Irish banks paid out more than three quarters of a billion dollars to customers who were overcharged on their mortgages, a scandal that has tarnished the industry for a decade since the financial crisis.

Lenders handed 683 million euros ($768 million) to customers by the end of May. The nation’s central bank said Tuesday in its final report on the so-called tracker scandal — an increase of 36 million euros since February. Banks identified about 40,100 affected accounts, with 98% of those having received redress and compensation. The scale of lenders’ tracker mortgage failings was industry-wide, causing immense distress and damage to affected customers and their families,” said the central bank’s director-general for financial conduct, Derville Rowland. “We continue to pursue lenders through our enforcement investigations.

Tracker mortgage loans were closely tied to the European Central Bank’s key interest rate and came into vogue before the crash that devastated the Irish economy from 2008. Bank funding costs surged as the financial system teetered on the edge of collapse, meaning such loans became money-losers for banks as the ECB slashed interest rates. Many customers were subsequently placed at an incorrect rate.

The central bank ordered banks that offered tracker mortgages to review their loan books in 2015. That review revealed a pattern of overcharging. The regulator handed Permanent TSB Group Holdings Plc a record fine for its role in the scandal in May and has said it’s investigating the nation’s other main lenders. When a person purchases a property in Canada, they will most often take out a mortgage. This means that a purchaser will borrow money, a mortgage loan, and use the property as collateral. The purchaser will contact a Mortgage Broker or Agent who is employed by a Mortgage Brokerage.

A Mortgage Broker or Agent will find a lender willing to lend the mortgage loan to the purchaser. The mortgage loan lender is often an institution such as a bank, credit union, trust company, Caisse Populaire, finance company, an insurance company, or pension fund. In addition, privatee individuals occasionally lend money to borrowers for mortgages. The lender of a mortgage will receive monthly interest payments and keep a lien on the property as security that the loan will be repaid. The borrower will receive the mortgage loan and use the money to purchase the property and receive ownership rights. When the mortgage is paid in full, the lien is removed. If the borrower fails to repay the mortgage, the lender may take possession of the property.

Mortgage payments are blended to include the borrowed (the principal) and the charge for borrowing the money (the interest). How much interest a borrower pays depends on three things: how much is being borrowed, the interest rate on the mortgage, and the amortization period or the length of time the borrower takes to pay back the mortgage. The length of an amortization period depends on how much the borrower can afford to pay each month. The borrower will pay less in interest if the amortization rate is shorter. A typical amortization period lasts 25 years and can be changed when the mortgage is renewed. Most borrowers choose to renew their mortgage every five years.

Eddie Bowers
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