The implications of the Pepper Finance (vulture fund mortgages) Court Ruling.

This might have consequences going down the line. Basically Tullamore district court ruled in favour of a Personal Insolvency Arrangement (PIA) for a couple with a home loan of €290,000. The court ruled that a 25 year loan payment period with a fixed interest rate of 2.5% (to remain at that for the whole 25 years) could go ahead. The interest rate before this was 5% variable.

Not surprisingly Pepper Finance didn't like the outcome as they usually employ a variable rate with their customers as do a lot of other vulture funds. What probably sunk Peppers case IMO was their refusal in court to outline how much the loan its client had acquired had cost it and how much it was costing into the future. Apparently there are 32,000 distressed mortgages in the country currently, so no doubt others will be looking on with interest at all this.

https://www.irishtimes.com/your-money/2023/05/10/road-map-for-borrowers-as-pepper-forced-to-fix-rate-for-25-years/

spaceHopper

Good on them, but if they ever miss a payment Pepper will be all over them. Pepper probably paid less than 50% for the loan and they and the other banks don't want people finding out. Could you imagine if you were in arrears and looked for a write down but they said no only to give perrer a bigger write down.

tom1ie

How the hell do you go about getting a 25 year fixed rate of 2.5%? 😂

The best on the market before the hikes was a 7 year fixed of 1.9%!!!

https://www.boards.ie/discussion/comment/120579812#Comment_120579812

That's it isn't it? It's an incredible deal if you ask me. If this ruling is not overturned in the courts down the line, queue panic among these lenders, not that I would have much sympathy for them mind. Seems the rates they charge could hit 8% this year.

https://businessplus.ie/news/mortgage-interest-rates-2/

https://www.boards.ie/discussion/comment/120579803#Comment_120579803

 Could you imagine if you were in arrears and looked for a write down but they said no only to give perrer a bigger write down.

That happens all the time, and with good reason.

If you and your neighbour both had a mortgage with the same provider, and he lost his job so he fell behind on his mortgage, then 6 months later he goes to the bank and says "I'm struggling here, I need you to knock 70,000 off the mortgage", and they did it............What's the first thing you'd do (or stop doing) the following morning?

You'd stop paying the feckin mortgage, is what you'd do. If you multiply that by the 720,000 mortgages in the country, you're talking about the collapse of the entire finance industry in Ireland.

Borrowers get a loan of X.

Banks/mortgage providers are owed X.

They cannot get X, for whatever reason, so they sell the debt off for 60% (or whatever) of X. (better than nothing for the provider)

Company A pays 60% of X and they can now seek to recover as much of X as they can. (better than nothing for company A)

Borrower still owes X, minus whatever payments off the capital have been made.

Unless they do a deal with company A, and agree to pay off 75% of X over 20 years (better than nothing for the homeowner)

If the bank offered it to the borrower for 60% of what they owe, they'd be out of business in a month, simple as.

This way is better for everybody concerned.

tom1ie

So if ya stop paying your mortgage and take on a ball of personal debt and maybe cut down your working hours after spending all the money you got on the loan you can tell your bank you need a PIA? If they reject it you can then go to court?

“Since 25 June 2021, all mortgages in arrears or the subject to an alternative payment arrangement can seek a court review of the rejection”

SEPT 23 1989

Whoever invited these parasites into this country should be given the rope

and to think Irish people work for these companies

StrawbsM

I know somebody who first got their mortgage through Irish Nationwide back in the tiger years. Irish Nationwide went bust and they were transferred to Irish bank resolution company. That was then liquidated and they were put on Nama’s books. Nama wrote to them saying they’d be selling a bulk of mortgages to a vulture fund so they wrote back to Nama making an offer of X amount to clear it off nama’s books just to see what they’d say. Nama wrote back saying they would only accept the full amount. The mortgage was then sold on and a company called shoreline took over then it went to Pepper.

They’ve always wondered if the offer they made to Nama was more than what the vulture fund paid. They did have arrears after the crash but that was cleared a long, long time ago. But the interest rate increases has them struggling again and they are unable to switch due to income level and dependents. €300 extra a month with more increases to come is tough.

https://www.boards.ie/discussion/comment/120579812#Comment_120579812

Sounds like a great win for the mortgage holder.

spaceHopper

https://www.boards.ie/discussion/comment/120581171#Comment_120581171

If they offered more than NAMA got then did NAMA fail to get the best return for the taxpayer and were they obliged to do so?

spaceHopper

https://www.boards.ie/discussion/comment/120579855#Comment_120579855

If bank A fails and has a stack of loans, state agency NAMA take over bank and is obliged to get the best return for the taxpayer. Then Borrower A is able to raise 75% of their debit but NAMA say no. They then sell the debit for less that 60% to Pepper. The state has lost out on more than 15 %

PJ2022

They won't get far with an appeal if they don't disclose what was paid for the loan.

Lionel Fusco

https://www.boards.ie/discussion/comment/120580844#Comment_120580844

Nonsense these companies are a godsend they are the only ones trying to make sure these spongers actually pay their debts.

StrawbsM

https://www.boards.ie/discussion/comment/120582780#Comment_120582780

Good question and have no idea what the vulture fund paid. All I remember was seeing the letter saying that only the full amount would be accepted. They didn’t invite the borrower to contact them to negotiate further.

It would be interesting to know what Nama sold it for.

thegame983

As someone who used to work for a vulture fund I'll say this.

Ha Ha. F**k them.

https://www.boards.ie/discussion/comment/120582833#Comment_120582833

What's the point of whacking ever higher interest rates on these people who couldn't afford to pay the loan with a lower rate in the first place?

StrawbsM

https://www.boards.ie/discussion/comment/120583572#Comment_120583572

😂

Any insights into how much they were paying to take over a mortgage?

thegame983

https://www.boards.ie/discussion/comment/120583596#Comment_120583596

Honestly. No. I would doubt that anyone below upper management would have known.

Seth Brundle

https://www.boards.ie/discussion/comment/120582780#Comment_120582780

https://www.boards.ie/discussion/comment/120583544#Comment_120583544

I assume that @StrawbsM's mortgage along with say 999 others would have been sold as a package rather than individual lots. Some of these were performing fine whilst others were in arrears and unlikely to be fully repaid. The reason NAMA wouldn't offload any performing mortgages individually was purely because they were needed in order to shift the shite ones!

StrawbsM

https://www.boards.ie/discussion/comment/120583638#Comment_120583638

Wasn’t my mortgage but I get your point.

Sad thing is, those performing mortgages were stripped of the opportunity to fix their rates and have been paying higher than normal variable rates since they transferred. Not everyone was able to switch either

brick tamland

https://www.boards.ie/discussion/comment/120583668#Comment_120583668

Any performing mortgages should/would have refinanced with a different bank as soon as their fixed rate ended surely

A pain in the hole no doubt, but a no brainer

https://www.boards.ie/discussion/comment/120583593#Comment_120583593

Because in this country we don't do what should actually be done, which is to repossess the house. So good luck to them, send a message that says if you don't pay your mortgage you'll end up getting hammered. Otherwise why should we not all just stop paying our mortgage tomorrow?

https://www.boards.ie/discussion/comment/120583726#Comment_120583726

I think we need to distinguish between the can't pays and won't pays. The latter do deserve to lose their houses IMO.

https://www.boards.ie/discussion/comment/120583734#Comment_120583734

How do we decide who falls into which category? I could get a minimum wage job tomorrow and suddenly put myself into the can't pay category. Should I still get to keep my house for purposely making my mortgage unaffordable?

StrawbsM

https://www.boards.ie/discussion/comment/120583771#Comment_120583771

What about those who are paying but the income criteria doesn’t allow them to switch? Should the option to fix a rate have been there for them to avail of?

8valve

I know of a friend who fell on hard times, due to long-term illness and marital breakdown.

Their mortgage went to a vulture fund, who pursued them ruthlessly and unsympathetically.

Constant harassing phone calls, letters arriving EVERY FRIDAY (so that they would be stressed out all weekend!), reminding them that they were in arrears and that they were being dragged through the courts and would ultimately lose their home. Absolutely horrible treatment.

They went to MABS, who took over dealing with the vulture fund on their behalf, much to the vulture funds annoyance.

Eventually they found a way out of their situation, but during documentation exchanges etc., it transpired that their 250k mortgage (plus over 100k arrrears/interest lumped on by the vulture fund) their debt was sold.....for 60k.

So, ultimately, is this fraud by the vulture funds? If they buy a debt for say 100k, can they pursue someone for 400/500k legally?

If I bought a car for a hundred quid, crashed and claimed a grand to replace it, wouldn't I be done for insurance fraud?

Any Person working for these companies here, should be utterly fu(king ashamed of themselves, for inflicting this kind of misery and duress on people.

https://www.boards.ie/discussion/comment/120583827#Comment_120583827

Valid point. Personally I think the court has set this particular mortgage at a stupid rate, as 2.5% for 25 years is something most mortgage holders would bite your arm off for, but is not available in the market. So its a bit strange for the court to mandate this non existent term on this particular case.

8%+ rates are obnoxious by the vulture funds. The court could have applied a market rate, rather than possibly the best mortgage rate in the country right now.

https://www.boards.ie/discussion/comment/120583771#Comment_120583771

I think trying that in reality would raise the red flag with a lender. Which would be fair enough.

Seth Brundle

https://www.boards.ie/discussion/comment/120583843#Comment_120583843

So, ultimately, is this fraud by the vulture funds? If they buy a debt for say 100k, can they pursue someone for 400/500k legally?

If I bought a car for a hundred quid, crashed and claimed a grand to replace it, wouldn't I be done for insurance fraud?

How could it be fraud? The debt was sold by the original lender in a legal manner (I presume the possibility of sale was also written into the original mortgage contract signed by your friend).

Also bear in mind that these "vulture funds" bought a load of debts which will give them the net sum of nothing!

As for your comparioson to a cheap car crashed, presumably you are suggesting that the insurance claim be for a grand but you're forgetting that the maximum amount payable by the insurance company is the market value of the car (about €100). To try and claim for a grand wouldn't work because the insurance companby know the value of the car (regardless of what you insured it for). If you insured it for a million euro, you'd still only get €100 compensation back.

howiya

https://www.boards.ie/discussion/comment/120583846#Comment_120583846

If my understanding is correct the court doesn't set the rate.

The rate is proposed by the personal insolvency practitioner (PIP) when preparing the personal insolvency arrangement (PIA). The lender rejected the PIA so the PIP can bring it to court for approval (or not). PIP proposing 2.5% fixed. According to Irish Times reporting Pepper proposed a write down of 10% from 290k to 280k and a variable rate of 3%. I don't think the court can apply a market rate.

Both plans put forward by the PIP and Pepper involved 25 years. At current rates the difference in the two plans is about €25 a month if I have my figures right. Pepper argued it was unfair but per the reporting don't appear to have backed that up. If I'm right on the calculations its not hard to see why the judge approved the plan proposed by the PIP.

Varik

https://www.boards.ie/discussion/comment/120582806#Comment_120582806

So in your made up case the borrower somehow has 75% but is also in arrears as that's the only reason their loan is being discounted by any such amount.

BattleCorp

https://www.boards.ie/discussion/comment/120583843#Comment_120583843

You do realise that if you borrow 400/500k, you should are required to pay back the 400/500k + interest.

The constant harasing phone calls, letters every week etc. is probably illegal or against a code of practice somewhere, but it doesn't negate the fact that the borrower still owes the money and the company that owns the loan is entitled to collect on it. The fact that they paid less for it is immaterial.

I agree with a previous poster, houses should be repossessed here much quicker here and much more often. And for every person living in a house that should be repossessed but isn't, those paying their mortgages are paying for the non-paying people.

spaceHopper

https://www.boards.ie/discussion/comment/120584957#Comment_120584957

I never said they were in arrears

Peregrinus

https://www.boards.ie/discussion/comment/120583638#Comment_120583638

This. Nama's obligation is to get the best value for the taxpayer not loan-by-loan but for the loan book as a whole. They sell a package of loans to a vulture fund. If the more solvent borrowers were able to buy themselves out of the package, then the package would be comprised entirely of less solvent borrowers, and the vulture fund would pay much less for it, or wouldn't be interested in buying it at all.

Podge_irl

https://www.boards.ie/discussion/comment/120586734#Comment_120586734

Not to mention the administrative cost of dealing with every loan individually as opposed to as a group.

strongback

Look up "nama haircut"........smoke and mirrors....farcical.....absurd by anybodies standards

Seth Brundle

https://www.boards.ie/discussion/comment/120587494#Comment_120587494

So if NAMA was to put a tranche of say €100m worth of mortgages (a combination of both performing and non-performing loans) on the market, how much do you think they should have been sold for?

Potatoeman

https://www.boards.ie/discussion/comment/120585051#Comment_120585051

There is a reason people get mortgage insurance, though pre-existing conditions invalidate it.

Irelands problem is that the won’t pay are lumped in with the can’t pay. If someone is struggling for a short time then I don’t have issues with them making lower payments but I remember during the crash people refusing to pay as the asset was worth less. In that case reposes the property and cease assets.

The banks just pass this onto other mortgage holders through higher interest rates so they are not sticking it to the bank but other people paying their mortgage.

Nigzcurran

For what it’s worth I can’t stand people not paying a cent off their mortgage for years while they fight it out in the courts and live for free. Those people should be evicted asap and held responsible for any money owed. On the other hand I’m one of the unfortunates that has had their mortgage sold to pepper, I have it 15 years and have never missed a single payment with zero arrears and it has risen from €1000 a month in October to €1500 a month now with the interest rate at 8% and rising. I contacted them 2 months ago when the rate was less than 6% and told them my fears of falling into arrears at some stage and could they possibly fix the rate at 5% for 12 months and then 6% for the following 12 months and so on so I could guarantee I wouldn’t fall behind on the payments. They have just informed me “they have no appetite for that solution” and can’t offer any options whatsoever, they then sent me a letter telling me I can voluntarily hand the house back now and walk away! These people don’t want my mortgage paid on time, they want me falling into arrears and ending up owing a fortune in arrears and interest and eventually losing my home

fixxation

https://www.boards.ie/discussion/comment/120579812#Comment_120579812

Before the hikes, both Avant and Finance Ireland had 20/25 year terms at 2.5%, up until around June last year

https://web.archive.org/web/20220522050814/https%3A//www.avantmoney.ie/mortgages/one-mortgage

They didn't last for long... I think Finance Ireland stopped all the long term terms now.

francois

https://www.boards.ie/discussion/comment/120589130#Comment_120589130

I'd go to MABS, see what they advise

tom1ie

https://www.boards.ie/discussion/comment/120589287#Comment_120589287

Really?

We switched in 2021 and enquired what the longest term offered was- and were told 7years?

howiya

https://www.independent.ie/business/personal-finance/vulture-fund-agents-may-be-put-out-of-business-by-courts-mortgage-ruling-standard-and-poors-global-warns/a1854692359.html

Interesting article in the indo this morning re the implications.

Makes you wonder more at the poor defence offered in court by Pepper.

If it were that mission critical surely they could have backed up their point of view with figures in court.

Nigzcurran

Greed and unwillingness to help will hopefully be their downfall

thegame983

Won't somebody think of the vulture funds!

The Mulk

https://www.boards.ie/discussion/comment/120590188#Comment_120590188

I switched mid 2022 to a 20 year fixed 2.5% with Avant. Less than 50% LTV though, that was a condition. It finished around September 22 as far as I remember

howiya

https://www.boards.ie/discussion/comment/120590188#Comment_120590188

Finance Ireland only introduced their 20 yr product in May 2021 so may not have been available if you switched earlier in 2021.

https://www.boards.ie/discussion/comment/120590511#Comment_120590511

Vulture funds provide a service, whether you like it or not. They take non performing loans of the balance sheets of the pillar banks, which otherwise could inhibit the ability of those banks to lend to decent folk who want to pay their mortgage.

Just like actual vultures carry out a dirty but necessary role in the natural world, these funds are doing the work that others don't want to do.

Podge_irl

https://www.boards.ie/discussion/comment/120590570#Comment_120590570

The need for them might be less if we had a functioning repossession system.

thegame983

https://www.boards.ie/discussion/comment/120590570#Comment_120590570

I've worked for two vulture funds.

Their business model is profiting of the misery of others. I have as much sympathy for them as I do for the men and women who lost their jobs operating the gas chambers at the end of WW2.

https://www.boards.ie/discussion/comment/120590764#Comment_120590764

Why did you choose to stay in the industry and work for a 2nd VF, participating in inflicting such misery?