Life Loans are back

odyssey06 said:
Could "taken the house" mean "compelled to sell"...
I sensed a lot of weasel words on the programme... leaving out the 230k they were still left with after discharging the debts.
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It gets better, about Deirdre, and this bit drove my brother mad, the house was a corporation house, so presumably they got it for free. (I've edited my case study) And yes her husband might have used up his 70K pension, but they ended up with 230K. Plus of course the dad had the use of the borrowed 30K. Real cost was therefore 40K in interest.
 
While the Law Society did not object to the product, it didn’t endorse it either. That is clear from the Introduction.

Besides concerns about certain terms in the contract, it also in the final paragraph of section 9 questioned the appropriateness of the redemption fee:

“While the bank may be permitted to charge such a redemption fee by virtue of Section 121 of the Consumer Credit Act 1995, consideration should be given as to whether such a charge is appropriate in the context of this particular kind of mortgage where the concept of being “customer focussed” could conceivably take precedence over the desire to maximise profits which, it is appreciated, is of some importance to the bank who will argue that it is to compensate them for having a fixed rate of interest, etc.”
 
Case Study Francis - with Senior Fund - this one is a bit different

- it was a vulture fund
- loan taken out in 2007, 45K, now 90K 8% father had suffered a brain injury a few years before
- case is with ombudsman
- house was valued at 300K and apparently the houses are worth 160K
- father had no house insurance, so SF took out house insurance, added that to loan, and compounded it
- wife died 4 months before he applied for loan, pestered to take out loan, declined 4 times and took it out on 5th time
- Execution only - means they don't have to explain the product to you, didn't understand this

Case study - Martina

- FIL, borrowed 112K in 2007 when properties were valued a lot higher
- Died 2020 owed 285K which is just below the amount of the loan
- two adult children devestated and agrieved. There is no inheritence, FIL would not have taken out loan if he thought his kids would not inherit
- nobody discussed it, it's a disgrace, compound interest

Case study - Elaine

- mother and father borrowed 61K, value 300K in 2005 to do house repairs, now owe 157K
- mother has dementia, at home needs Fair Deal
- Fair deal do not take the loan into account when valuing the house, nor in calculating an assessment of how much you will pay
- house worth 300K or 400K, but it's only worth 100K to family due to life loan.
- Fair deal will take the loan into account if they can provide receipts as regards the work, she said who has receipts from 2005

Observations

Fair deal I'm not au fait with. But apparently they won't be eligible, it costs 2K a week said Joe, so they will have to pay I suppose, but what happens if there is only the state pension for the dad. My late aunt had no asset and no money and the HSE paid for a lovely care home. Is that not what happens? So sometimes it's worth owning nothing.

Problem
That loan will never be repaid until Dad dies, as there is no money there. Very difficult situation to be in.
 

That made no sense at all.
It was Seniors Money who are not a Vulture Fund.

They had a variable rate product.

45k to €90k in 13 years is only 5.5% which was not bad for 2007.
For comparison, the ECB rate was 4% and the permanent tsb mortgage rate was 5.44%

The house insurance is absolutely standard. If someone doesn't pay their house insurance, the lender could lose their entire investment, so they have a right to insure the house. This can be avoided by the person not cancelling their insurance.

Don't understand the pestered bit.

If I buy shares through a stockbroker , I can can be a full service client where they will give me advice, or an execution-only client, where I tell them I want to buy 100 shares in Paddy Power and they just do it.

I had not heard of it in relation to mortgages. But mortgage lenders generally regard themselves as providers of a product and not advisors.

Brendan
 
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What amazed me is what business is it of the Law Society to talk about interest rates. That's bank business. Also I suspect the fact the banks had set a fee with solicitors probably irked them. The Law Society in Ireland doesn't want the banks encroaching on their business.
 
How is this the business of the Law Society. And being vague about it, the redemption fee. Either it's legal or it's not.
 
Bronte said:
How is this the business of the Law Society. And being vague about it, the redemption fee. Either it's legal or it's not.
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It is absolutely awful stuff from the Law Society. Way out of their depths on the financial workings of the banking system.*
The main driver of bank interest rate policy is the interbank market - at what rate can they borrow? A loan from the bank to a customer is funded by the bank borrowing in the interbank market. It is the interbank market which sets the rates (of course, the bank adds on a margin for expenses and profit). Fixed rates can be lower than variable rate as they are now. An early redemption leaves the bank holding the baby of its funding and if this is higher than current interbank rates the bank faces a real loss - this is not double charging. And the Law Society document is riddled with similar populist nonsense. Surely the BoI could have sued the Law Society - though come to think of it that wouldn't work, would it?
* For avoidance of doubt I have no axe to grind for the BoI
 
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I remain convinced that the Seniors Money/Spry proposition is a great product.

It’s like an “interest only” mortgage, only with far greater flexibility.

Yes, the person can simply choose not to make further repayments, and at 5.5% it will compound over time.

BUT, you can make up to four repayments a year, with a €500 minimum, and up to 10% of the original loan amount each year.

Let’s say the OAP needs €50,000 to upgrade their home. Surely all of these adult children who lose their minds and call Liveline can, together with their parents, rustle up €229 a month to keep the €50k at €50k?

Credit Union or bank loans for that sort of thing attract rates of 8-10% and you HAVE to make capital repayments. The Seniors Money stuff is ridiculously flexible.
 

Gordon

That is great. I completely missed that.

We love the Credit Unions. But we hate "vulture funds" like Seniors Money so we are prepared to pay a much higher rate to the Credit Union.

Brendan
 
Totally agree with you. I suspect the bank which gave out loans at the height of the Celtic Tiger got burnt on some of these loans as the valuations were way high then and subsequently went way down. Those kind of things have to be factored into their interest rate. The rate isn't picked out of the air, they will have had acturies doing calculations on the risk. They will also calculate how long until people die. Some people will take issue with my mentioning this but it's a reality of these things so we should be able to state it. There's less risk when you do an ordinary mortgage which seems to be lost in the discussion, younger people take out ordinary mortages, they will live to pay back their mortgages and every year the risk gets smaller for the bank as the asset is increasing in value and the mortage is deceasing.

Because of this thread I checked out interest rates. Personal loans are in the 8% to 9%. Credit unions are charging 12%. Nobody has told us what 65 year olds who need to do house repairs are supposed to do.

I'd but I'm not sure, that some people in their sixties thought to themselves why not borrow and have a bit of fun (travel/cruise/party) or just to have a nice new car, put in better heating, supplement their retirement. But they won't admit it to their children. Much better to blame the bad bank.
 
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Joe Thursday 28th Jan
- Said that if you won the lotto and paid down your loan early, after 5 years, you would still have to pay 15 years interest
- He read the RTE news website about Spry Finance (giving Spry great advertising)

Lifetime Loan provider re-opens to new applicants

Lifetime Loan provider, Spry Finance, the new retail division of Seniors Money Mortgages DAC, is re-opening to new applicants.
www.rte.ie

- Read out a statement from Spry CEO Derrick Hanly
- wondered if there is a warning about the Fair deal in their warnings There is, see below
- then later mentions small print, then says there are 5 different warnings and does this not mean there is a problem ... the fact you have to pu in 5 separae warnings, say's there is no small print anymore as you can blow it up. (it is in big capital warning boxes)

WARNING: PURCHASING THIS PRODUCT MAY NEGATIVELY IMPACT ON YOUR ABILITY TO FUND FUTURE NEEDS.
 
Case Study – Siobhan
  • Uncle in hospital, took out loan in 2004 100K
  • Aunt in home, now ow 261K, 6% went to 3% after 10 years
  • It will only end when both are dead
  • Trying to sort out fair deal, discovered the bank had the House Deeds
  • Feels bank traded on their good name, bank hoodwinking people
  • Wondered why they stopped the Life Loans in 2010 because that’s when the bank had accrued all the money
  • A wits end, the tracker people got compensation, feels the show means that people will get recompense, it’s all the old and dying people, bank sweeping it under the carpet
Observation

Not sure what there is to worry about, her uncle will be taken care of by the state at the end of the day and it will paid for by the taxpayers.

Case Study - Bill

- mother 85 told Bill to drive her to the bank, borrowed 80K. Passed away in March at age 101, fully with it, now owe 200K
- came out with an envelope of money and gave it to him, and said this one is for you and there's the same for your brothers
- she said she was giving him the money while she was alive not when she was dead
- she explained how she got it, he looked at the money and said wow that will help out in paying off my debts when he was looking at the money, thinking that was that was really going to help out
- sold house, had to because they couldn't afford it, after legal fees, little left over
- getting a tiny amount now from estate
- People go into banks owing millions and have the debt wiped off, and what's the difference between them and him, wants banks to look into each individual case, you're struggling and the, the bank/these people, and decide not to , plus 'we' own the banks, 'we' bailed them out, the bankers in their big offices, an 85 year old woman doesn't read small print, the banker in the pin stripe suit, all his mother couldn't wait to get into the car and give him the money. The look on her face, and the look on his face when he got the money.
- Was persuaded by beautiful girl on Joe's team to go on the show, came on because of the woman who wanted to die about her debt
- Why isn't there a legal representative beside his mother (I don't undestand how she got a cheque directly, did it no have to come via a solicitor?)
- his mother didn't expect to live to 101, so she thought I'm giving a few bob at age 85 and so she thought she'd have another few bob when she died

There was confusion initially about cash in the envelope it was actually a cheque. Which means Bill had to go and get it cashed.

Siobhan - people don't question banks, shame on you BofI. Can't believe it was legititimate, that the regulations were changed because they realised they were doing wrong. Penal interest, it's immoral, criminal charges the interest, thanks Joe. Joe- they are not St. VdeP.
 
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I have moved the disucssion on covenants here:

Using a covenant to make the repayments on a Life Loan

Let’s say the OAP needs €50,000 to upgrade their home. Surely all of these adult children who lose their minds and call Liveline can, together with their parents, rustle up €229 a month to keep the €50k at €50k? Thinking about this (a dangerous practice!). If the parents needed a lump sum now...
askaboutmoney.com
 
Tom Murray - Financial Independant Advisor Fair Deal Leading Advisors

- Joe says the warnings don't mention the loan might affect the Fair Deal
- Tom says they do, comes across implications on far too regular basis, upset the products are back, one ad said they already had 30K clients, but that's gone now (due to Liveline they believe).
- In 2021 you are asked if you've taken legal/financial advice, but it was different in 2000
- Joe says why should you need to have a relative with you
- HSE do not recognise Life Loans, unlike normal mortgage, so a disaster as regards Fair Deal
- two issues, clause prohibiting 'additional charge' on property, but if bank doesn't agree, you can't get the 721 Euro per week, from Fair deal. 36K a year.
- Thinks the central bank regulator should ban them
- thinks the forms in 2000 didn't have clauses about financial advice and legal advice
- says many people who took loans out didn't expect to live so long, many were bright people.
 
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Brendan Burgess - from Ask about Money

- Joe says BB thinks the loans are the best thing since sliced bread
- his blood pressure
- outrageous that people can go on and make outragous
- David, BB geting really annoyed he said, mentions it was Pounds not Euro's, it was not 25K but 32K, in 2001 paid off loan in 12 years, looks at his notes and says it's 14 years, David went to bank with her, David was on Liveline in 2016. Every one of the Listeners did not take out the loan without legal advice, 2004 brochure sent to show. Dispute about figures. Siobhan said it was Euro's in 2004. Joe plamasing BB. And stops him speaking and distracts BB.
- Brochure is crystal clear, you can repay a Life Loan at any time, as with any fixed interest rate, early repayment penalty, says did not have to pay interest for 15 years, the caller yesterday was wrong. Very good product.
- Joe asks would BB mention fair deal. BB says 'probably' he would.
- Fair Deal, high blood pressure, Bill, says at 85 what vitality do you have, mentions BB's blood pressure (this is mad stuff). BB says he is 63.
- BB says Spry mentions the Fair Deal. If there is a problem with Fair Deal take that up with them.
- Siobhan says the Fair Deal is a loan on your house, BB, trying to calculate, tells her she can go in and pay off loan, says there is no penalty, she says it's fixed at 3%
- BB If you don't own your house than you can't use it as security.

David Hall

- Joe says BB thinks it's a great country
- it's a strange country where Burgess has to come on for the banks (first dig at BB there)
- says you should get advice, should get enduring power of attorney, let family know about loan
- Predatory product, the most intelligent articulate person, when they become vulnerable, you need effective regulation, you can waive legal advice (?) very little regulation on this, at the time, this is a main stream bank, now very profitable, supported by state and the people, they have contol, they can change the interest rate, a halt can be put to this, the Minister for Finance, the Department of Finance. Central Bank and Director of Consumer Protection,
- The five warnings says it all, and BB is right, you should get independant financial advisor.
- mentions austirity taxes, UPC, money pumped into banks and state
BB
- page full of warnings if a 25 year old get a normal mortgage, the brochure on this product has 5 warnings, this doesn't mean much, brochure is basically perfect, an independant advisor migh advise you not to take the loan, might advise you to sell your house and tade down

- Joe says Tom Murray says they should be banned, Hall says they are a despicable predatory product, there are much cheaper options to borrow money (? no examples) predatory product, vulnerablity, nakedness, embarrassed to ask for money, his Client (widow) borrowed money to pay for her daughters wedding, 6% in a bank that we pumped money into, how much the people have paid in taxes during the austerity after the crash....

Joe says he'd come back to BB after ad break. Goes to James, afer rabbitting on for ages
 
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Case Study - James

- Mother borrowed 75K, paid back 191K in 2020, now with dementia in care home
- needed to do a bit of work on the house and to travel, James not in a position to help her at the time
- Had to deal with Fair Deal and sort out Enduring Power of Attorney
- Product is the greatest form of Elderly abuse that ever existed, his mother did definitely need the money, but the amount owing is criminal
-
BB - she had the loan for 14 years

James says it was astronomical, (BB says it was not) money served it's purpose, they tried to pay it back but it was out of their reach, says they could not pay back part, dispute with BB, who is surprised you can't repay part, new product you can. James says it's an old loan and you can't. That is what he was told.

BB compares it to renting a car over 14 years. If you don't make any repayments it will be a high cost. (bad example) He's trying to make the point i you pay zero back over such a long time of course you'll ow loads, but that fell on deaf ears, James laughed and said you'd buy the car.

James said they had to sell house to repay loan. Not able to get Fair deal. Can't get Fair Deal when the house is sold. And she has no Fair Deal.

BB reads from brochure of 2004 which says you can repay part. James then changes and says they weren't in a position to repay part. And says he wasn't in Finance and didn't undestand that.

Joe asks about the interest rate, BB says it's too high because of Liveline. Everybody thinks this is hilarious. Joe plays to this audience. (he's really good at that)

BB says if
 
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Tom Brannigan - Retired Banker - this bit is totally bonkers

- came on because of people on the show who signed an agreement but didn't realise what they were signing, didn't understand
- offer letter says to seek legal advice.
- (BB says it's a form of mortgage and you had to take legal advice/solicitor.)
- Tom says if a solicitor tells the borrower it's in your interest to take out the loan than the solicitor should look to his ethical standards
- Joe says it was not sold as a mortgage, dispute over obligatory legal advice
- Tom says legal advice was not obligatory (contradicting himself as regards the offer letter)
- BB says it's a formal mortgage document, secured on your home, must have a solicitor, money goes to the solicitor to pass it on to the borrower, same legal process as getting a mortgage. Confusion then over financial advice. (which can be waived but it's lost in the chaos) BB says it's the same legal process and Joe says 'but you're not buying a house'.
- James interjects about compound interest, BB says all mortgages are compound interest, all loans are compound interest (OMG)
- Joe says all loans are not 5.5%
- BB mentions Ann paid 15% on her mortgage, that long term fixed mortgage rates are more expensive, Joe says in 2000 mortgage raates weren't 17%, asks Hall about legal advice
- Hall says loans were sold onto third parties, despicable, we pumped billions into banks, no return for vulnerable people, Central Banks needs to stop this, Joe says CB approved this product, Hall says the CB agreed it over a game of Golf (OMG)
- Joe says that the fact your solicitor pays the cheque to you is no proof of legal advice (we have arrived in Mars folks)
- BB explains to Joe the contract goes to your solicitor, and he doesn't say to the client you know what you're signing so I'm not going to bother reading it, instead he says do you understand that you are giving the security of your home to the Bank and in 15 years time.... Joe says then nobody would have taken out a loan because solicitors, especially as they don't don't discuss it with them over a game of golf. Ramps it up by basically insinuating all the borowers were so stupid they hadn't a clue what they were signing because they wanted the money fo a trip to Australia and they were so stupid they didn't see it as a mortgage. In response to Tom trying his best to say taking out a mortgage is a serious matter.
 
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