Repossessions are halted after lender botches its figures
Thousands of subprime borrowers affected
Subprime lender Start Mortgages has been forced to temporarily stop repossession proceedings after it emerged it has been miscalculating the arrears on accounts.
The lender has now been forced to reduce the level of arrears, and in some cases has put people on lower interest rates.
The issue is understood to affect thousands of borrowers.
A subprime lender active during the boom, Start was bought by Dallas-based vulture fund Lone Star. Also now part of the group are mortgages originally issued by Bank of Scotland (Ireland), Nua Mortgages and Irish Nationwide, sold by the liquidators of Irish Bank Resolution Corporation.
In a note issued to bond investors recently, Lone Star revealed that almost 20pc of its Irish mortgages are in arrears, twice the market average.
It is one of the most active lenders in court repossession hearings.
Many of those who borrowed from Start during the boom were unable to get mortgages from mainstream banks, and were vulnerable when the downturn hit.
Subprime lenders charge higher interest rates because they are often lending to those with poor credit histories.
David Hall said his Irish Mortgage Holders Organisation had received a large number of queries from people who got letters from Start pointing out the error.
One of the letters, seen by this publication, states that the arrears on the account have come down to almost €7,000.
"The methodology we previously used to recalculate your CMS [contractual monthly subscription] included the accumulated arrears on your mortgage account…"
The lender said the arrears had been added to the amount borrowed, inflating the monthly repayment amount. Start said it had now recalculated the arrears figure.
A source close to Start said it had stopped repossession proceedings while the issue was being sorted out.
"It increased the monthly repayment amount to reflect the arrears, but they were still chasing the arrears amount at the same time," said consumer advocate Brendan Burgess.
Mr Hall said Start was now offering some of the people affected a lower mortgage interest rate, and capitalising the arrears for others.
He said the fact that Start had told people their arrears were higher than they were may have frightened some into failing to engage with the lender.
"I am deeply concerned about people, who, faced with alleged large arrears amounts, may have been frightened and not engaged only to now find the amount was excessive," he told the Central Bank.
Start had no comment.