Any chance of Banks "wriggling out" of trackers ?

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House Insurance

Hi 'Sid

Don't wait for the renewal date. Update your house insurance with your current company immediately.


Marion
 
theclassic said:
think if moves are made by the financial institutions to renage on the tracker mortgage deal based on a slight of hand, then there would certainly be merit in establishing a group to fund and instigate Legal Proceedings / Class Action.
I would be willing to donate a few hundred to a properly formulated and constituted group of persons in a similar situation & I hope there are others.
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Each bank has their own terms and conditions for trackers, even within individual banks terms and conditions are frequently updated or changed. I think different cases will have to be decided on their own merit. For this reason I cannot see a group challenge being effective.

If any customer of any bank has their tracker withdrawn, surely the thing to do is follow the banks complaints procedure and if the matter is not rectified then take the complaint to the Financial Ombudsman.

His decision is free and is legally binding to both, subject only to an appeal to the high court.

If your complaint is upheld he can instruct the bank to rectify any similar cases, if he thinks it is appropriate.
 
House Insurance

Hi MixedNuts

No I don't.

But I was thinking about this since speculation arose regarding banks wriggling out of their commitment and I identified house insurance as an area where people could easily slip up in relation to their contract.

Better be safe than sorry!

Marion
 
Just looking at my Mortgage Offer of Advance, which myself and the OH signed in the presence of our Solicitor, who also signed.

The first page set out the text

"Ulster Bank is pleased to offer you an advance as detailed below subject to Special Condition(s) and the General Condition contained in this Document"

Goes on to give Names, Property, Amount, Period, No. of Repayments, Instalment, Interest Rate, etc etc.

Next page has Special Conditions relating to Loan: Loan Number

First Line there says:

The rate of the Ulster Bank Flexible Mortgage tracks ECB rate with a margin which is fixed for the life of the Home Loan term. The Margin for this Home Loan is ECB rate plus 0.95%. This margin is dependent on the amount borrowed and the value value of the property to be mortrgaged.

The emphasis above is in the Document.


The signature part of the Document was called Acceptance and Authority.

This was in 2004, and the Offer of Advance was from Ulster Bank.

Valuation is not a problem, as Mortgage was for just about 30% of the cost of the property at the time.

Is this water-tight, or do UB have any kind of get-ou?.
 
I will be talking about this subject on Newstalk tomorrow morning (19 April) between 7-730am provided the telephone line where I am is OK. The issue is that folks do not to panic, rather being forewarned is to be forearmed, so take a look at your mortgage documents and any marketing material received at the time and of course any statements made to you by the bank that you relied upon regardless whether those points are specifically covered in the mortgage documents or not.

If you want me to raise anything with me before tomorrow morning – no promises they will be covered - then may be email me privately to spare the group information overload?

Other issues:

As Marion pointed out there may be things in there that you need to keep abreast of such appropriate insurance etc notwithstanding the ECB tracker issue.

"People should ensure that they insure their house at least for the value advised by the lender at the time the tracker mortgage was taken out. [Marion]" Presumably if you brought your house from 2004 onwards then by default (given the state of the market) you should be compliant! However this is the rebuild value, yet even that has dropped in price and not just land value. But do give this area thought.

On the separate point about the role of solicitors raised above - I wonder how many solicitors involved in conveyances actually thought about advising on the wording of mortgages as opposed to ensuring that good title passed to their client. An honest straw poll of lawyers might reap interesting and varied answers. Perhaps at the height of the boom some were just pushing conveyances through like a factory especially given the price war on fees? I am not convinced one would have recourse against the solicitor unless it could be established that the client specifically (or had a reasonable expectation engendered by the solicitor) that he/she was advising on each and every term & condition in the mortgage documents as opposed to those elements relating purely to the conveyance of property (and other matters material to the conveyance).
 
twofor1 you are perfectly correct, all avenues should be pursued before resorting to any legal action of any kind: it should be the last resort in dispute resolution.
however I think people should be willing to use the court system - it is after all the final arbiter in all matters and the financial institutions are adverse to bringing people to court.

the prospect of a serious & protracted legal challenge by a large number of customers would not be welcomed, particularly when Irish financial institutions are trying to attract foreign investment.

the issue of banks offering different tracker options is correct however, the key point should be that in any other walk of life a contract is given meaning by what all parties undersand it to mean - in this instance the financial institution & the customer.

Marion & OakesP make very good points however, we the customers must make sure not to give the financial institutions and ensure all i's are dotted - the matter of house insurance is particularly relevant given the LTV's.
 
House Insurance

Just to clarify:

I was a given a valuation for insurance by Halifax. It was detailed in letters and in my contract that this sum was to be insured and index-linked for the duration of my mortgage..

Therefore, for me, It is irrelevant that house building costs have fallen by the latest figures on the SCS.ie site by up to 9% if I wish to hold onto my tracker.

One might be tempted to reduce costs according to the revised figures on the SCS site in order to obtain a lower insurance cost but this could have adverse effects in relation to holding onto the tracker.

Marion
 
Of course you would discuss it with the bank to avoid unilaterally disregarding whatever the banks' valuation and original requirements were. But if someone did alter their insurance without reference to the bank which provided a fair and reasonable sum insured in the circumstances I am not sure that by such action by itself would occasion a breach of a condition in the mortgage contract which would allow the bank a fundamental right to change/repudiate other terms and conditions, such as the tracker issue. A legal analysis would be required to get to the specifics here. However I would repeat that that you should not alter your insurance without discussing with your bank and recording whatever they told you, especially if it cut across the face of the mortgage contract.
 
Re the trackers, PTSB did amend their loan offers some time ago for trackers and had a clause which read something like...should the ECB rate become an unsuitable reference rate the bank reserves the right to use another interest rate for the purposes of this tracker loan......(i cant remember the exact wording because I dont have it in front of me) but they were giving themselves a get out clause. I checked my own offer letter (ecb +.75) and it does not have this clause in it.
I think we can be sure that the banks will and are investigating all avenues to get out of these contracts....
 
Does anyone find any get-out by UB given this, which in in the Loan Offer Document, which was signed by both of us, in the presence of our Solicitor,who also signed the document.

This was in a Special Conditions section of the Document.

The rate of the Ulster Bank Flexible Mortgage tracks ECB rate with a margin which is fixed for the life of the Home Loan term. The Margin for this Home Loan is ECB rate plus 0.95%. This margin is dependent on the amount borrowed and the value value of the property to be mortrgaged.

The emphasis above is in the Document.
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MáirtInide said:
Does anyone find any get-out by UB given this, which in in the Loan Offer Document, which was signed by both of us, in the presence of our Solicitor,who also signed the document.

This was in a Special Conditions section of the Document.
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I should suspect that know one will want to offer advice - neither am I - in a discussion board on an extract sitting in isolation from the rest of the mortgage document. Why don't you think that the intention of the wording is clear? May be you are looking for others with UB mortgages to share their opinion - which counts me out as I am with another provider.

Always note that you can never read a document in a fragmented manner. Each clause hinges on other clauses within the document. Perhaps go back to your solicitor and ask him/her if you have real doubt? May be he/she might respond by saying that his/her role re the mortgage was limited to acting as a witness only though.
 
Are my Bank of Ireland tracker conditions safe?

Very interested in this topic as I have 2 large 6 figure trackers. If the banks moved me off my ecb +0.8% to something like 4% this would push us over the edge!

I looked at my Bank of Ireland loan documents and both of them state in the mortgage loan offer letter in "The Special Conditions" section. a) part (v)

" The interest rate applicable to the Loan is a variable interest rate an may vary upwards or downwards. The interest rate shall be no more than 1.05% above the European Central Bank Main Refinancing Operations Minimum bBid Rate ("Repo Rate") for the term of the loan.

Can anyone see any way that this sentance could be interpreted, allowing them to cancel the tracker, because I cannot.

I am also concerned about the possibility that if I moved out of my 2 bed apartment (as we are expecting our second child) and rented it out (as I cannot sell due to negative equity), that they could force me off my tracker. But again, I cannot see anything in the loan document that mentions that it is a loan for a ppr only, or that I need to inform them if it becomes an investment property.

Again, does anyone know of any catch-all generic terms I should look out for or am I safe here too?
 
I checked my AIB agreement and it was very straight foward. I am on a 1.1% tracker for the lenght of my term (plus .75% for unpaid amounts).

there is no mention of it being raised to other refernce rates or anything to do with the value of the property affecting it (it is not an LTV tracker).

as mentioned above, they mention that you must have your house insured for the rebuild amount stated on the documents supplied to them and that this is your resposability

I am happy now in my situtation not to give this another thought!
 
Please see below in Sundays Business Post ....Called

BANKS SEEK LOOPHOLES TO ESCAPE TRACKER MORTGAGES

[broken link removed]

Banks seek loopholes to escape tracker mortgages
Sunday, April 18, 2010 - By Kathleen Barrington
Banks are examining the fine print of their tracker mortgages to see if there are any circumstances in which they can wriggle out of the promise to track the European Central Bank rate of interest.

A source close to one of the banks said it was looking at provisions in mortgage contracts that could get the banks off the hook in some cases. Some tracker mortgages sold to buy-to-let investors included a provision which entitled the bank to review its arrangements with the borrowers after five years, he said.

It might also be possible for the bank to revoke the promise to track the ECB rate if the borrower had breached the terms of the contract, for example if the borrower had missed repayments, the source said.

His bank was not the only one looking at ways of reducing the number tracker mortgages.

‘‘They are all at it,” he said, speaking on condition that his bank not be named. The issue of banks trying to wriggle out of the promise to track the ECB rate was raised by Peter Oakes of Compliance Ireland on RTE’s Morning Ireland last week, but several lenders denied contemplating any such move.



A spokeswoman for the Financial Regulator said it ‘‘would appear to be a matter of contract between the provider and the consumer, and customers should carefully examine their terms and conditions to see what is permitted under their contract’’.

She said the Consumer Protection Code states that ‘‘a regulated entity must ensure that all information it provides to a consumer is clear and comprehensible, and that key items are brought to the attention of the consumer. The method of presentation must not disguise, diminish or obscure important information.”
 
OakesP said:
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I should suspect that know one will want to offer advice - neither am I - in a discussion board on an extract sitting in isolation from the rest of the mortgage document. Why don't you think that the intention of the wording is clear? May be you are looking for others with UB mortgages to share their opinion - which counts me out as I am with another provider.

Always note that you can never read a document in a fragmented manner. Each clause hinges on other clauses within the document. Perhaps go back to your solicitor and ask him/her if you have real doubt? May be he/she might respond by saying that his/her role re the mortgage was limited to acting as a witness only though.
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Thanks for your reply Peter.

I actually think the intention of the wording is quite clear, and I am confident UB will not attempt to undermine this contract.

No, I was just wondering in light of the general discussion, regarding Banks possibly/probably attempting to wriggle out of Tracker Mortgage Contracts, which most people thought were cast-iron, and quoting what I found in our Offer of Advance from UB, which we signed, etc etc.

Remember, this was 5 years ago, and for most people a tracker seemed to guarantee some sort of cap on repayments, which at that time was what it was all about.

To now possibly be faced with the prospect of Banks Legal Departments attempting to undermine contracts which people entered into in good faith, does seem to reek of the desperation within the Banking Community.

It makes one wonder why they do not pull out all the stops to recover those "distressed loans" which were handed out to their Developer and Political friends, instead of expecting the Taxpayer and Citizen to bail them out through the NAMA mechanism.

Thanks again.

I'm Desperate Dan!!
 
I've heard this before in relation to this topic: "if the borrower had missed repayments".

As a homeowner on a tracker mortgage, this bit is reassuring that the "buy-to-let investors" are being targeted.
 
Tailspin said:
Very interested in this topic as I have 2 large 6 figure trackers. If the banks moved me off my ecb +0.8% to something like 4% this would push us over the edge!

I looked at my Bank of Ireland loan documents and both of them state in the mortgage loan offer letter in "The Special Conditions" section. a) part (v)

" The interest rate applicable to the Loan is a variable interest rate an may vary upwards or downwards. The interest rate shall be no more than 1.05% above the European Central Bank Main Refinancing Operations Minimum bBid Rate ("Repo Rate") for the term of the loan.

Can anyone see any way that this sentance could be interpreted, allowing them to cancel the tracker, because I cannot.

I am also concerned about the possibility that if I moved out of my 2 bed apartment (as we are expecting our second child) and rented it out (as I cannot sell due to negative equity), that they could force me off my tracker. But again, I cannot see anything in the loan document that mentions that it is a loan for a ppr only, or that I need to inform them if it becomes an investment property.

Again, does anyone know of any catch-all generic terms I should look out for or am I safe here too?
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Tailspin - does your contract with BoI go on to say "In the event that, or at any time, the Repo Rate is certified by the Lender to be unavailable for any reason the interest rate applicable to the Loan shall be the prevailing Home Load Variable Rate"? Also do you have a clause 6(c) which talks about EURIBOR?

I read a BoI contract for a friend last week and will post a more detailed note later today. Just curious if you have the same wording.
 
Charlie Weston in the Independent (24/04/2010) wrote a follow-up piece on this story at http://www.independent.ie/business/personal-finance/watchdog-alert-on-tracker-home-loans-2147218.html.

The story covers a number of points:

1) Regulator called upon by Chairman of the Consumers' Association of Ireland James Doorley to probe mortgage lenders to make sure they are not attempting to encourage homeowners to give up tracker mortgages.

2) Financial Regulator stating on 23/04/2010 that lenders were required to act honestly and in the best interests of customers. "Our firm view is that no bank should offer incentives for tracker mortgage customers to switch to less favourable options," the spokeswoman for the regulator said.

3) Comments by mortgage broker Karl Deeter saying most tracker contracts were based on the mortgage being a set percentage or lower of the value of the house. That most lenders based their tracker offers on the loan-to-value ratios. He is reported saying these lenders could seek to renegotiate the mortgage rate to reflect the higher value of the loan relative to the value of the home, he said. Lenders could ask consumers to pay down money on the mortgage to bring the loan to value back in line with the original agreement, or force people to switch to a variable rate loan (see link above for context of quote).

[OakesP comment - I have never seen a NIB mortgage contract. I was passed a copy of a BOI tracker contract and its states that as a condition precedent that ‘A valuation (including a photograph) of the Property for mortgage purposes showing the valuation in an amount of not less than Euro XXXXX etc”. To my mind this is a state of fact that had to apply before the loan was advanced and does not appear to be a continuing obligation. I then looked at the ECB interest rate clause which copied the language provided by ‘Tailspin’ above - “The interest rate shall be no more than 0.XX% above the European Central Bank Main Refinancing Operations Minimum Bid Rate (“Repo Rate”) for the term of the Loan.” The same clause goes on to state “In the event that, or at any time, the Repo rate [sic] is certified by the Lender to be unavailable for any reason the interest rate applicable to the Loan shall be the prevailing Home Load Variable Rate.” Very interesting eh? I wonder what the bank’s definition of ‘unavailable’ is? The pessimist in me does not lead me to conclude that that the bank would seek to interpret this word in a narrow fashion, especially since it has sole discretion to make the decision.

For those interested the Repo Rate is at http://www.euribor-rates.eu/euribor-rate-1-month.asp and the ECB rate is at http://www.ecb.int/stats/monetary/rates/html/index.en.html. In particular, take a look at the divergence between the two rates in early 2008 and then note the following clause I located buried in the fine print – “Notwithstanding anything else provided in this Offer Letter, the varied applicable interest rate shall never, in any circumstances, be less that 0.1% over the one month’s money at the Euro Inter Bank Offerred Rate (Euribor).”

Two things strike me: Firstly, the bank would have a hard time arguing that the Repo Rate is not available for so long as it is published by the ECB and/or secondly, it is only when there are times of divergence between the ECB and EURIBOR (which is plausible based on historic movements), that those with similar wording in contracts may need to be concerned. Yet as I say above, the BOI states it has sole discretion in deciding when the Repo Rate is not available. I’ll let the question sit out there as to what ‘unavailable’ means. The Financial Regulator has signaled that banks need to bolster their finances and that consumers should expect interest rate rises independent of the ECB. The regulator did not qualify his statement before the Committee so one presumes he was referring to SVRs and not ECB trackers. Is it likely that some banks might be buoyed by the regulator’s address to the Committee and seek to see how far they can push the boundaries?

I raised this issue on RTE Morning Ireland back on 15 April 2010, see http://www.complianceireland.com/RTE-Morning-Ireland-Peter-Oakes-Compliance-Ireland-Matthew-Elderfield-14-April-2010.ivr) and later on Newstalk interview on 19 April 2010 at http://www.complianceireland.com/Newstalk-Peter-Oakes-Compliance-Ireland-ECB-Tracker-Mortgages-20100419.mp3). Since that time, together with Charlie Weston’s separate stories about Halifax/BoSI, a lot of media and industry commentators have followed up the issue. This is good honest and necessary debate. And hopefully the IBF and/or the banks will move to say that all this is all a nonsense and that they commit to honouring ECB trackers regardless of changes to LTVs or borrowers missing payments who in good faith seek to honour the long term commitment to the mortgage despite short-term problems. We say that a pet is for life, not just for Christmas. Same applies to both parties to a mortgage contract especially when the taxpayers (the borrowing parties) have bailed out the banks (i.e lending parties).

3) A spokesman for the Irish Banking Federation said it was its information that members were not trying to exploit loopholes in tracker contracts to push through rate rises.

[OakesP comment – there is no direct quote provided in the article from the IBF. However the words attributed to the IBF are interesting – what is the IBF’s information based upon? (1) A response to a direct question asked by it of its members (and if so which banks were asked and which ones answered clearly) or (2) the fact that no one is asking questions and that none of the banks are offering up information freely to the IBF and others?]

I have to say I like the title of Charlie Weston’s article - You'd have to be crackers to give up your trackers. Short, succinct and to the point. One of those phrases up there with “I don’t know what a tracker mortgage is’ See http://www.independent.ie/opinion/columnists/charlie-weston/charlie-weston-youd-have-to-be-crackers-to-give-up-your-trackers-2141861.html

Peter Oakes
 
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