Can bank hold me to crisis-era mortgage extension without signed paperwork?

Q&A: Dominic Coyle answers your personal finance questions

‘Do I have any recourse to retroactively challenge the lender’s manner in which they forced me to extend my mortgage term?’ File photograph: iStock

‘Do I have any recourse to retroactively challenge the lender’s manner in which they forced me to extend my mortgage term?’ File photograph: iStock

 

My business suffered from the recession that hit us all more than 10 years ago and, as a consequence, I fell into arrears with my Irish mortgage lender. There were several calls from their credit department to discuss the arrears. On one call, they asked me would I clear the arrears by extending the term. I said yes but, in hindsight, I deeply regret the decision. I didn’t realise the additional cost this would add to my loan.

It was a terrible time for me with a dwindling business and fierce tension in the house.

The thing is my wife is a co-signatory on the mortgage and she had no say in the decision that was made. There was nothing in writing – only that phone call to me.

I can’t believe this was a fair approach to take by the lender at the time. There should have been, at the very least, a document to sign by both of us explaining the consequences of a mortgage term extension.

Do I have any recourse to retroactively challenge the lender’s manner in which they forced me to extend my mortgage term? I am 60 now with six years left on my mortgage and would really like to shorten this term now.

Mr JP, email

Your story is illustrative of the horrific pressure so many people found themselves under after the financial crash and during the subsequent recession. The banks were clearly under huge pressure and so too were many of the people who found themselves owing them money.

I know several people who had quite horrific experiences with banks that proved singularly intransigent. But I have to say a feature of all the cases I became aware of was the banks insisting they had water-tight signed documents for some of the crazy arrangements they persuaded people to agree to.

This in itself makes your case worthy of pursuit, at least through bank channels.

There is no dispute, as I understand it, that you were offered a way out of your arrears issue by extending your mortgage and you do not dispute that you accepted this offer verbally on the phone.

I would assume the bank has a copy of this recording. And I further assume that they would argue this is a binding contract.

However, I am wary given that no confirmatory paperwork was ever signed.

The bank may argue that it is inevitable that a mortgage extension would add to the overall sum due on the loan – and they’d be correct. But, in the stressed circumstances of the time, with a business threatening to go under, personal finances in disarray and disharmony at home, the issue is that people were not necessarily thinking straight.

That’s why a written contract explaining all these issues would be standard procedure for the lender and would make life much simpler for the bank now.

And then there is the issue of two people being signatories to the mortgage but only one being consulted on a change in conditions that had a fundamental bearing on the cost of credit. If the bank required both your signatures on the original loan, as they did, then it was incumbent on them to secure both signatures to any alteration of the arrangement.

On the flip side, you were desperate at the time and agreed to the new terms. In the circumstances of the time, would you really have balked at signing a written contract that got you out of the tight spot you were in on the mortgage over extra payments that would not fall due for a decade?

I cannot guarantee you will win any challenge but, given the lack of paperwork and the exclusion of a party to the loan, your wife, from the agreement, I see no reason not to pursue it even if only to try to negotiate a settlement. Your lender will have a complaints procedure on their website.

That aside, you don’t clarify if this loan has been at a fixed rate since that rather odd renegotiation. If not, there is nothing stopping you paying off more that is due monthly, thereby reducing the term of the loan and minimising the additional money you are having to repay the bank.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into

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