Retired Cork couple face eviction over endowment mortgage shortfall caused by 2008 economic crisis

By Ann O'Loughlin

A retired couple face eviction from their home in a year over a €45,000 shortfall on their endowment mortgage caused by the 2008 economic crisis, the High Court has heard.

Reginald and Teresa Hayes, of Rathpeacon, Mallow Road, Cork, got a IR£70,000 (€88,900) endowment mortgage from AIB in 1991.

Endowment mortgages involved taking out a separate insurance policy whereby it was envisaged the capital sum would be paid off by the value of the policy at the end of mortgage term, which in this case was 20 years and three months.

With such a mortgage, Reginald and Teresa Hayes only had to pay the interest monies due on the loan as it was envisaged the encashment value of the endowment would equal or exceed the IR£70,000 borrowed amount.

However, as Mr Justice Seamus Noonan said when he dismissed an appeal against an order granting AIB Mortgage Bank possession of the Hayes' home, all of that "changed dramatically following the financial crisis that commenced in 2008".

When the Hayes policy matured in 2011, the "inevitable occurred" and the value on maturity was just €55,000 leaving the "unfortunate" couple with a substantial shortfall on the capital sum due on their mortgage, now of the order of €100,000, he said.

File photo.

This was a source of great anxiety and distress to the now retired couple who had faithfully paid the mortgage interest and insurance premia for some 20 years, he said.

Arising out of negotiations between Mr Hayes and an official of the bank's debt recovery section, it was agreed the debt would be settled by paying over the encashment value of the endowment policy along with another €4,000.

The bank later said the official had no authority to do this and sued. It got an order for possession of their home in the Circuit Court which the couple appealed to the High Court.

Mr Justice Noonan said that although the bank belatedly admitted the encashment value plus €4,000 had been agreed over the phone between Mr Hayes and its official, it argued it was not an enforceable agreement.

The judge agreed with this because as a matter of law the agreement was not supported by any valuable consideration for the bank.

There was no benefit accruing to the bank because it was already entitled to the proceeds of the endowment policy and the €4,000 could not, on any view, be seen as other than part payment of a debt. The Hayes had no defence in law to this claim, he said.

It had to be said the bank's conduct in relation to this matter was regrettable and had given rise to a great deal of unnecessary worry for the Hayes, for whom the judge had great sympathy.

In view of that, he was putting a stay on the possession order for 12 months and he also made no order as to legal costs which means both sides have to pay their own costs of both the Circuit and High Court hearings.

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