Mortgage game changer ruling

Hope for vulture fund mortgage prisoners as lender forced to offer couple lower fixed rate

Charlie Weston

A leading mortgage servicer acting on behalf of vulture funds has been forced by a court to give a cheap long-term fixed rate to a borrower couple.

The court decision has huge implications for the thousands of “mortgage prisoners” whose loans were sold to vulture funds and are managed for the funds by credit servicer firms.

Tullamore Circuit Court approved a formal personal insolvency arrangement that will force mortgage servicer Pepper to give a borrower couple a rate of 2.5pc, fixed for 25 years. Such a low rate, over such a long term, is not available in the market.

The scandal of vulture funds treatment of mortgage holders

Pepper had told the court it does not offer fixed rates, a situation that means thousands of its clients are stuck on tracker and variable rates, with some as high as 8pc and 9pc.

Insolvency experts said the court decision meant that the refusal of vulture funds and mortgage servicers to offer fixed rates to “mortgage prisoners” would now backfire on them.

This was because thousands of trapped borrowers, who are being hit hard by rocketing rates, were now likely to seek personal insolvency arrangements (PIA) to force funds to give them similar low fixed rates over long periods.

Pepper Finance, which manages 60,000 mortgages sold to vultures by the banks, had claimed in the case last Friday that it would be “fundamentally unfair” for the court to compel it to offer the fixed rate.

It had rejected a PIA for a Laois couple prepared by personal insolvency practitioner (PIP) John Lupton. But the proposed PIA was appealed to the court to overrule the lender veto.

Pepper insisted it does not offer fixed rates to the homeowners whose mortgages it services. Barrister Keith Farry BL, who represented the PIP and the borrowers, persuaded Circuit Court Judge Mary O’Malley Costello to approve the PIA with the low fixed rate over 25 years.

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