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Tuesday 16 July 2019

Fund forced to halt repossessions after it emerges repayments incorrectly calculated

Photo: Thinkstock
Photo: Thinkstock

Charlie Weston Personal Finance Editor

A FUND that manages mortgages here has suspended repossession cases after it discovered repayments were being incorrectly calculated.

Mars Capital said the issue affects people who originally took out mortgages with the now defunct Irish Nationwide Building Society and are in arrears.

Mars, a so-called vulture fund, services the loans on behalf of US debt fund Oaktree.

The mortgages affected will now be recalculated in a move which is likely to lower the monthly repayments and reduce the overall arrears balances. But it is understood refunds will not be issued.

Letters are being sent to customers, with the issue understood to affect hundreds of mortgage holders.

In a statement, Mars Capital insisted customers had not been overcharged.

Mars was one of the biggest foreign buyers of Irish mortgages after the financial crisis, and also services debts.

The company said the issue emerged when loans moved to it from another mortgage servicing firm.

Mars said the originator of the loans, Irish Nationwide, had been adding the arrears to the monthly repayments, a move that inflates what is owed each month. This is known as automatic capitalisation of arrears, or “auto capping”. All the loans Mars services are now being reveiwed.

Mars said: “Whilst we have undertaking this review, we have taken the decision not to enter into any new litigation for customers affected by this matter, nor to progress litigation where it has already been commenced.”

The Central Bank said it had been told about changes to the way Mars monthly loan payments are calculated which it said has impacted a small number of lenders.

“We can confirm that the Central Bank has been engaging with Mars Capital Finance Ireland DAC in relation to this matter. Customers who have queries in relation to this matter should contact the firm directly,” the regulator said.

Central Bank director of consumer protection Gráinne McEvoy told the Oireachtas Finance Committee last June that a review by the regulator into automatic arrears capitalisation had found that the practice was “not widespread in Ireland”.

Some 5,400 cases were identified at that point.

“We do not have concerns that borrowers were overcharged, rather we are not satisfied that borrowers’ arrears were presented in a fully transparent manner,” Ms McEvoy wrote in a letter to the committee members.

“Where the practice was identified, we intervened to ensure that the practice ceased,” she wrote.

Lender Start Mortgages was forced to temporarily stop repossession proceedings two years ago after it emerged it has been miscalculating the arrears on accounts.

The lender was forced to reduce the level of arrears, and in some cases it put people on lower interest rates. The issue is understood to have affected thousands of borrowers.

A sub-prime lender active during the boom, Start was bought by Dallas-based vulture fund Lone Star.

Another fund was last year forced to admit it was incorrectly calculating arrears levels on mortgage accounts. 

Tanager had to withdraw legal proceedings against a number of property owners in arrears.

Tanager, a US fund that bought Bank of Scotland mortgages, has been recalculating how it works out arrears on accounts. Owned by Apollo in the US, Tanager snapped up more than 2,000 distressed home loans from Bank of Scotland Ireland in 2010.

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