Incorrectly calculated arrears - mortgage had been deemed unsustainable as a result

Discussion in 'Mortgage arrears & negative equity case studies' started by fineline, 1 Feb 2019.

  1. fineline

    fineline Registered User

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    Last edited by a moderator: 1 Feb 2019
    Hi,

    While I have since restructured my loan with the bank, and am back on track, just after we came to agreement, I received a letter to say that my arrears were not in fact €52,000, but only €8,500. These arrears were accumulated over a period of 4 years approx.

    The loan was sold to a 'vulture fund' in 2014/15 (?). Very soon thereafter, they started writing to me to tell me my mortgage was unsustainable (they denied me the interest only arrangements I had with previous provider), and eventually after a couple of years, gave me some very disheartening options, of which I chose voluntary sale as full and final settlement. This was a 6 months agreement, where it was my responsibility to manage the sale, including select an agreed agent. Four months into the agreement, the bank contacted directly the sales agent and told them not to market the property until further notice. I got this in writing from the agent having pressured them to do so for several weeks.

    The issue I have is that had the correct amount of arrears been calculated for the bank's credit committee, I believe they may have made different options available. Further, had i known the correct amount of arrears, this would have only cost €180 per month additional to keep me compliant, and I could have borrowed this from family.

    My house was on the market twice - a hugely stressful time which took its toll on my relationship and family (resulting in separation), my physical and mental health. Eventually, I went to NewBeginning, where I was told that the bank was bullying me. I stepped away from the voluntary sale, and NB helped me get the mortgage re-structured.

    Have I any recourse over this fiasco, or do I have to put up and shut up?

    Thanks
     
    Last edited by a moderator: 1 Feb 2019
  2. Brendan Burgess

    Brendan Burgess Founder

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    Hi fineline

    Did you go back to New Beginning with this information? They should be your first port of call.

    Who was the initial lender? Was it Bank of Scotland?

    When exactly did the €52,000 arrears arise?

    Did they arise before or after the sale?

    Did they arise because you were no longer on interest only and so were just paying the interest?

    BoSI calculated arrears incorrectly, but generally the overstatement was about 30% for someone who was paying a good bit towards their mortgage.

    Brendan
     
  3. fineline

    fineline Registered User

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    Hi Brendan,

    Yes BOSI was the original lender. Arrears started to accumulate after BOSI sold the loan, and yes, because i was paying interest only, but they wanted C+I repayments

    I have a meeting planned with NB next week

    Martin
     
  4. Brendan Burgess

    Brendan Burgess Founder

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    When the fund bought the loan how many years were left to run on the mortgage?

    How much was the balance on the mortgage?

    What interest rate?

    Brendan
     
  5. fineline

    fineline Registered User

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    there were 20 years left, the balance being 480K, and the interest rate 1.25 over base

    Martin
     
  6. Brendan Burgess

    Brendan Burgess Founder

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    That is an amazing difference to accumulate so quickly.

    I suspect that you were still on the interest only agreement but they put you on capital and interest by mistake, so the arrears built up that way.

    The systematic error that they made wouldn't account for that level of difference.

    Are you in a position to refinance the mortgage?

    They might be happy to get rid of a €480k tracker mortgage, but you would want a discount of around €100k to surrender such a valuable tracker.

    Brendan
     
  7. fineline

    fineline Registered User

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    Brendan, they didn't put me on C+I by mistake - they did it intentionally, as they rejected an application to remain on interest only - the previous bank had let me renew it every 6 months for about 3 -4 years. Once they were expecting C+I payments, I could only pay the interest (plus a bit), so the monthly payments fell short by about 1000 per month. hence the 52K (by my reckoning).

    However, in late 2017, it appears the regulator chased these banks to report arrears accurately, after which I got a letter to say the arrears were 8.5K, and not 52K as reported when they tried to take my house.

    I'm not in a position to refinance yet, but perhaps in a a couple of years' time.

    i'm curious about whether I have any recourse for the way they treated me, and how they (seemingly falsely) tried to make it out that the mortgage was unsustainable, and thus made a move on my home, and how they then interfered with the process agreed for voluntary sale

    Thanks
     
  8. Brendan Burgess

    Brendan Burgess Founder

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    BoSI renewed the interest only every 6 months, but were under no obligation to do so and at some stage would have said your mortgage was not sustainable.

    If your mortgage fell short by €1,000 a month, then you would accumulate around €12,000 a year in arrears.

    So I can't see how it was only €8.5k after 4 years.

    The mistake that the lenders made was complicated but generally over a 4 year period, I would expect the arrears to be overstated by only around 10% or 20%.

    It's hard to know how to handle this.

    Your mortgage was clearly unsustainable without getting a deal from BoSI and later from the fund. If they had not done a deal, your arrears would have been probably €100,000. Don't forget there is no obligation on the fund to do a deal. You have no right to a deal. They could have just refused and pushed for a repossession.

    So I am not sure that you have a case. But I would be interested in hearing what NB has to say about it.

    Brendan
     
  9. RETIRED2017

    RETIRED2017 Frequent Poster

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    Out of interest is the 8500 over paying interest on mortgage and balance is the 43500 you should have reduced your mortgage by,
     
  10. fineline

    fineline Registered User

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    they have tried to explain the difference in the 'methodology' used to calculate the arrears before and after (52K vs 9K). I wrote to them to ask them to explain to me, in simple terms, how they calculated it beforehand, and how they calculate it now. I also asked them to explain why they didn't afford me the opportunity to pay an additional 180 per month, which would have kept my account compliant.

    The explanation I received was:

    "the methodology we previously used to recalculate you Conractual Monthly Subscription (CMS) included the accumulated arrears on your mortgage account up to the date of recalculation to ensure that you clear your mortgage within the remaining term. Prior to the recalculation your arrears balance comprised the shortfall between: (i) your total monthly repayments due since your loan was drawn down and (ii) the payment actually made by you since your loan was drawn down"

    "We have adopted a revised CMS calculation methodology with effect from 01 Nov 2017 which will ensure your arrears figure remains independent of your CMS should it be calculated in the future, for example if your interest rate changes. The recalculated arrears figure ow comprises the shortfall between: (i) your total monthly repayments due since your CMS was last calculated and (ii) the payments actually made by you since your CMS was last calculated"
     
  11. Brendan Burgess

    Brendan Burgess Founder

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    That is what I assume happened, but I can't figure out how it would overstate it by so much.

    Just to explain what this means in simple terms.

    Let's say you owe €120 on 1 January with 12 months left at 0% interest.
    Your repayment is €10 per month.

    If you don't pay anything in January and February, you still owe €120.
    The correct way to do it is to say that your arrears are €20 and your repayments are still €10 a month.
    If you skip March's payment, your arrears rise to €30.

    Or they could capitalise the arrears and say - "OK, you can't pay the €20, so you owe €120 with 10 months left, so your repayment is increased to €12 a month"

    But what a few lenders did was say
    You owe us €20 arrears
    and
    your repayment is now €12 a month. This is incorrect.

    So if you don't pay March's payment, your arrears would be €32 - or overstated by €2.

    Brendan
     
  12. fineline

    fineline Registered User

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    more:

    "your CMS was last calculated on 31st March 2017 when the interest rate was changed from 0.00% to 1.25%. The arrears figure at 30 Nov 2017 was €8918 and this comprises of the total monthly repayments due since the CMS was last calculated of €19,671, less the payments actually made to the account since the CMS was last calculated of €10,752"

    I am not totally financially illiterate, but this still does not make sense to me. Is CMS an industry-wide term, or term used by the Financial Regulator? And, even if it were, why would they re-calculate this CMS at periodic times, and why March 2017, etc etc.

    Perhaps you can make sense of it for me?
     
  13. Brendan Burgess

    Brendan Burgess Founder

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    I have never heard the term CMS before.

    They recalculate the monthly payment when something changes - e.g. when you pay off a capital sum or when interest rates change.

    In your case, they say that the rate changed from 0% to 1.25%.

    To be fair, that sounds like a great deal. They were not charging you any interest at all.

    Brendan
     
  14. fineline

    fineline Registered User

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    of course, I didn't owe any less when the arrears were recalculated. And, I did ask them if I were due a refund of surcharge interest on arrears (which I repeatedly got reminds letters about), but no again
     
  15. Brendan Burgess

    Brendan Burgess Founder

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    No surcharge interest was charged. It was banned by the CCMA in 2010.

    The arrears is a notional figure and does not affect the balance.

    Brendan
     
  16. fineline

    fineline Registered User

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    Apologies, that was not stated correctly. The regular letters I received stated that "interest is charged on capital on arrears at the rate of interest on your mortgage". I assumed that this meant I was paying additional interest on the arrears part, and now that this was reduced by 80%, there would have been less interest which had been due.

    I still don't understand how they can go from 52K arrears to 8.5K. If they had always been calculated in the new way, I would have been able to avoid arrears by borrowing from family, for instance
     
  17. Brendan Burgess

    Brendan Burgess Founder

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    No. A mortgage is just like a bank overdraft.
    You pay interest on the balance.

    Let's say your balance is €100,000

    The difference is that in a mortgage, there is an artificial distinction between "capital" and "arrears". So your loan of €100,000 is called €80,000 capital and €20,000 arrears.

    You are still charged interest on the €100,000.

    If they say your arrears should have been only €5,000, then the figures would be changed to
    €95,000 capital and €5,000 arrears.

    Brendan
     
  18. robert 200

    robert 200 Frequent Poster

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    I would also involve the FSPO . This is an excellent service and its free.