"I can't even put into words how bad it was," says Sadie Byrne as she recalls the seemingly endless stream of letters and phone calls she got from Pepper Finance after it took over managing her distressed mortgage more than four years ago.
She had remortgaged her home to to the tune of €115,000 with subprime lender GE Capital Woodchester Home Loans in 2005. It was, she now knows, "the worst possible time to borrow that kind of money".
It didn’t seem like the worst time then and her regular bar work, coupled with her husband William’s steady job in construction meant, servicing the debt was not a problem.
But then William hurt his back. The injury required him to have two discs removed from his lower spine. The procedure helped with the pain but it meant he could no longer work on site.
But with her job, and his social welfare entitlements, the couple could still make ends meet. Then the crash happened and she lost her job too. Suddenly they were both on social welfare.
“I was getting €138 a week and Willie was getting €193 week,” she says. With a combined monthly income of just over €1,400 the couple struggled to keep on top of their monthly mortgage repayments, which amounted to €680.
“We couldn’t make the payments in full. We kept paying what we could – around €500 a month – but even so we started to fall into arrears,” she says. “We were still with Woodchester at that point and we started to get phone calls. It was a trickle at first but they started growing more and more frequent.
“I used to really look forward to the weekends because I figured they would not be able to call me on Saturdays and Sundays. I remember on one day they called 10 times. We were doing all we could to keep on top of things but it was hard.”
In 2012, she says, things got even worse. That was the year Woodchester sold its loan book to Pepper Finance – the Irish arm of Pepper Asset Servicing.
Pepper’s Irish business is made up, essentially, of three strands. It services loans on behalf of other lenders, it is also a niche mortgage lender and it has acquired the loan books of subprime lenders such as Woodchester, although it objects to being described as a vulture fund.
On the last day Woodchester operated a loan book in the Republic – September 27th, 2012 – the loan portfolio was valued at €281.9 million. The portfolio was valued at €173 million when it transferred to Pepper. That seems like a big discount but a more telling figure is the one that put a face value of more than €600 million on its loan book before the financial crash in 2008, when it stopped writing new business.
Effectively, Pepper was able to take on the Woodchester book and pay just 28 per cent of what it was worth before the crash, back when the Byrnes took out their mortgage.
“When we were with Woodchester there was a constant stream of phone calls but they never threatened to throw us out,” Byrne says.
“Things changed with Pepper. They wrote to us repeatedly to say they wanted all the arrears paid off immediately. I think it was around €15,000. They were putting us under so much pressure, they kept saying they wanted us to sell the house. It was just so stressful.
“I just can’t explain how bad it was. I was terrified: I thought we were going to end up on the street. They only offered three solutions: we could give the keys back, we could sell it independently or they could sell it for us.”
In desperation, the Byrnes contacted the Phoenix Project, a Portlaoise-based charity set up to help borrowers in danger of losing their family homes. The charity set up a meeting between it, the Byrnes and Pepper.
“It was absolutely horrendous,” Byrne recalls. “It didn’t matter what Phoenix said, it didn’t matter what we said. They didn’t care if we lived or died, they just wanted their money. They were like robots and kept repeating the same messages over and over and over and over again. They wanted us to pay €900 month to clear the arrears but we could only afford €500. They knew that but they didn’t care.”
Eventually, the rancorous meeting proved too much for her husband and he broke down, his wife says.
While the couple were put through the wringer, the Phoenix Project stood its ground. It contacted the most senior executives in Pepper’s Irish headquarters in Dublin and an arrangement was facilitated.
The deal has seen €44,000 of the couple’s mortgage warehoused for a period of 10 years. They are now paying off about €500 monthly to service an outstanding debt of €103,000.
“Sometimes when we are hungry now, when we don’t have enough food to eat, I wonder if we made the right decision by putting what money we have into our mortgage. It is money we can’t really afford but then I look at rents around here and I hear about homelessness and I just get so scared.”
Byrne is also worried about what might happen in 10 years’ time when the warehoused portion of the debt falls due. “Life passes by in the blink of an eye and I worry about what will happen in the future. I am 57 now and it is hard to find work at my age although I do my best. I am still scared that we will be homeless as we come close our 70s but for now there is nothing I can do about that.”
When contacted for a response, Pepper said the company had “a strong track record of working with customers who are experiencing financial difficulties; and, while we cannot comment on individual cases, we always engage in two-way communication and strive to find a long-term and sustainable solution”.
A spokeswoman also strongly rejected any suggestion that Pepper could be classified as a vulture fund and said reports that it had acquired the Woodchester loan book at a discount of more than 70 per cent were speculative.
When asked what kind of discount had been applied to the transaction, she declined to say, on the grounds that the information was “commercially sensitive”.
Like Sadie Byrne, Phoenix Project chairman John McGrath is also worried about the future, although he not looking 10 years in advance but three months from now. “I believe things are gearing up for a big sweep of repossessions,” he says.
“It took a couple of years for vulture funds to get their feet under the table here. What we are hearing now is that they are not really interested in doing deals. They have seen the value of the assets rise dramatically and want to cash them.”
He expresses fear that they are going to start moving in against principal private residences in a big way.
“In March there could be as many as 3,000 homes listed for repossession. Not all of them are going to be repossessed in the short term but even if only 10 per cent are it means there will be 300 families who have their homes taken from them.”
He believes the Government needs to push the mortgage-to-rent scheme harder. Under it, people in mortgage arrears would lose ownership rights to their home but would continue to live there in the long term and pay rent – either to a State body or a private institution.
“Up to now only 271 mortgage-to-rent deals have been done but think about it: if it cost €150,000 to build a home and only €100,000 to buy a mortgage an allow people stay in their own house, which makes more sense? It is a permanent and practical solution.”