Getting settlement deal from Pepper for positive equity tracker case?

Walos2019

New Member
Messages
3
BTL property is now worth 100k more than the mortgage balance. There has never been any arrears and the loan is on a low tracker rate. The loan was recently sold to Promontoria and is now managed by Pepper. On the basis that the vulture is stuck with a performing loan for another 15 years on a low rate, (so they will probably want to sell it on after 5 years), I'm wondering if they might settle for less than the €300k loan balance to get rid of me? I could refinance elsewhere at a higher rate and then happily sell the property if a decent settlement discount is available. Has anyone had any experience in this area? Any rule of thumb for how much I should offer in settlement?

I appreciate that in negative equity cases I might typically be looking at the current market value plus a contribution towards the residual debt to settle, but thankfully I am in a much more fortunate position now. I am not in any financial difficulty and could hang on in there, but if there was a deal to be done, I'd be happy to get out. Any suggestions would be gratefully received.
 

Brendan Burgess

Founder
Messages
38,702
Very unlikely. Lenders are not giving discounts for the early repayment of trackers.

There is no harm in asking though.

Brendan
 

EmmDee

Registered User
Messages
227
BTL property is now worth 100k more than the mortgage balance. There has never been any arrears and the loan is on a low tracker rate. The loan was recently sold to Promontoria and is now managed by Pepper. On the basis that the vulture is stuck with a performing loan for another 15 years on a low rate, (so they will probably want to sell it on after 5 years), I'm wondering if they might settle for less than the €300k loan balance to get rid of me? I could refinance elsewhere at a higher rate and then happily sell the property if a decent settlement discount is available. Has anyone had any experience in this area? Any rule of thumb for how much I should offer in settlement?

I appreciate that in negative equity cases I might typically be looking at the current market value plus a contribution towards the residual debt to settle, but thankfully I am in a much more fortunate position now. I am not in any financial difficulty and could hang on in there, but if there was a deal to be done, I'd be happy to get out. Any suggestions would be gratefully received.
It is likely that the portfolio (including your loan) was bought at a discount. So while you are paying x% over ECB (i.e. a low tracker rate), the new owners of your loan are getting a higher rate of return

For example - if the original loan was 1% on a €100,000 loan (i.e. €1,000 per annum), if the loan was purchased at 80% of nominal the new "owner" is getting €1,000 on €80,000 i.e. 1.25% pa. Obviously the return they are now getting depends on rate of original loan and level of haircut on the purchase.

So if you rock up suggesting you are doing them a favour, they may not see it the same way
 

Walos2019

New Member
Messages
3
It is likely that the portfolio (including your loan) was bought at a discount. So while you are paying x% over ECB (i.e. a low tracker rate), the new owners of your loan are getting a higher rate of return

For example - if the original loan was 1% on a €100,000 loan (i.e. €1,000 per annum), if the loan was purchased at 80% of nominal the new "owner" is getting €1,000 on €80,000 i.e. 1.25% pa. Obviously the return they are now getting depends on rate of original loan and level of haircut on the purchase.

So if you rock up suggesting you are doing them a favour, they may not see it the same way
Thanks EmmDee. I see your point of course. Going one step further, the vulture fund will want to get rid of the loan asset typically within 5 years. In the meantime they have to pay Pepper on an ongoing basis to service the loan, so that is reducing their annual income return. The tracker rate is currently 0.8%, so in your example they are getting a gross annual income return of €800, which represents a 1% return on €80,000. My understanding is that the vulture fund's cost of funds currently exceeds 2% p.a., so they are losing money (the income part) when we use your example figures. On that basis, ceteris paribus, nobody would buy the loan from the vulture now at €80,000, so it would have to be sold on at a further discount in my view.

Unlike a bond, the loan owner receives capital repayments every month rather than at the end of the term, so they are recouping some of their investment evry month. However this also means that the loan value to sell on is reducing every month.

As the vulture funds are very experienced now in buying loans, they would have paid less than the €80,000 figure in the example if they were only buying one loan. However they obviously bought a portfolio of loans at an average price and some of those loans will be a lot more profitable. This particular loan produces a very low income return (if any) for the vulture but the positives for them are that it is in positive equity and performing.

From my point of view I am largely indifferent whether I get out or not. Cheap long term affordable financing is great and my annual net return exceeds the cost of financing. I would be mad to walk away from the current arrangement without some incentive (discounted settlement). I am hoping Pepper will appreciate this position and decide there is room from a profitable compromise on both sides. As Brendan stated, ther is no harm is asking.
 

Daddy Ireland

Frequent Poster
Messages
308
Interested to know how you get on Walos2019 if contacing for a settlement. I have about 7 years remaining and a balance of 28k on a very low tracker on primary residence. I'm just wondering any chance of them accepting 25k or 26k.
 

Protocol

Frequent Poster
Messages
2,980
The tracker rate is currently 0.8%, so in your example they are getting a gross annual income return of €800, which represents a 1% return on €80,000. My understanding is that the vulture fund's cost of funds currently exceeds 2% p.a., so they are losing money (the income part) when we use your example figures.
I have heard of funds buying mortgage books, where the funds have a negative cost of funds.

For example, Goldman Sachs buying Danske mortgages, it was discussed here that GS could borrow at 0% or even less.
 

RedOnion

Frequent Poster
Messages
3,288
I have heard of funds buying mortgage books, where the funds have a negative cost of funds.

For example, Goldman Sachs buying Danske mortgages, it was discussed here that GS could borrow at 0% or even less.
Someone was listening! ;)

Funds aren't buying mortgage portfolios to lose money. Everything is worked out to be profitable, being a combination of negative cost of funds and a discount in the purchase price.
 

MBF68!!

New Member
Messages
5
Very unlikely. Lenders are not giving discounts for the early repayment of trackers.

There is no harm in asking though.

Brendan
Brendan I am really surprised at your answer. Promontoria (Pluto) have just sold my mortgage to pepper, (messy divorce etc..) but they have told me they would have been very open to try and do a deal and I have a ultra low tracker a parked part of my mortgage and a non performing loan. MY problem is the sale is going through with Pepper in the next two weeks I can not stop it
 

MBF68!!

New Member
Messages
5
BTL property is now worth 100k more than the mortgage balance. There has never been any arrears and the loan is on a low tracker rate. The loan was recently sold to Promontoria and is now managed by Pepper. On the basis that the vulture is stuck with a performing loan for another 15 years on a low rate, (so they will probably want to sell it on after 5 years), I'm wondering if they might settle for less than the €300k loan balance to get rid of me? I could refinance elsewhere at a higher rate and then happily sell the property if a decent settlement discount is available. Has anyone had any experience in this area? Any rule of thumb for how much I should offer in settlement?

I appreciate that in negative equity cases I might typically be looking at the current market value plus a contribution towards the residual debt to settle, but thankfully I am in a much more fortunate position now. I am not in any financial difficulty and could hang on in there, but if there was a deal to be done, I'd be happy to get out. Any suggestions would be gratefully received.
Walos please let me know how you are getting on. I believe they will do a deal with you if you make a decent offer. The question is what is decent ?
 

RedOnion

Frequent Poster
Messages
3,288
parked part of my mortgage and a non performing loan
You do realise this sentence makes your circumstances completely different to everything else here? The OP is in positive equity, and never been in arrears.

They're willing to do a deal with you because your mortgage is non-performing. Not because it's a tracker.
 

MBF68!!

New Member
Messages
5
You do realise this sentence makes your circumstances completely different to everything else here? The OP is in positive equity, and never been in arrears.

They're willing to do a deal with you because your mortgage is non-performing. Not because it's a tracker.
Ok I am in positive equity not by much. I have never in arrears too, but my income has been battered. So my ability to repay is limited, but my mum wants to assist me with funding to hopefully clear my mortgage if I can negotiate a decent deal. Funny enough I was told I was performing on the agreed deal
 

dobbins

Frequent Poster
Messages
36
Just FYI, I have contacted Pepper a couple of times with regard to paying off a tracker mortgage early (originally taken out with National Irish Bank then bought out by Danske Bank and subsequently by Pepper). They are not offering any "deals" e.g. a discount if paying off the full amount of the mortgage or allowing the transfer of the mortgage to another property. The only option is to continue with the existing mortgage on the existing property OR pay it off using a new mortgage on a different property from a different lender (at a less favorable interest rate). That is my experience at least. If anyone has had a different experience, would be great to hear about it here.
 
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