Do banks refuse switches from vulture funds because of the stigma?

[REDRUNNER]

I’m following all things vulture funds/mortgage prisoners/mortgage switching for a good while now. I’m starting to think that the biggest barrier isn’t the ability to afford switching to a new bank, but the stigma attached to why a borrower is sold to pepper and other fund managers. It seems to be a big red flag to not getting involved with the borrower at all.

I assume that in main stream banks and credit unions the culture is not to entertain applications from vulture fund switchers.

Am I wrong here? ….I’ve just never heard of anyone being successful in switching back to a bank.

 

[ClubMan]

Am I wrong here? ….I’ve just never heard of anyone being successful in switching back to a bank.

I would expect that lenders would judge applications on the facts - e.g. were there missed repayments, arrears. restructuring/rescheduling etc. along with the usual ones such as the applicant's income/debts, ability to repay etc. Not merely on the fact that a person happens to have a mortgage with a vulture fund. But most (although not all) of the loans with vultures are with them for a reason - i.e. they were in some way non-performing/restrcuctured etc.

 

[REDRUNNER]

I would expect that lenders would judge applications on the facts - e.g. were there missed repayments, arrears. restructuring/rescheduling etc

As I’d also expect….but I’d be sceptical about it, I’d say in many institutions there’s a special bundle for vulture switchers, with a red “application denied” stamp conveniently positioned beside them.
We owe 150,000 our house is worth 400,000 that’s an LTV of 37.5
I gross 33,500 & my wife 21,000 we are 18 years into the mortgage with 22 years to go. When we had kids 8 years ago we applied to extend the loan term in order to make the payments more affordable….we were also offered a reduced interest rate for 5 years, so I took it. Technically with the reduced interest rate we were in the non performing loans bracket… even though we never missed a payment. At the end of the 5 year’s KBC sold us on to pepper.

No Bank or CU will accept us even though we have never missed a payment.
If we can’t switch (my point being we shouldn’t be high risk)…I don’t see how the “Vulture fund stigma” is not in some way a factor here.

 

[ClubMan]

Technically with the reduced interest rate we were in the non performing loans bracket…

Isn't that your answer so? Your loan may have been categorised as non-performing so that, rather than who your lender currently, is maybe the deciding factor?

 

[REDRUNNER]

Isn't that your answer so?

No I don’t think it is, it was all an agreed increase of the term length of my mortgage. I’ve been out of that reduced interest rate since 2019. As I’ve said I’ve never missed a payment of the exact amount due. If it’s a case that I’m in a bracket that will never be allowed to switch because I entered into an agreement to increase my term loan….then maybe there are two piles of applications beside that red stamp…it’s all being halted by the banks when they see vulture funds are involved….surely not because a young family increased the loan term in order to create an affordable repayment, many years ago.
If a young couple went to the bank with 250,000 equity…earning 50,000 + P/A looking to borrow 150,000 it should be very straightforward….throw the vulture fund into the equation and it’s a very different matter… not only are we falling at the first hurdle…but as I’ve been saying, I suspect we are not even allowed to enter the race.

 

[Brendan Burgess]

I have just seen these posts now as they were buried in another thread.

This is a bizarre idea and one which the Central Bank first suggested, although there is absolutely no evidence for it.

Believe it or not, the mainstream banks make a lot of profits on mortgage lending and they want new customers who have good credit records.

People who are with vulture funds because they were sold by BoSI or Danske who never missed mortgage payments had no problem switching.

People who have mortgage arrears or restructured mortgages find it difficult to switch. And it does not matter whether they are with Bank of Ireland or Pepper.

A performing mortgage with Pepper can switch easily to another lender.
A restructured mortgage with AIB will find it difficult to switch to another lender.

 

[Brendan Burgess]

…earning 50,000 + P/A looking to borrow 150,000 it should be very straightforward

Not really.

They will look at your expenditure to see if you can comfortably afford your mortgage and an increase of 2%.

With €50,000 of income and a few children, they might decide that you cannot afford the mortgage repayments.

Brendan