Tracker pulled before Mortgage drawdown back in '09

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Calibos

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Posting this question on behalf of my parents who are not internet saavy.

This isn't the more common tracker issue where people lost their tracker coming off a fixed rate. My parents lost their tracker when they went to drawdown the first mortgage installment cheque.

My parents applied for a €200,000 15 year mortgage (for renovations) in late 2008 and were approved. There were several amended approvals for various reasons with the final amended loan approval in late March 2009 which was signed by my parents in April 2009. All loan approvals were trackers @ ECB + 1.2%.

Unfortunately planning and a few other issues delayed work starting on the house till November 2009.

Nowhere on the loan approval or documentation did it say there was a time limit on the Approval. Staff at the EBS as late as Sept or Oct IIRC said the money was there and ready to draw down. At no point did anyone at EBS say our approval was about to run out.

Building work starts in November and the house is gutted back to literally the bare 150 year old walls. My parents go to draw down the first payment for the builder only to be told that the loan approval is being renegotiated. They demanded that a car loan and a term loan be paid off. My self and siblings paid these for my parents. The EBS sent new loan approval forms but this time without a tracker, just standard variable. They knew they had us over a barrel with the house already gutted and now with nowhere to live but rented accommodation so we couldn't afford to pull out and fight a case or seek a mortgage elsewhere.

This caused a massive amount of stress at what was supposed to be a happy exciting time.

I tried to persuade my parents back then to seek legal advice but being older they are more deferential to authority and assumed that if EBS did this they must be within their rights to do this. They contacted the ombudsman a few weeks ago to mediate with the EBS about repayment of arrears, I persuaded them to add a postscript about our initial horrible treatment at the hands of the EBS wrt pulling tracker approval. Got a call from a rep of the Ombudsman to say that she agreed that all our trouble stemmed from the loss of the tracker but couldn't say whether we had any case, just that by mere mention of the word tracker we had triggered what was supposed to be an arrears mediation casefile to be moved to the ombudsmans tracker department. Job done as far as I'm concerned. At least we might finally get a yea or nay answer about whether we had a case.

Several weeks since that call from the ombudsman, so still none the wiser as to whether we have any kind of case.

The last seven years have been filled with stress and financial worry as my father tries to balance paying the full current mortgage repayments and keeping his sole trader business afloat keeping neither EBS or Revenue entirely happy. Can't afford to lose either the house or business.

Year 7 of the 200,000 mortgage and about 24,000 in arrears. Only ever missed two full payments but since 2011 theres been quite a few payments that might be 2,3,4 hundred short etc.

The thing is. Had we gotten the tracker we had approval for our repayments would have been about €1,400, in 2011 my parents wouldn't have fixed at 5.6%. Funny how the EBS was able to ring my father several times to tell him the fixed rate offer was about to expire but didn't find the time to call him back in 2009 to tell him his approval was about to expire. Anyway, needless to say, no sooner had my parents fixed at 5.6% did ECB rates start dropping to the floor. While our fixed payments went north of €2,000 a month, had we been on the tracker our monthly payments would have been dropping to 1,100 or 1,200 if I'm correct.

If we had a case that we should have never lost tracker approval, I'm sure it negates the fixed rate from 2011-2016 which is most of what our arrears stem from and given the difference in monthly repayments, far from underpaying every other month, redress would mean we had in fact massively overpayed every month for nearly the entirety of the last 7 years.
 
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Unfortunately with the mention of a tracker the case has been put on hold pending the outcome of the tracker examination by their bank.
They need to write to their bank requesting that they be included in the tracker examination (if they haven't already been included). They'll need to provide copies of all the documentation to the point at which the loan was renegotiated.
I've no idea whether or not you'll be successful.
However, given that you have an arrears issue that you've referred to the Ombudsman you might like to request that the arrears negotiation be completed now so that they are not placed in further financial hardship while waiting for the Examination to be completed. This could take up to a year longer and I'm sure that they don't need the existing issue to be hanging over them for that long.
 
Not withstanding what saysomething has said, your argument is regarding mortgage approval. The time had passed, trackers products had probably been taken off the cards so there was no other option but to offer your parents fixed or variable options.

It was a full year before they drewdown what they had been approved for. I would have thought the one thing bank standard letters of offer were good for was telling you when the approval was up.
 
Any loan offer I dealt with always had in the small print something to the effect that the final rate was only applicable on the day of drawdown, fixed rates could and did change too before drawdown, sometimes they went up and sometimes they went down and sometimes they were pulled completely and different term/rate was available by drawdown date.

I know where I worked, which was not EBS, trackers disappeared practically overnight for new customers but there was a couple of months allowed for those in the pipeline to drawdown which again was the same procedure with fixed rates, so if a person was in a position to speed up drawdown before the cut off date they got that rate. If they weren't ready then the new rates applied on drawdown.
 
@Calibos do you have access to all the loan documentation including the original loan offer, original T&C’s and the communication with your parents when the tracker was withdrawn.

Can you 100% prove there was no expiry on the loan offer ? This means having this in writing
Can you 100% prove there is nothing in the mortgage agreement, banks general T&C’s at the time that the rate was not liable to change up to drawdown ?

If you can prove those two facts - and think you will struggle - you may have a case.

Otherwise I think your case will be very weak. Your parents were told that the new rate would be SVR before they drew down. It was their decision to continue with the new revised loan agreement. I understand work had commenced but it was still their decision

You need to get all your paperwork together, writing to the bank for it if required, and working out what it says and if you have a case (legal one not moral one). After that you can decide next steps. Worst case you can bring it into the arrears negotiation !!
 
This would be something you should see someone like Padraic Kissane about - Kissane Financial Services (you'll see him elsewhere in the forum)

Most mortgages for new houses are standard with a relatively fixed date of drawdown that usually only moves a little, but on self builds it is different and the banks know there can be substantial delays for various reasons. So it may be that self builds don't have a specific drawdown expiry.

Unless your parent's financial circumstances changed between April and November, there should have been no issue and just an extension to the drawdown and certainly not a completely new application - smacks of "how can we get out of this". I assume you have a copy of the signed letter of offer from April, that will be the important aspect of this.

Currently you would not be able to go to ombudsman as its over 6 years (that may change). But certainly talk to Padraic Kissane for his views.
 
Wow, Thanks everyone.

One of things I'd said to my parents in order to allow me to add the postscript to the cover letter to the Ombudsman re the arrears was that at worst, it could help their case wrt to the Arrears as GNF_Ireland says, best case obviously being if they had a case for re-instatement of a tracker and Redress.

First drawdown application was in December for first payment to builder who started work Nov 15th. Thats what triggered EBS telling the parents to come in to renegotiate loan approval. Not a peep out of them when they got the letter of commencement of works starting in mid November that approval had or was about to expire. April-December is 9 months.

I've always said myself that it smacked of, "How can we get out of this". After all trackers were already on the way out around this time.

Peemac. So you reckon that after weeks of waiting for word back from the Ombudsman wrt to the tracker case, they'll just get back to us with words to the effect of 'Nothing to do with us due to the statute of limitations'. Does the SOL just apply to their involvement or to the ability of us to take a case to the courts at all?
 
I still think you need to get access to all the relevant material on this and confirm absolutely what was signed and what the banks general T&C's are. As others have said, I would be amazed if they did not state somewhere that there was an expiry included somewhere in it. It may be in the depths of the T&C's but if its there, it seriously weakens your case.


Calibos said:
I've always said myself that it smacked of, "How can we get out of this". After all trackers were already on the way out around this time.
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This in itself is not wrong - you may view it as immoral but that is a different story. If the bank had an expiry of say 6 months on the draw down they are well entitled to do what they did.
In reverse, this is no different to when people bought houses off the plans and had a default date, that if it passed the contract was broken. They waited anxiously for the date to pass so they got out of buying the house in the first place. I remember hearing stories of builders working 24/7 to try complete houses on time so the purchaser would have to honour the terms of the contract.


Its also worth noting that back in late 2008, ECB was 3.75% - ECB +1.2% is 4.95%. Basically what I am saying is while hindsight is great 8 years later, your parents may not have understood the true value of a tracker back then. Unless all calls to the bank were recorded, its very hard to know what was discussed/agreed along the way.

So advice still stands - get access to all documentation and after you review it take it from there - whether that is to Padraig or others is your own choice
 
SaySomething said:
Unfortunately with the mention of a tracker the case has been put on hold pending the outcome of the tracker examination by their bank.
They need to write to their bank requesting that they be included in the tracker examination (if they haven't already been included). They'll need to provide copies of all the documentation to the point at which the loan was renegotiated.
I've no idea whether or not you'll be successful.
However, given that you have an arrears issue that you've referred to the Ombudsman you might like to request that the arrears negotiation be completed now so that they are not placed in further financial hardship while waiting for the Examination to be completed. This could take up to a year longer and I'm sure that they don't need the existing issue to be hanging over them for that long.
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Got an email back from the Ombudsman today funnily enough, saying exactly what you've suggested here. ie. We need to lodge a complaint with the bank first. We kind of already knew that. The initial contact with the ombudsman was wrt the arrears issue anyway. It was only the mention of the tracker question from 2009 in a postscript that shunted the casefile over to the Ombudsmans tracker department. The issue we actually contacted the ombudsman was that EBS agree we are struggling with the repayments but their suggested remedy is that we pay more per month than we are now to clear the arrears???? One suggestion we asked about was whether we could add the arrears onto the end of the term and pay the mortgage for 16 years instead of 15.

So given that the EBS final word was in effect a cure thats worse than the disease, I don't think settling the arrears issue before the tracker issue can put us in any further financial hardship than we are already in. One wonders that even if we didn't have a case wrt to the tracker, might the instigation of a tracker complaint make them more amenable to coming up with a reasonable solution to the arrears issue...or conversely make them dig their heals in further??

An issue the planning department had with a Dormer in the plans required new plans to be submitted which delayed things several weeks. That Dormer might have been the most expensive Dormer Window in Ireland!! Arrgghh!!
 
Hi Calibos,

I feel for your parents situation but you have no guarantees on the rate until you draw the funds.

A loan offer is not binding on either party really unill you actually draw down the Mortgage. If you sign a loan offer and the rate changes then that’s what you get I’m afraid.
 
corktim said:
Hi Calibos,

I feel for your parents situation but you have no guarantees on the rate until you draw the funds.

A loan offer is not binding on either party really unill you actually draw down the Mortgage. If you sign a loan offer and the rate changes then that’s what you get I’m afraid.
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I'd disagree agree with that. An official loan offer would be part of any contract, and it would state various terms.

It will probably state interest rates can change, but if it's a tracker, it would follow a set formula.

Similarly, variable rate would be the rate pertaining at drawdown.

Fixed rates would also be those at drawdown, but would be the fixed term agreed in the loan offer.

Best route is to give the details to Padraic Kissane who will give an immediate opinion based on years of knowledge.
 
Corktim's analysis is bang on - the deal isn't done until funds are drawn down.

That's the simple reality of the situation.
 
Corktim and Sarenco. While the following hypothetical is not perfect because variable rates were similar to tracker at the time, don't you think it would be highly questionable for a bank to entice someone to take a mortgage for renovations out with them with the carrot of a tracker, wait till works had started and the house was virtually demolished, and then and only then pull approval and make a take it or leave it loan offer with worse terms? How could that be legal never mind moral. (this of course assumes theres nothing about expiry date of approval in the small print). Would that not be like an airline selling you a plane ticket for a certain price and then when in the air telling you the price had gone up and if you don't like it you can jump out of the plane without a parachute?

I'm hoping Peemac is right and that a self build/renovation mortgage is different to a house purchase one because one would only think of drawing down once the contractor had completed the first tranche of works and asked for his first payment installment. Hence our first drawdown in December after works started mid November. To my mind, if our approval expired before works even started we should have been told by the EBS so that we could have had the chance to pull out and either cancel the job before it started or seek a mortgage elsewhere. If the approval was about to expire close to the date we sent the EBS the Works commencement notice in early November, I feel they also had a duty of care to warn us to drawdown asap especially considering that if and expiry date for the approval is there, its buried deep somewhere in smallprint .

Look, don't get me wrong, while we can't find anything in our documentation about approval expiry dates, we are consulting a solicitor and will be contacting Padraic Kissane. We will be disappointed but not necessarily surprised if it turns out EBS are legally covered for some reason and we only have a moral case not a legal one. In that scenario, we just have to take small comfort in the fact that such a pattern of immoral though not illegal actions by the EBS might help in any arrears mediations or heaven forbid a repossession court case.

BTW in case it matters. The house is currently worth between 6-700,000 and the outstanding balance of the mortgage is about 160,000 IIRC
 
But if the variable was same price or cheaper than tracker how was the tracker a carrot at all? Bearing in mind no one knew how good they would become at that stage.

I worked for a bank and there was no difference between self build and any other mortgage loan offer. I don't think banks contact customers when loan offers are about to expire, I never recall doing that, feel that's up to customer and solicitor to get their act together to draw down in time. Lots of people end up in similar circumstances with either building or buying, any number of things cause delays resulting in slow drawdowns. Were the extra loans the bank wanted your parents to clear taken out after the loan offer issued? That could account for the renegotiation as they may have done another ICB report before drawdown.

I think the key will be if there is something in the loan offer about rate at drawdown or expiry date of offer.
 
Montbretia,
I didn't work in a bank but had experience of Trackers and liked the fact that they tracked ECB. I always felt fixed rates were gimmicks as non bankers (ordinary people) didn't know if they were good value or not. I got stung fixing once and ECB went down and ended up paying over the odds. That is why I "trusted" Trackers (famous last words)

You say, as someone who worked in a bank, that no one knew how good a Tracker was. I did, as I am sure many others did too. I am surprised that as a Banker, you didn't know. But still senior management knew, and duped customers to switch because THEY knew EXACTLY what was coming.
Shame on all our Banking institutions. Their behaviour had been dispicable. M&S refund when you are not satisfied, my local vegetable shop refunds when produce is not right (he never dangles carrots to entice us to buy his lovely vegetables). Our "esteemed" bankers however, on massive bonuses, call in the lawyers and small print and screw the customer, laughing all the way to the "bank".
Words cannot express my distain and contempt for senior management in banking institutions who have willfully brought distress and hardship to approx 30,000 plus families and Young people in the prime of their lives in this now acknowledged "Tracker Scandal". They should be ashamed of themselves. They issue hollow apologies. They are seeking the pound of flesh that Shylock sought. It is a pity they did not ask for a pound of flesh as then at least I could challenge them to take that but not a drop of my blood, sweat and tears.
 
Well Stitcher I will admit I did not know! It was a new product like any other new product offered and it would take time to see how it panned out, remember the endowment mortgages! They were lauded as the best thing since the sliced pan but look how that turned out, as it happens I was taking out my mortgage around the time they were flavour of the month in early nineties as were several of my work colleagues and I was the only one not to take an endowment as I was suspicious of the theory behind them.

There were times when variable was as cheap and cheaper than trackers so the overriding belief that they were better overall certainly did not permeate the bank branch I worked in or any of my lending colleagues, we treated it as another new product. Now when they started to drop to extremely low margins over ECB they were clearly the better product and value at that time and would have been recommended as such. Still though many people were suspicious too of them as they felt it was tracking a European rate over which we had no control, now of course we all know we have no control over what the bank sets for the variable either but there is a big element of the 'devil you know' and the familiar sometimes in people's decision making.

I actually did take a tracker mortgage but because I wanted the current account mortgage which was effectively a tracker, interestingly I felt the current account mortgage was one of the best things ever and still do but it was particularly hard to promote to customers, they were suspicious of it, again it sounded too good to be true. I found the people most interested in it were those that had lived abroad, particularly Australia as there were similar products available and they knew the benefits of it. I personally did not have any experience of any other banking system other than Ireland so maybe that is a disadvantage in general.
 
Hi Montbretia,
First let me apologize if I went overboard a bit last night. I was disappointed and upset to find out that I was not included in what the banks are promising before Christmas. I will have to keep fighting my corner. PTSB talk about 100% of Impacted customers (as decided by them) being sorted by Christmas, whereas I am sure the number of Impacted customers as decided by PK is probably double. The contracts of Impacted and nonimpacted customers are the same. So if an "error" has been made for one group it has also been made for every one else, I only moved to the SVR because of that error, and then switched banks. If the "error" had been discovered earlier then I would still be on my Tracker.

I remember the endowment mortgage alright and was always suspicious of them as they didn't guarantee to pay off the loan and the broker also got money up front. No Matter how it was presented, it didn't feel right. Tracker mortgage s however were different in that the ECB underpins all loans, at least that is what I understood. I know banks change rates regularly but on principal, I reconed they were good value. Fixeds were always a gamble I thought as you never can tell what is going to happen. The Tracker I always thought was honest and fair, and a low rate Tracker was as good as it gets.
Hope you got a good Tracker rate!!
Stitcher
 
No worries. I totally agree bank behaviour has been despicable, I know the tracker mortgages I processed were to roll back to tracker after a fixed when that was the option chosen initially, someone somewhere made a decision to change the default on them before the fixed expired. Amazing how there is no whistle blower person out there, someone must know what they were told to do!

My tracker is 1.15 over ECB, happy out with it as I actually pay no interest as have accounts offset against the mortgage, those offset mortgages were a great plan :)

I actually think in the finish up this whole mess might cost the banks more than it would if they had just left trackers alone, now they have to pay compensation and may well end up putting people on trackers in cases that are not crystal clear at all.
 
Monbretia said:
may well end up putting people on trackers in cases that are not crystal clear at all.
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I am not as sure on that part.

I think there are some very strong cases out there - especially where customers have lines like "lifetime of the mortgage" or being offered a tracker on expiry of the fixed rate and it was not offered to them, as the product had expired. In those cases, the text of their own mortgage agreements makes the scenario pretty clear.
There is the scenario where KBC told brokers all fixed customers would roll over onto a tracker on expiry of the fixed rate. However, no rate was specified. However, if they were not offered one, and the customer has asked the broker about this, then it is a difficult scenario.

Then, there are those who are pushing for the original tracker rate to be restored to them even though they gave it up voluntarily in cases where the tracker rate was more expensive than the variable rate. I am not as sure their case is as strong. They may claim they were misled or encouraged to drop the tracker, but they still made the decision. That is totally different to not been given the decision to make in the first case.

I will never understand why the banks did not offer a 5%+ECB tracker in 2009-2012 period and let people choose it or not.

I think it will cost the banks money, but cases where its not crystal clear, I am doubtful the banks will end up having to pay massive compensation even if they retrospectively apply some sort of tracker rate. It is also possible that in some of those 'greyer' areas, the banks may offer a settlement of 2.5%+ECB with no compensation, without accepting liability, and leaving the only other option being the legal challenge route.
 
Calibos said:
Would that not be like an airline selling you a plane ticket for a certain price and then when in the air telling you the price had gone up and if you don't like it you can jump out of the plane without a parachute?
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I don't think the analogy is fair. How about changing it to the airline asking you to pay extra for exit row seats on check-in because allocated seating rules & prices had come in between the time you purchased the seat and used it.

Or maybe a better analogy would be the builder doing the work - he gives you a quote in April to build the house based on the plans submitted to him. He has a QS do up the costings and you agree a price and sign on it. Materials will cost him 10k; Labour costs him 5k and 5k profit for it - cost agreed is 20k. 8 months later you get to start the project, and the QS redoes the costs and finds out that costs have risen - Materials is now 14k and Labour 7k. The cost is now 21k before any profit, so instead of getting a 5k profit from the job its now a 1k loss. Do you expect that he is within reason to renegotiate the contract with you before it starts given the 'extraordinary' time delay?

Given the length of time between the agreement and draw down, did your parents call into the bank at any stage during that window to inform them of the delays in planning, the fact that the building work was still going ahead, ask if there was any issue with the mortgage application or any sort of engagement with the bank in this window?
Given the whole banking world was in crises and the credit squeeze was in the news on a daily basis, it would not be unreasonable to expect your parents to confirm with the bank before the work started given the lengthy delay in the process.


Again, I think you need to review the mortgage agreement in detail, and the banks general T&C's regarding mortgage offers and see what they say, and then decide what to do next.
 
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