Mortgage Overcharge v Mortgage Underpayment

[IdesofMarch]

Can anyone tell me why is it that, if a borrower cannot pay his monthly repayment towards his mortgage, the banks/funds can sue for default (breach of contract) and seek repossession.

On the other hand, when a bank overcharges the borrower on his monthly mortgage repayments or misinterprets contractual obligations (tracker mortgages) they can simply give you your money back (sometimes, many, many years later and not of their own volition) and pay the borrower some paltry compensation?

Some proportionality!

 

[llgon]

You're right Ides.

If, after many years of not repaying any of their debt, the borrower gave the money back to the bank, along with some paltry compensation, it would balance everything up.

 

[IdesofMarch]

IIgon, what really happens is that most mortgage contracts have a default clause, so that if you miss a monthly payment or part thereof for more than 3 months, the bank have a right to seek repossession (both contractually and statutory) The bank do eventually get the property from the borrower, albeit at a slower pace if it is the borrowers principal private residence. This may suit Government agenda, seeing that they own the majority of the banks in the State. The bank then sell the property via the receiver (sometimes to themselves, let's not mention the West Register). When this is completed they come after the borrower for any residual debt. If the bank make a loss in this process, they set it off against future profits. Job oxo.

 

[newirishman]

Repossession takes years in Ireland on a good day, and is pretty much not happening at all if you decide to pay just a little bit less (“undercharging your repayments”, of you wish). So I’d say it’s pretty much par for course, isn’t it?

But what exactly are you proposing Ides, as otherwise your post is just a rant with no substance to discuss.

Of course, if you take out the mortgage and sign the contracts, one is pretty much made aware that you could lose your home if you don’t keep up with repayments. So it shouldn’t come as a surprise to anyone.

 

[RedOnion]

I don't always agree with him, but to quote a poster from another topic, I hope you find the below to be helpful. I've certainly entered a period of self reflection since I first read it.

Its terrible that old law stuff, if only it wasn't there!

Oh wait. That was you?!..

You do understand contract law Ides, don't you?

 

[Brendan Burgess]

Hi Ides

Just to balance it. Over 100,000 borrowers have had their mortgages rescheduled. All of these were in breach of their contract and in theory the banks could have sought an order for possession. While many of these reschedules didn't cost the bank anything as they still charge the full interest, there were a lot of split mortgages which effectively reduced the interest rate and half of them were trackers so the reschedule was very costly.

You also have the 30,000 tracker case. Very few of these had actual breaches of contract - my guess would be about 3,000 of them would have succeeded in court. The other 27,000 got massive compensation in cases which would not have been upheld as breach of contract. In fact, only half of them would have been upheld by the Ombudsman.

The big scandal has been the very high mortgage rates in this country. For the 300,000 people on non-trackers, they have paid way over the odds.

Brendan

 

[IdesofMarch]

Hi Ides

Just to balance it. Over 100,000 borrowers have had their mortgages rescheduled. All of these were in breach of their contract and in theory the banks could have sought an order for possession. While many of these reschedules didn't cost the bank anything as they still charge the full interest, there were a lot of split mortgages which effectively reduced the interest rate and half of them were trackers so the reschedule was very costly.

You also have the 30,000 tracker case. Very few of these had actual breaches of contract - my guess would be about 3,000 of them would have succeeded in court. The other 27,000 got massive compensation in cases which would not have been upheld as breach of contract. In fact, only half of them would have been upheld by the Ombudsman.

The big scandal has been the very high mortgage rates in this country. For the 300,000 people on non-trackers, they have paid way over the odds.

Brendan

Totally agree with you Brendan, just why were variable mortgage interest rates so high in this Country (they are coming down as of late, Sarenco says its competition in the marketplace!!). The cost associated with default risk would certainly not make up for the differential between our variable mortgage rates and that of our European compatriots. Maybe Red Onion Can provide the answer?

 

[IdesofMarch]

I don't always agree with him, but to quote a poster from another topic, I hope you find the below to be helpful. I've certainly entered a period of self reflection since I first read it.



Oh wait. That was you?!..

You do understand contract law Ides, don't you?

Can you answer the question in the last post please? I'm all ears!

 

[RedOnion]

Can you answer the question in the last post please? I'm all ears!

The question about high variable rates? I've given my thoughts before, told I was wrong because it didn't fit with your view, then the thread turned personal and our posts were deleted.

If you're interested in having a mature, adult conversation, I'm more than happy to talk about competitive forces, availabilty of funding, RWA calculations, capital adequacy ratios, and inability to repossess, and the effects each have on pricing. If you want to tease out those topics, I'd suggest you start a separate thread on the topic, and explain the thinking behind your figure (I believe you suggested rates here should only be about 15% higher than other countries?), and I'll engage, and hopefully we'll get other views also.

Red

 

[Sarenco]

The big scandal has been the very high mortgage rates in this country

The average rate charged on all outstanding mortgages is probably lower here than the Eurozone average at this stage. I think that's pretty extraordinary when you consider our outsized level of non-performing mortgages and the impact that has on provisioning, etc.

Even effective new home loan rates are rapidly heading towards the average rates charged on the continent. When you take account of the fact that loan arrangement fees are practically unheard of in this country, I don't think it's accurate to say that the effective cost of home loans is particularly high in this country in comparison with other Eurozone countries.

 

[Webster]

The average rate charged on all outstanding mortgages is probably lower here than the Eurozone average at this stage. I think that's pretty extraordinary when you consider our outsized level of non-performing mortgages and the impact that has on provisioning, etc.

Even effective new home loan rates are rapidly heading towards the average rates charged on the continent. When you take account of the fact that loan arrangement fees are practically unheard of in this country, I don't think it's accurate to say that the effective cost of home loans is particularly high in this country in comparison with other Eurozone countries.

Sarenco, if at all possible could you post any data regarding the average rate on outstanding mortgages v the Eurozone average.

 

[Sarenco]

Sarenco, if at all possible could you post any data regarding the average rate on outstanding mortgages v the Eurozone average.

The Central Bank published data on average rates charged on outstanding mortgages here compared to the Eurozone average a few years ago but I don't have up to date numbers.

Bear in mind that around half of all outstanding mortgages in Ireland by value are low cost trackers and are charged a rate that is materially lower than the Eurozone average.