legal contract is with Pepper, a regulated entity, but the beneficial owner is an SPV. Saves the purchaser having to set up any operations here.



Makes sense.

But doesn't there need to be more than just a service contract between Pepper and Proteus, to enable them to state that my obligations will be owing to Pepper (rather than describing Pepper as the collecting agent or similar, for Proteus) ?  

Also, if Pepper are the new lender, then what happens if I want a top up - does the new loan come from Pepper, rather than Proteus, given Pepper is the new "lender" ?


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## RedOnion

Absolutely, there is much more than a service contract here. 

There is probably a definition of 'lender' in your original Mortgage contract that Pepper will fulfill. By having a licensed entity take on that role allows for such things as top-ups / remortgage etc that a fund wouldn't be able to do.

The 'trust' element is something I haven't seen before. In theory it's no different to 100% of the Mortgages being put into a covered bond and sold to a single entity, except that entity gets more control and all the decision making / strategy decisions. Pepper will need to be delegated decision making rights, etc.

At this stage we don't know who owns Proteus, so it's unclear what their strategy will be. (In theory Proteus could even be owned by Danske still as a vehicle to simplify the sale - the just sell the entity rather than the loans).

All the indications are still that it's Goldman Sachs / Pimco.


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## Protocol

I have an NIB - Danske LTV tracker, and I received the same letter today.

New lender = Pepper Finance Corporation DAC

Beneficiary = Proteus Funding DAC.


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## Protocol

I'm reading they paid 95c in the euro for the loans, so it seems no chance of being able to do a deal with them to redeem a tracker early??


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## MrEarl

Hello,

If that 95 cents in the Euro story is true (and I have seen it before now), then it makes no real sense.  These funds are after far greater returns than can be achieved buying this portfolio, unless there is clear intention to lend new monies to this customer base, at higher rates (to include expectation that the current loans can be repriced, as part of any new deal).

There are now two discussion threads running on this topic btw (see here for other thread), so perhaps Brendan or one of the Mods might be so kind as to merge the two threads when time permits.


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## llgon

I haven't heard from Danske/Pepper about my offset mortgage. I wonder if this is the case for everyone with this product? If so,  are they not included in this portfolio? Were Proteus not interested in taking them over?


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## Duggie

I got the letter too. Pepper are still going to be the servicer, just for Goldman / Pimco and not Danske. Not a retail bank so another raw deal for Danske customers as there will be no opportunity to get better rates or top-ups etc. They buy the mortgage book at a decent discount on performing loans and just run it down. 

Issue for me is that I am stuck in the tracker review. Danske apparently not playing ball with the CBI so completely stuck in limbo. Anyone else on the same boat? Danske won't engage and just hiding behind the ongoing review.

Brendan, all the talk is about the Big 5 banks and all of the announcements today from Pascal. Have you heard anything on the other lenders?


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## MrEarl

Click  here  for the second discussion thread on this topic.

Hopefully Brendan or one of the Moderators can merge the two threads for us, at some point.


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## Duggie

You will find that Goldman are paying less than 95c for the book. On a blended rate the book is probably yielding a 3% cash yield (blended SVR / tracker rates). So they buy for say 85, then this yield increases to 3.5%. They put in 30% equity (IRR c. 12%) and borrow the balance at say 3% so their levered IRR is  c. 6.7%. So they need to make this return every year on the book. If you discount that over the medium term, there is no economic basis for paying 95c. 

Anyone else out there stuck in the Tracker review with the CBI. I am (tracker to fixed to SVR) and Danske have told me to run and jump. CBI still reviewing. Just interested to hear different perspectives and approaches. Other banks (definitely PTSB) have restored trackers in identical circumstances.

Tks.....


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## RedOnion

Duggie said:


> You will find that Goldman are paying less than 95c for the book. On a blended rate the book is probably yielding a 3% cash yield (blended SVR / tracker rates). So they buy for say 85, then this yield increases to 3.5%. They put in 30% equity (IRR c. 12%) and borrow the balance at say 3% so their levered IRR is  c. 6.7%. So they need to make this return every year on the book. If you discount that over the medium term, there is no economic basis for paying 95c.
> 
> Anyone else out there stuck in the Tracker review with the CBI. I am (tracker to fixed to SVR) and Danske have told me to run and jump. CBI still reviewing. Just interested to hear different perspectives and approaches. Other banks (definitely PTSB) have restored trackers in identical circumstances.
> 
> Tks.....


Nope, you'll find they paid 95. If they put in 30% equity, they can currently borrow the balance at negative rates currently. The blended rate is a lot less than 3%, but they'll be making a return of over 10% on the money they put at risk themselves.


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## aristotle

So consensus is there is likely to be no discounts available to customers if they were to offer to pay off their remaining balances?


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## RedOnion

aristotle said:


> So consensus is there is likely to be no discounts available to customers if they were to offer to pay off their remaining balances?


If you happened to be massively in arrears, maybe you could negotiate, but they have no reason to offer a discount on a performing Mortgage, tracker or otherwise.


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## Duggie

RedOnion, they borrow the money in what is called "loan on loan" finance. You get a loan to pay for a loan book. That's how the loan sale market works. Maximum leverage of up to 70% and for a redo mortgage book as collateral, pricing at 3-4%.


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## RedOnion

Duggie said:


> RedOnion, they borrow the money in what is called "loan on loan" finance. You get a loan to pay for a loan book. That's how the loan sale market works. Maximum leverage of up to 70% and for a redo mortgage book as collateral, pricing at 3-4%.


That's what Dilosk initially did when they bought the ICS portfolio, because they had no other way to fund it.

GS/Pimco have other resources, and this isn't their first rodeo. They've set up a funding vehicle. They'll wrap the entire portfolio into a securitised / covered bond type structure, and issue junior and senior debt secured against the portfolio. They'll have their own equity at risk covering about 10%, depending on the LTV of the portfolio. Their own funds might buy the junior debt because they're desperate for anything with a positive yield for cash at the moment.

They'll easily sell the senior debt at a negative rate in the current environment because it'll be a AAA rated bond.

That's how the world really works when you're backed by a fund with over 1 trillion under management, rather than a start-up with a poor credit rating.


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## Duggie

Fair enough RedOnion....makes sense and you obviously know your stuff!

Anyone else in the same boat as me though?


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## MrEarl

RedOnion said:


> ....they'll be making a return of over 10% on the money they put at risk themselves.



I don't dispute your logic at all, but I was surprised to see you didn't give mention to the cost of managing the portfolio.  Pepper won't be in this for nothing as we all know and even if they have agreed some sort of arrangement where they share in any upside, they'll still want ongoing fees.

I'm still surprised that the funds in question would be interested in this deal at 10% or thereabouts, I'd have expected them to be looking for mid teens in terms of their return, but perhaps 10%-ish is all they can get in the market at the moment and they have plenty of money available to invest.

The opportunity to lend new money on this loan book brings an obvious opportunity to increase the return, so when I see Pepper described as the Lender and we know they want to grow a loan book of their own, I continue to wonder about the potential for new advances (top up loans, with repricing of existing debt included as part of any deal).


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## RedOnion

MrEarl said:


> I don't dispute your logic at all, but I was surprised to see you didn't give mention to the cost of managing the portfolio.  Pepper won't be in this for nothing as we all know and even if they have agreed some sort of arrangement where they share in any upside, they'll still want ongoing fees.
> 
> I'm still surprised that the funds in question would be interested in this deal at 10% or thereabouts, I'd have expected them to be looking for mid teens in terms of their return, but perhaps 10%-ish is all they can get in the market at the moment and they have plenty of money available to invest.



Indeed, and I had included outsource fees in my post on this a few weeks ago. 
https://www.askaboutmoney.com/threa...uy-danskes-mortgage-book.205377/#post-1533965

Just simplified above as there's a disbelief from some people that money can be earned on this.

I didn't say how much more than 10% could be made, but for context GS as a group earned just over 11% on their equity based in quarter ended June. 

If they've a average margin of more than 1.2% over ECB on this book, that return quickly becomes >20%


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## RedOnion

Duggie said:


> Fair enough RedOnion....makes sense and you obviously know your stuff!
> 
> Anyone else in the same boat as me though?


This sale might be good news for people in your position. The loan sale deed would have included a disclosure about tracker issues, and which party is liable for any costs of redress.

The purchaser will want to know ASAP what it is they've bought, so they'll want rates corrected. They'll also need the redress amounts calculated. It's possible that they'll hold part of the purchase funds in escrow until it's resolved so they're not left short. As a minimum purchaser and seller will have agreed who's legally responsible for what, and from what date.


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## Duggie

I know that's the way it works. Either way they will be fully indemnified by the reps and warranties. Should be interesting warranty bundles!

I'm really anxious to see if any other people are in the same boat as me (sorry for repeating myself). Danske have behaved deplorably and it's really frustrating that the government are only concerned about the big 5 lenders and we can't get any meaningful updates from Danske or the CBI.


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## aristotle

I found Danske good when they were in Ireland. I had no issues on things like credit card charge backs after my credit card was defrauded, no issues getting a fee refunded on share trading, no issue getting a bank draft released early into my account before it had fully cleared and so on. I though they were good to deal with. 

But things may have changed since they no longer have a presence here.


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## Gordon Gekko

I have a Danske “LTV Mortgage” at ECB +0.5% and received the letter regarding the imminent changes.

For what it’s worth, I’m not concerned at all; as I understand it, this is a transaction that’s based on a financial engineering angle rather than any planned skulduggery.


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## llgon

I still haven't heard anything from Danske about my performing offset mortgage.  I'm assuming at this stage that it has not been part of this purchase unless anyone has heard otherwise?


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## llgon

Got a letter today from Danske headed: IMPORTANT INFORMATION REGARDING THE SALE OF YOUR ACCOUNT(S). No mention in the rest of the letter about the account being sold (or not) just a statement to say 'All obligations remain due and owing to Danske Bank' and information regarding new contact details for Pepper.  Typical Danske.


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## Duggie

Strange - I didn’t get any letter. Danske will send what is called a “goodbye” letter when the sale closes (15th Dec I think) the Best Goldman will send a “hello” letter a few days later providing borrower with new contact details. They shouldn’t be sending any correspondence in between.

Anyone have any sense as to how we will be treated by our new lords and masters? Hopefully it will be the kick up the ass everyone on a SVR needs to heed Brendan’s advice and refinance where possible.

Pepper have the most expensive SVR rates on the market so not sure it augurs well, and they don’t provide fixed rate products!  Will be interesting to see how this pans out for the SVR borrowers.


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## llgon

llgon said:


> Got a letter today from Danske headed: IMPORTANT INFORMATION REGARDING THE SALE OF YOUR ACCOUNT(S). No mention in the rest of the letter about the account being sold (or not) just a statement to say 'All obligations remain due and owing to Danske Bank' and information regarding new contact details for Pepper.  Typical Danske.



Another letter today saying that the last letter contained incorrect information and clarifying that the account had not been sold. It says that the heading should have stated the 'Servicing' of your account rather than Sale.


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## MrEarl

Got a letter today from Pepper, advising about changes on how they apply the TRS.

Going forward, they will offset the TRS against monthly mortgage repayments, rather than pay it to us separately after we make our mortgage repayment.  I'm good with that.   However, as part of a system change, they won't be giving any credit for the March 2018 TRS payment, until December 2018 (seems odd that they need nine months to put this right ?).

Pepper have also kindly advised on the front page of their letter that "your mortgage payment will remain static from March onwards (subject to the Year End Process, set out below)....".  I'm surprised they didn't provide for the possibility of a future interest rate rise there.


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## Carnmore

MrEarl said:


> Got a letter today from Pepper, advising about changes on how they apply the TRS.
> 
> Going forward, they will offset the TRS against monthly mortgage repayments, rather than pay it to us separately after we make our mortgage repayment.  I'm good with that.   However, as part of a system change, they won't be giving any credit for the March 2018 TRS payment, until December 2018 (seems odd that they need nine months to put this right ?).



Slightly confusing alright but does it make any material difference as there won't be a month without TRS being refunded or applied?


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## Carnmore

Does anyone know if there have been any write downs for early settlement since Pepper / Proteus took over Danske's loan book?


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## MrEarl

Carnmore said:


> Slightly confusing alright but does it make any material difference as there won't be a month without TRS being refunded or applied?



They are taking circa 9 months free credit on all customers TRS payments for the month of March.  

That's a material difference (obviously more for them, than for each individual customer)


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## SN9

Hi All,
I got a "hello" letter today from Pepper on trust for Proteus, for my ECB +0.5% Tracker on my PPR.

Maybe I'm picking holes here, but I had a lot of questions about what they've sent..
* The main letter was atrocious - words split at the end of every sentence and rolled over to the next line.  Talk about attention to detail!
* They've told me that I need to contact my insurers to tell them that Pepper is to be noted as the interested party on my policies (presumably house insurance and mortgage protection).  Surely this is for Danske to contact the insurers to tell them that they pass their interest onto Pepper?
* They're saying that I need to fill out AML information... again, surely Danske should have passed this on?  Are they not allowed to under Data Protection?  Am I actually obliged to do this or what happens if I don't bother?
* They say that the regulations that they are obliged to follow are Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and MEdium-Sized Enterprises) Regulations.  But I'm not a small or medium sized enterprise (hold the sniggers ;-) ).  The relevant regulations defines a "small enterprise” as an enterprise which employs fewer than 50 persons and which has an annual turnover and annual balance sheet total which does not exceed €10 million.  Definitely not me. Are they pulling a fast one here?  This is my Principal Private Residence I'm talking about!
* They say that they conduct their business in the English language.  Doesn't affect me much, but again, are they allowed to not accept correspondence in Irish?
* Lastly, one that I'm really not happy about, they say that they will tranfer my data to countries outside the EEA...

Any thoughts??
Thanks!


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## SN9

PS see Wikipedia's definition of Proteus.  Not sure it will inspire confidence...
_*Proteus*_ is a genus of Gram-negativeProteobacteria. _Proteus_ bacilli are widely distributed in nature as saprophytes, being found in decomposing animal matter, sewage, manure soil, the mammalian intestine, and human and animal feces. They are opportunistic pathogens, commonly responsible for urinary and septic infections, often nosocomial.

So.  An opportunistic pathogen...


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## MrEarl

Hello,

I got the same letter.

I just about managed to read the fist page, before I started losing the will to live, and had to stop reading.

Whoever wrote that letter, needs to be sent back to primary school.  It's an absolute disgrace, and definitely does not inspire confidence in Pepper.


Best to update your bank payment details immediately, to ensure that future loan repayments get to the correct account (if you pay by transfer or standing order).

It's also worth updating your insurance details (as in the unlikely event that you make a claim on your insurance policy, the insurance company's cheque will be issued in the joint names of the property owner(s) and Danske Bank, if you don't get the details updated.  If that happens, you will have serious problems trying to lodge the cheque, you may have to contact Danske to get them to write to the insurer to consent to their interest being removed from the policy etc.).

I will not be sending Pepper my AML documents again. Both my wife and I provided copies of all required documents to Pepper, on two previous occasions.  Prior to Pepper taking charge of our file, we had also provided all necessary documents to Danske.  The most recent copies only went to Pepper in the last 12-18 months and were perfect, as I think the previous set were also.

Given that I have not read the entire letter yet, I cannot speak with confidence on what else is in the letter, but no doubt it's the same letter as SN9 has received.

A quick telephone call to the Data Protection Commisisoners Office tomorrow, should answer the question about whether or not you can stop your data from being transferred outside of the EEA and if so, what you need to do.  Please let us know what you learn, as I'd also like to stop them from sharing my data outside of the EEA, if it's possible.


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## aristotle

"I'd also like to stop them from sharing my data outside of the EEA" - I appreciate the data protection issues in general, but in this case with Pepper and Proteus what exactly are you worried about? In reality it means your personal info might reside on a server or file outside of the EEA, but I am not concerned about that. But maybe I am ignorant of the issues with that.


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## Buddyboy

Received the same letter, and as has been said, the layout is abysmal.  There are words where the first letter ends on one line, with the rest of the word continuing on the second line.

Regarding updating your bank details, it states that if you are paying by direct debit, the transfer will happen automatically. 

So it looks like I have to take no action to have my DD continue, and like Mr. Earl, they can whistle for another set of the same AML documents already provided.  As nothing has changed on my side, I see no reason why I should jump through hoops again.

I will inform my house insurance company to be on the safe side.

And as SN9 so aptly quotes from Wikipedia, they are bottom feeders.


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## yop

Be keen to see if anyone will try get a right down. Only got the letter today off them. 
Sick of how Danske robbed us of the Offset. 

Sounds like they wouldn't be interested in a right down. But who the hell do we contact anyway!


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## MrEarl

Hello,

You communicate through Pepper, just like before.


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## Gordon Gekko

Were the bank account details for anyone else’s Danske repayment changed recently?

I pay my mortgage by standing order and have always done so; this month’s payment just arrived back into my account.

Many thanks.


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## Eeyore

There was something in the letter about the bank account changing which would affect standing orders but for direct debits there was no need to do anything. Mine is paid by DD and this months payment went through as usual.


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## MrEarl

Gordon Gekko said:


> Were the bank account details for anyone else’s Danske repayment changed recently?
> 
> I pay my mortgage by standing order and have always done so; this month’s payment just arrived back into my account.
> 
> Many thanks.



Hi Gordon,

I make monthly payments the same way.

The bank transfer details were changed, with details provided in that long winded, badly written letter issued recently.  If you need the info, let me know and I'll send you a copy.

I've also noticed that they've moved the date of my repayment forward by 3 days.  My scheduled repayment used to be due on 29th of each month, but now it's set to 26th.  When I asked Pepper about this, they were quite relaxed about it, didn't admit to any changes to my repayment schedule, but told me I can get the date "changed back" if I send them a letter requesting it.  Has this happened with anyone else ?


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## Gordon Gekko

Thanks Mr Earl,

I didn’t receive a letter. I called them this morning and the details had indeed changed so I put the payment through there and then.

I wonder if there’s potential for a deal? I doubt it as I understand they paid 95c in the Euro for this bucket of performing loans.

Cheers.


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## Carnmore

Any opinions on the chances of a deal for early settlement?


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## Gordon Gekko

Carnmore said:


> Any opinions on the chances of a deal for early settlement?



Zero as I understand it. These are performing loans which also performed through the crisis. As I understand it, they paid 95c in the Euro for them.


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## MrEarl

Gordon Gekko said:


> Zero as I understand it.
> 
> These are performing loans which also performed through the crisis. As I understand it, they paid 95c in the Euro for them.



Yup, have also heard in recent days that there is currently no interest in providing discounts for early settlements.


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## poka

Hi there, 
I have a tracker with Danske and now owed by proteus. I recently got a letter from Danske stating my remaining loan amount and term. The term was incorrect out by a few years, should be 18 yr but stated 23yrs. I rang pepper and they said it must be a mistake and had I taken a break or interest only period. I had reduced payments, paid interest plus some capital when I was on a career break, all agreed by Danske. However, I have paid the full amount for the last few years and all is up to date. Pepper said it must be a mistake, I said I wanted the correct term in writing and she said Danske are sending out letters. I got the impression that this had happened to other mortgage holders. Should I be worried? No letter received yet. I heard that the vulture funds are only accepting the initial terms of the mortgage and any changes to these terms, even if agreed with Danske, are being recognised.


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## Carnmore

poka said:


> Hi there,
> I heard that the vulture funds are only accepting the initial terms of the mortgage and any changes to these terms, even if agreed with Danske, are being recognised.



Did you mean to say _not _being recognised.


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## poka

Yes apologies, they are not accepting any deviations from original agreement.


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## IdesofMarch

MrEarl said:


> Got a letter today from Pepper, advising about changes on how they apply the TRS.
> I'm surprised they didn't provide for the possibility of a future interest rate rise there.



Maybe that's because there is not a snowballs chance in hell of there being an increase in ECB interest rates this year or even next year.


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