Maraval couple sues bank over increased mortgage rates

The content originally appeared on: Trinidad and Tobago Newsday

Justice Joan Charles –

A MARAVAL couple has taken a local bank to court for increasing their mortgage interest rate.

The couple’s attorneys have asked that their names not be published. According to their claim, the Maraval couple entered a mortgage agreement with First Citizens Bank in January 2017 for $1.9 million to finance the purchase of a home at a private development in Maraval.

The terms of the mortgage were that the couple would repay the sum over 24 years at an annual interest rate of five per cent.

“The crux of the claimants’ claim concerns the defendant’s decision to vary the interest rate of the said agreement from five per cent to six per cent…

“The claimants will contend the defendant exercised its contractual discretion in an arbitrary, and/or capricious and/or irrational manner without justification and/or in breach of the mortgage agreement,” the statement of case said.

The matter came up for hearing on Thursday before Justice Joan Charles, who gave directions for disclosure. She adjourned the matter to May when she will decide on an application filed by the couple’s attorneys on a preliminary issue.

The statement of case said the couple paid the increased interest rate from January 2018 to December 2020.

However, the court documents said they did not agree to the increased annual rate and were initially unaware of it but paid the new higher sum to avoid incurring debts or penalties.

They are now seeing repayment of the increased sums.

The couple approached another bank for a mortgage at 4.5 per cent to pay off the debt owed to FCB.

They asked for a settlement letter and were told the figure on the agreement was $1.8 million. In April 2021, they paid off the mortgage with FCB but later wrote to the bank asking about the increased interest rate, why the penalty interest applied despite the three-month notice and why the pay-off figure was overstated by $1,508.36.

The bank informed them the increase was a result of the mortgage market reference rate (MMRR) re-pricing of existing mortgages, which is done annually. They were also told the increase was a result of the risk premium of their creditworthiness.

The couple’s attorneys wrote the bank asking for justification for the increase, noting that it appeared the assessment was general and not individual, which was arbitrary.

The bank also said while the couple’s risk rating was not elevated, the operating cost for the bank was increased for that period, which had an impact on their interest rate.

The attorneys provided a copy of the MMRR and contended that there was no increase for that period as it had remained unchanged at three per cent from March 2016 to September 2021. It also cited a notice by the Central Bank suspending an increase in interest rates during the covid19 pandemic.

The breach of contract lawsuit quantified their losses at $78,744.49, including the excess they paid and penalties because of the increased rate.

However, in its defence, the bank said the residential real estate mortgage guideline of the Central Bank in 2017 gave all commercial banks the option of re-pricing residential mortgages to align with the MMRR.

It also said the terms of the couple’s mortgage agreement also applied to interest rates, which was a viable rate subject to re-pricing, so it was permitted to vary the annual interest rate.

“The defendant, at all material times, exercised its discretion in accordance with the guideline and/or the mortgage loan agreement and therefore did not act arbitrarily, capriciously or irrationally and/or without justification or good faith as alleged.”

The bank also said the rate was increased from February 1, 2018, and the couple were told of the Central Bank’s advisory in 2012 that existing residential mortgages must be re-priced using the MMRR plus a spread, which is the difference between the annual interest rate and the MMRR and included a risk premium (or assessment) of their creditworthiness. The bank also said this was explained to the couple in November 2017, and all its mortgage customers who had mortgages ascribed to the MMRR regime would have had their mortgages re-priced annually based on the three-part risk rating profile.

The bank further contended the covid19 relief measures had no bearing on the couple’s lawsuit since the increase took effect in February 2018, long before the pandemic.

The couple is represented by attorneys Dinesh Rambally, Kiel Taklalsingh, Rajiv Sochan and Kavita Moonasar. The bank is represented by attorneys Andrea Orie and Saajida Mohamdally.