Key Post What to do with an Endowment Mortgage Shortfall.

Many people are getting letters from their life insurance companies that the with profits endowment policy they took out when they took out their mortgage is not going to be enough to pay off their mortgage. So how do they make up the shortfall?

Do not increase your premiums
The charging structure on these policies is such that most of the increase in the premium in the first year goes in charges. So this is the one thing which you should not do.

Don't panic
Typically, the projected maturity value is around €45,000 while the mortgage is €50,000. Given that the house is probably now worth, €500,000 there is no need to panic. The worst that can happen, is that on maturity, you will still owe the lender €5,000 or 1% of the value of the house.

You can increase your mortgage repayments
Your mortgage lender will tell you how much you need to increase your monthly repayments by to pay off the mortgage.

If you have rented out the property, you should not increase the repayments as you get tax relief on the mortgage interest so you should keep your mortgage balance as high as possible.

You can cash the policy now and switch to a repayment mortgage
This is usually not a good idea. While it's very difficult to project how these policies will perform, they are usually at maximum value if held to maturity.

If you do decide to cash your policy now, an endowment policy company may give you a better price than the life insurance company. There are three such marketmakers licensed by IFSRA
Irish Policy Exchange Company Ltd 066 711 7677
Endowment Policy Purchasing Co. Ltd. 1850 59 59 59
Endowment Exchanges Ltd 061 923 025

cash the policy now ?

"endowment policy company may give you a better price than the life insurance"

True but...

You don't want your policy. The insurance company will give you a few grand for it. The endowment company will give you a little more. I or someone like me will buy it from them, keep it to maturity and make a decent profit on my initial outlay. You are the one who will have suffered all the upfront commission and set up charges. My knowledge of the detail will enable me to put your loss to my advantage.

If your endownment policy was really that bad then no one would want to buy it from you in the first place, so is your policy really that bad?

It may not clear the loan and dissappoints because of it but it may still earn you a decent profit. Think twice before shooting yourself in the foot.

Re: cash the policy now ?

You can also consider seeking compensation for mis-selling.

If you were told that your mortgage would be paid off, then you could have a case for mis-selling. The amounts involved would not warrant the costs and hassle of taking legal action. You could complain to the Insurance Ombudsman or wait until next April for the new Ombudsman for the Credit Institutions.

Brendan

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

I am surprised that this issue has not reared its head again recently.

A lot of people have endowment mortgages which are maturing about now and they must have big shortfalls due to the collapse in the stockmarkets.

Brendan

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

Your post is timely as far as I am concerned. I had a with profits endowment policy with Friends First taken out in September 1988. Capital amount borrowed was the equivelant of Euro 42,712.78. Cheque received from Friends First last week was Euro 40,536. Shortfall of more than Euro 2,000.00. Not to mention that the quote I received from Friends First in September 1988 foresaw a surplus of Irish Pounds 13,600.00 after the mortgage was paid.

When I raised the shortfall with Friends First they blamed the shortfall on deterioriating market conditions. Although I have had initial discussions with both the financial regulator and the ombudsman's office I am not hopeful. Relevant legislation on endowments was enacted in 1995 (Credit Intermediaries Act) and 2005 (Ombudsman Financial Services Act) -I am not excatly sure if these are the correct names for the two Acts.

Unfortunately neither of these Acts, as far as I understand it, do not have retrospective provisions. Pity, as the majority of these products were sold in the late eighties and early ninties.

I have now begun a disputes procedure with Friends First on this matter. First step, I have written to them asking them what the procedure is. Still awaiting a reply. When this procedure is finished and I am sure that the outcome will be not satisfactory from my point of view, I can then go to the Financial Ombudsman with my complaint. I suspect he will dismiss it on the bassis that product was sold before 1995 or 2005.

When all this is over I am then considering through sites like this raising the issue of endowment shortfalls and floating the idea, with other disgruntled customers of these instituions, of investigating the possibility of a class action ( I have to familiarise myself with how these work but I understand there are precedents in the U.K.)

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

I have just seen Edwardg's post and I fully concur with his views. In 1990, when I took out a mortgage, my bank unreservedly recommended the Endowment product. It was flavour of the month then and no other option was recommended to me at the time. I specifically raised a point at the time - namely that I would be 3 years over retirement age when the mortgage period would be over. Not to worry I was told, as there would be sufficient funds to pay the motgage during my years without a salary. This was a key issue with the UK authorities who took this as clear evidence that the Endowment product was miss-sold and the customer mislead. Thousands of UK customers were remunerated. What is the difference in Ireland? Why are the Irish authorities so mute on the issue? Right now my bank has offerred me 2 alternatives. (A) Increase my repayments by over 20% to meet any shortfall. (B) Continue as before and be responsible for the shortfall at the end. This is ludicrous as the customer is funding the commercial errors made by the institutions when their investment expectations were not realised. This is a commercial decision that went wrong and the insistence that the mortgage holder pays up is unjust and would not be feasible in any other sphere of business.

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

Are these companies still in business? I live in the US and would like to sell a 17 year old endowment policy (Bank of Ireland Life) but can't even get voicemail when I call. I have paid 32,000 euros over 17 years; my policy is worth 35,000 euros and should be 54,000 euros to cover the mortgage when it comes due in June 2011. And I have paid a premium that increased from an initial 75 euros a month to most recently 260 euros a month. The banks should not be allowed to get away with this kind of financial mismanagement. I have asked for my premium to be ceased and am just paying the interest on the mortgage. Advice?

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

Molly Malone - You are going to pay almost another €8k into this policy and there will still be no guarantee that the 54k will be covered. You are probably paying about 200 euro a month in interest on the mortgage - so your total payments are about 460 a month including the endowment?
If I were you I would cash in the policy if they are giving you 35k for it - pay that off the mortgage and convert the remaining amount (19k) into a repayment mortgage and pay it off over the next 3 to 4 years. (at 4.5% that would be a repayment of 433 amonth over 4 years ).

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

I took out a Endowment Mortgage with AIB in 1989. When I took out this endowment mortgage, I was told at the time that this type of mortgage was the way to go. I was pressured also at the time into taking out this type of mortgage. I do not think I was even offer a regular mortgage. I was in my early 20s and I was a first time buyer. I did not understand that with this type of mortgage there was a risk. I was told at the time that it would definitely pay off the mortgage and leave me with a tax-free nest egg. Figures which were showed to me at the time was £15,000 to £25,000 punts at worst £5,000 to £10,000, worst case that it would pay off the mortgage. Now I am facing a shortfall on the endowment mortgage and God can only tell you how serious the problem is going to be. By the time I know for sure, it will be too late to do anything about it.
My Endowment payments finish in Aug 2009 and the current expected shortfall with the latest notice I have received is expected to be between €16,000 to €27,000 depending on rate of return between now and Aug 2009. The Shortfall at this time is €18,000.
What can I do about expected endowment mortgage shortfall?
Who do I write to Bank Manger, Aib or Endowment Company?
Can the financial regulator or the ombudsman's office help?

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

Glad I found this forum. I am in the same position as most of the rest of you. Signed up to endowment polity in 1989. It is due to mature in October 09. My mortgage is 45,000, my policy has dropped from Feb 2008 value of c 42,000 to present day value of c. 33,000. I have received letter from Building Society warning that I should make alternative arrangements for shortfall. I have started preliminary proceedings i.e. letter to insurance co demanding to know why such a drastic drop was allowed to hapen (mismanagement?), and secondly a letter to bank/society re bad advice in first place and no advice when they should have been looking after these customers.

I hope people who are in the same situation as us get on here and maybe together we can do something about this mess!!!

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

I have also discovered a shortfall (over 20k) in my mortgage projection (2011) over the last few days. I have increased the payments on 2 occassions over the last number of years based on notification from the insurance co (dont unfortunately have the exact history but have asked the bank insurance company). We are obviously at or near the bottom of the market at this point. I have an amount in cash that could make up the shortfall (although I had other plans for it). Does anyone have any advise in the current market. I believe the bank did propose the endowment in early 1991 as the way to go but what comeback if any do I have?

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

It is a ludicrous and disgraceful situation, but I suppose par for the course with regard to financial institutions in this country. And, as usual, the Fianna Fail govt. could not care less.

I am in a similar position as all the other people who were duped into taking out these mortgages.

I am due to retire next year, and will not be in a position to pay the shortfall when it is due. What happens then - maybe they will try jail me. It should be the other way around!

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

molly as far as I know only teppco is still buying these policies and only then if they have at least 5years left to run

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

We are in a really similar situation with Bank of Ireland. I would really appreciate any constructive advice on how to proceed.

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

Can't believe so many people are prepared to accept this situation. Surely there are hundreds of people in the same boat as the people here.

Write a letter of complaint to your Endowment Policy company, and also to the Bank/Building Society stating you were mis-sold etc.

Then get in touch with Financial Services Ombudsman and take it from there.

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

Just discovered this thread. I am in similar position, €25,500 loan, 15 years, endowment policy worth €12,500 as of today with eleven months to go to maturity.

As last poster states there are hundreds of people in the same boat so are people interested in getting together on this one - if they haven't already.

Also, anyone know anyone who has had any success on this endowment policy mess or could you be throwing good money after bad.

Re: Key Post: What to do with an Endowment Mortgage Shortfall.

edwardg said:

Your post is timely as far as I am concerned. I had a with profits endowment policy with Friends First taken out in September 1988. Capital amount borrowed was the equivelant of Euro 42,712.78. Cheque received from Friends First last week was Euro 40,536. Shortfall of more than Euro 2,000.00. Not to mention that the quote I received from Friends First in September 1988 foresaw a surplus of Irish Pounds 13,600.00 after the mortgage was paid.

When I raised the shortfall with Friends First they blamed the shortfall on deterioriating market conditions. Although I have had initial discussions with both the financial regulator and the ombudsman's office I am not hopeful. Relevant legislation on endowments was enacted in 1995 (Credit Intermediaries Act) and 2005 (Ombudsman Financial Services Act) -I am not excatly sure if these are the correct names for the two Acts.

Unfortunately neither of these Acts, as far as I understand it, do not have retrospective provisions. Pity, as the majority of these products were sold in the late eighties and early ninties.

I have now begun a disputes procedure with Friends First on this matter. First step, I have written to them asking them what the procedure is. Still awaiting a reply. When this procedure is finished and I am sure that the outcome will be not satisfactory from my point of view, I can then go to the Financial Ombudsman with my complaint. I suspect he will dismiss it on the bassis that product was sold before 1995 or 2005.

When all this is over I am then considering through sites like this raising the issue of endowment shortfalls and floating the idea, with other disgruntled customers of these instituions, of investigating the possibility of a class action ( I have to familiarise myself with how these work but I understand there are precedents in the U.K.)

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Any update on the above?

My Mum is in the exact same situation and was totally mis-sold a financial product by an agent on behalf of a financial institute. Were currently getting all her old documentation together and planning a meeting with the bank to discuss the issue. I'm going to spell out the mis-selling and also the lack of information at the time of the mortage been taken in relation to management fees/entry fees and commission fees on this policy which was never explained. I'm hoping we can come to some sort of arrangement were we split the difference which is around 10 to 15k.

I believe similiar sitiuations have happen in the UK and the banks settle. But the lobby group were support by the government and the banks had to deal with the problem.

There will be no offer of help from the Irish Government in the current climate as they can't afford the banks to pay out on anymore losses.

So what options:

1. A lobby group needs to be set-up.
2. This will need funding.
3. Media campaign set-up and lobby group to tackle TD's government departments etc.
4. Hiring of legal teams etc.

Personally I feel it could take up to 10 years to get any action taken by the government.

If people want to tackle this problem they need to do it now.

I've just paid off a shortfall of 10 grand with six months to go on the mortgage, just to be shut of the damn thing.

Endowment Mortgages.

Is there any recent information about the on-going fate of Irish Endowment "Victims" ?

A very informative thread on this topic over on boards.ie

Royal Liver has settled some cases because the original brochure stated that the mortgage would be paid off

Apparently the Ombudsman has ruled

Endowment Mortgage shortfall – not upheld
Holders of an endowment mortgage were advised that their 15 year mortgage would be repaid
after a period of 13 years & 7 months. After 14 years the holders received notice that the
proceeds of their policy would not be sufficient to discharge the mortgage debt. They
complained that the mortgage provider failed to assess and notify them of the performance of
the policy, and it was not until 14 years had elapsed that they were made aware of the
anticipated shortfall of the proceeds.
The Ombudsman found that the holders had been kept informed during the course of the
mortgage and the manner in which the fund fluctuated up and down had been explained to
them. The complaint was therefore unjustified and was not upheld.
Comment
The Ombudsman will not make an order for compensation to be paid in situations where the
investor was fully informed of the risks involved and the poor return is merely a consequence
of the performance of the markets.

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