What happens if mortgage lender goes out of business?

the_amazing_raisin

Hi folks,
We're considering switching our mortgage to Ulster Bank and this morning my wife asked me if there's any risk associated with Brexit and UB being a UK owned bank.
I'm hoping for all our sake's that UB Ireland have minimised the risk of Brexit but let's just say for the sake of argument that something happens to cause UB to get into financial difficulty or go out of business. There's not much info on what happens and it certainly doesn't seem to have occurred in Ireland, but I've managed to gather the following info.
The mortgage debt doesn't disappear (unfortunately) so we'd still have to pay our mortgage, the question is to whom

The mortgage would be considered an asset of the bank so either one of the following two scenarios happen:

1. The Irish government buys UB from it's parent company (RBS) and give it enough money to keep operating. Later it would probably be folded into another bank or wound down
2. A private liquidator would be appointed who would then sell the mortgage to another provider

In any case, the mortgage would eventually end up with someone else, so here's questions 1: Can the new provider change the terms & conditions of the mortgage, in particular the interest rate (assuming it's a fixed rate)?

The next things I'm concerned about would be if the situation got so bad at UB that they're unable to process mortgage payments. To me this seems like the real risk because it creates a situations where we'd go into arrears. So question 2 is, if the bank fails to accept a mortgage payment, is there any protection for us?

Question 3 is, if for example we decide to switch the mortgage after UB goes bust, and assuming we can demonstrate we're making our monthly repayments, will we still be able to switch? My guess is that because we're paying our mortgage then that will keep our credit rating good and we shouldn't have any trouble switching (other than potential fees) but does anyone have any other thoughts on this?

Also I know I'm picking on Ulster Bank a lot here but I'm sure the same could be said for any other bank in Ireland

Geuze

RBS did get into difficulty, and the UK state rescued it.

the_amazing_raisin

True, but the UK government might not be in a position to rescue it a second time. Also as UB Ireland is an Irish company, it might not be part of any rescue plan for RBS.

I know it is a pretty extreme scenario, but given that we seem to be in a time when a lot of things are changing that people said would never happen, it'd be good to know the consequences of the worst case scenario

lawred2

cruisey1987 wrote: »

True, but the UK government might not be in a position to rescue it a second time. Also as UB Ireland is an Irish company, it might not be part of any rescue plan for RBS.

I know it is a pretty extreme scenario, but given that we seem to be in a time when a lot of things are changing that people said would never happen, it'd be good to know the consequences of the worst case scenario

mortgages will be bought at cents on the euro most likely

the_amazing_raisin

lawred2 wrote: »

cruisey1987 wrote: »

True, but the UK government might not be in a position to rescue it a second time. Also as UB Ireland is an Irish company, it might not be part of any rescue plan for RBS.

I know it is a pretty extreme scenario, but given that we seem to be in a time when a lot of things are changing that people said would never happen, it'd be good to know the consequences of the worst case scenario

mortgages will be bought at cents on the euro most likely

Mortgages in arrears will be, since they're bad debts and will be snapped up by not so friendly vulture funds and the like. Healthy mortgages would be considered worthwhile assets and would probably be quite valuable to anyone buying them. The hope is that whoever buys the loan can't change the terms and conditions too much, so they can't jack up the interest rate

My worry is that in the short term Ulster Bank (or any other bank) lose the ability to process mortgage payments (because for example they can't pay their staff so no-one turns up to work).

Then you're in a situation where you go into arrears through no fault of your own and it tanks your credit rating, meaning you can't move the mortgage to a healthier bank. And whoever buys the mortgage slaps a penalty rate on you because "you didn't pay your monthly repayments"

I think the important thing then is to ensure that no matter what, you keep up the repayments, and make sure it's documented to ensure your credit rating doesn't get hurt.

3DataModem

cruisey1987 wrote: »

My worry is that in the short term Ulster Bank (or any other bank) lose the ability to process mortgage payments (because for example they can't pay their staff so no-one turns up to work).

Then you're in a situation where you go into arrears through no fault of your own and it tanks your credit rating, meaning you can't move the mortgage to a healthier bank.

Your assumption is that a bank collapses so quickly that they cannot process direct debits, but still manages to notify the credit bureaux about the missed payments they failed to collect? This is absurdly far-fetched.

I think you are worrying about nothing.