Mortgage Prisoners - time to get loud!!

Mark Coan said:

Support to Close the Affordability Gap​

Finally, the government should extend the current First Home Scheme for First Time Buyers to mortgage prisoners, to allow them to reduce their outstanding mortgage size in return for giving up equity in their property. A smaller outstanding mortgage equals lower repayments and higher affordability. Higher affordability means more being able to switch away from the vulture funds to lower fixed rates.
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I don't agree with the First Home Scheme in the first place.

So I don't want the taxpayer to be taking stakes in people's houses. By the way, even if such a scheme were implemented, I doubt very many people would give up equity in their home to avail of it.

In theory, the government could set up a home loan fund to give mortgages to people switching from vultures. They could charge market mortgage rates +1% . But it would open to so much political manipulation that it couldn't work in practice. Could you imagine the state bank trying to evict someone? Or insisting that a house be sold because the owner died, while her son with special needs still lived in the house?

Brendan
 
Maybe it shouldn't be considered *normal* to take out a massive loan where you don't know what the future interest rate will be. Seems pretty crazy to me.
 
Hi Brendan,

The most important thing is that intervention is required, that is something we both agree on. The justification for intervention in these cases as opposed to other cases is that for these mortgage holders their supplier has a monopoly. If a monopoly situation arises bad things almost always end up happening to consumers. When the market fails like this regulators and government have a duty to step in. Once this point is understood a lot of the 'what aboutism' elsewhere on this thread becomes mute, this is a special case that needs to be treated differently than cases where the market is functioning correctly.

The question then becomes what to do about it. There appears to me to be two potential routes to a solution.

1) Keep people in the monopoly, but control the rates
2) Move people out of the monopoly

These aren't mutually exclusive, in fact I believe the correct solution is to move as many mortgage holders as possible out of the monopoly and to control the rates for those that remain.

However, I think the scope to limit rates in practice is quite limited due to the lack of foresight at the time of the sales to the Vulture Funds. As you pointed out at the time and subsequently, the conditions in these sales did not include the necessary consumer protections. Again the Central Bank was asleep at the wheel here. So the Vulture funds therefore purchased these loans with no strings attached.

Going back retrospectively and applying conditions therefore is likely to prove tricky. That said, I do think a gross margin cap should be considered for anyone that remains with the vulture funds to afford protection from blatant profiteering, but this will still end up with high rates due to the higher funding costs of these loans.

That's why my proposals focus on moving people out of the monopoly where possible through free advice, sensible affordability tests and equity release.

Free advice is warranted as the consequence of the wrong decision is large in these cases, the cases are complex and the options are limited.

Modifying the affordability tests is warranted as the issue with them isn't that they are too stringent, but that they don't fit for many of these kind of cases. By modifying the tests correctly to better suit vulture fund situations I don't believe lenders would take on anymore risk, just conduct a more nuanced assesment.

Finally using equity release to reduce the affordability gap, I don't believe anyone should be given a free ride and it may be that people choose not to give up equity in return for reducing their mortgage size in the end, but I believe they should be given a choice and that's precisely what they don't have today, any choice.

I don't pretend to know if these solutions are the best ones, but what I'm seeking to demonstrate is that there are workable solutions for these mortgage holders and help put a bit of a rocket under those who are in a position to actually implement them.
 
Mark and Brendan, as one of the affected borrowers my preference would be to move to a local authority loan on a fixed rate. I also would seek to fix the rate at a level that was available when I initially requested it and not now when they are so much higher.
 
Tomandgerry said:
Mark and Brendan, as one of the affected borrowers my preference would be to move to a local authority loan on a fixed rate. I also would seek to fix the rate at a level that was available when I initially requested it and not now when they are so much higher.
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Honestly, stuff like this is ultimately why there ends up being public opposition to taxpayer bailouts to certain cohorts (E.g. Mica).

I’d have sympathy for the plight of trapped borrowers but this is a ridiculous request and if it became part of the public discourse I’d quickly turn against a government bailout of any kind.

Personally I’d also love a local authority loan at a fixed rate. 35 years ideally. And at the 2.5% rate It was when I first sent an email enquiry to Avant back last year, just before their rates went up.

We’d all like 100s of thousands of free taxpayer money but you need to be realistic.
 
Brendan Burgess said:
I say it again, the only solution is to prevent the vultures from charging excessive rates to former customers of mainstream banks

Brendan
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Make the Vulture Funds adhere to the terms of the issuing mortgage providers rates , Start and Pepper did not issue the mortgage , they purchased the rights to them , the original terms should remain intact . They will still make a healthy profit as the loan books were sold at a discount .
 
It's a nice article @Mark Coan - a few questions/comments below

Mark Coan said:
Many of these customers have never been in arrears, but were caught up in the sale of loan books to non banks after the financial crisis. Others may have slipped into arrears at some point through job loss, divorce or plain bad luck, but have now worked their way back to making their repayments. Currently only around 20,000 of the 60,000 mortgage prisoners are actually still in arrears.
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Are there any statistics on this exactly? I've never found any.
Mark Coan said:
Belatedly, this week the Central Bank has indicated it will investigate the issue. I believe the Central Bank should focus on releasing mortgage prisoners by enabling them to switch away from the vulture funds, which will allow them to access current market rates of around 3% and fix to cap their repayments.
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This is not really true. Current fixed rates on offer range from 3.5% to 4.8%.

Mark Coan said:
The Central Bank should work with high street lenders to introduce ‘modified affordability tests’ for mortgage prisoners, in the UK the Financial Conduct Authority did this back in 2019, to allow more of these customers to pass lender affordability tests and switch to lower rates.
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I fully agree here. A track record of making repayments in recent years should be an aid to being granted a mortgage. There shouldn't be "original sin" of having once been in default.

Mark Coan said:
Finally, the government should extend the current First Home Scheme for First Time Buyers to mortgage prisoners, to allow them to reduce their outstanding mortgage size in return for giving up equity in their property.
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I disagree that this is either feasible or desireable. I don't think these borrowers want to grant anyone an equity stake, they just want to pay off their mortgage and own their house before retirement. Otherwise there is a whole lot or administrative burden and financial risk for the state for what is likely to be little impact. By comparison the mortgage to rent scheme has been in place ten years and has only been taken up by 2,000 homeowners over the period. It's not very much in the scheme of 60k homeowners in arrears at any point.


I still think the simplest and easiest solution to this problem is legislation to cap what funds can charge borrowers at a margin above a reference rate.
 
NoRegretsCoyote said:
It's a nice article @Mark Coan - a few questions/comments below


Are there any statistics on this exactly? I've never found any.

This is not really true. Current fixed rates on offer range from 3.5% to 4.8%.


I fully agree here. A track record of making repayments in recent years should be an aid to being granted a mortgage. There shouldn't be "original sin" of having once been in default.


I disagree that this is either feasible or desireable. I don't think these borrowers want to grant anyone an equity stake, they just want to pay off their mortgage and own their house before retirement. Otherwise there is a whole lot or administrative burden and financial risk for the state for what is likely to be little impact. By comparison the mortgage to rent scheme has been in place ten years and has only been taken up by 2,000 homeowners over the period. It's not very much in the scheme of 60k homeowners in arrears at any point.


I still think the simplest and easiest solution to this problem is legislation to cap what funds can charge borrowers at a margin above a reference rate.
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Thanks @NoRegretsCoyote, on the stats the Central Bank arrears data give the numbers in the non banks and in arrears, but not the reasons why. However, we have spoken to quite a few over the last year so I think this is representative.

On the rates I'm more thinking of the best APRC rate which is 3.19%, but it is a fair point fixed rates are higher.

On the First Home idea, I know giving up equity isn't desirable, but it would in my view be the 'least worst option' faced with repayments spiralling out of control. I'd be interested to hear more on why you think it wouldn't be feasible given we already have the First Home Scheme we could potentially piggy back the scheme administration on?
 
Why shouldn’t there be an ‘original sin’ of loan default?!

People seem to want to compel commercial businesses to take-on higher risk clients.
 
CorkHome2022 said:
Make the Vulture Funds adhere to the terms of the issuing mortgage providers rates , Start and Pepper did not issue the mortgage , they purchased the rights to them , the original terms should remain intact . They will still make a healthy profit as the loan books were sold at a discount .
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That's no guarantee of a healthy profits on these loans despite a discount. Some will default - and as we know it's almost impossible to repossess.

Also we don't know Pepper's cost of finance on them - they bought these loans with other loans. Probably at least partially with variable rate borrowings.

Commercial borrowing right now is expensive - more expensive in many cases than the rate Pepper are charging for these mortages.

Pepper's share price direction doesn't make me think they're making a killing, ASX: PPM

You could try to prevent banks selling mortgage books to private finance firms - but as soon as you do that - it pushes up the cost of borrowing for everyone as at that point Irish banks won't be able to repossess houses or dump loans
 
m.independent.ie

Hope for vulture fund mortgage prisoners as lender forced to offer couple lower fixed rate

A leading mortgage servicer acting on behalf of vulture funds has been forced by a court to give a cheap long-term fixed rate to a borrower couple.
m.independent.ie m.independent.ie

What I thought was interesting here is that Pepper could not prove that the 2.5% rate did not meet the funding costs of the loan (or chose not to disclose it in an open forum). I understand Minister McGrath has requested the vulture funds to set out their funding costs to the Central Bank so this might be good news.
 
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Duff123 said:
Hi Daddyman

The issue is they are Vulture funds are passing on every rate hike from ECB, tracker and variable. Main stream banks are not. (unless on a tracker) Those on variable rates are seeing there interest rates rise nearly to 8%. Any sensible person with their right mind would fix for protection from these hikes... we can not!!
My mortgage has gone up 400 euro a MONTH
If I had stayed with PTSB this would not be the case.
Put yourself in a vulture fund customer shoes and I'm sure you would see the issue then!
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I'm the same was €1356 now €1756 and another hit on the way on my own plus EBS won't let me change as iv a Car loan our never missed on anything nothing else owed absolutely OUTRAGEOUS
 
Is it ok to join the conversation?

My husband took out his mortgage with Irish Nationwide before we were married. He’s now with Pepper. He had an appointment with AIB regarding switching but they couldn’t offer him anything due to the fact that I’ve been a full time carer for my mum the last couple of years so I am classed as dependent on my husband. If he were single he would have met AIBs criteria.

Does anybody else feel that Limony Snickett could have written their life story?
 
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