Is it normal for a bank to withdraw mortgage approval?

Ellie32

Last February I got mortgage approval. I had a relative going guarantor on the mortgage with me.

The approval was for 12 months (I am 100% certain of this).

On foot of approval I placed a 10,000 euro non-refundable deposit on an apartment, I signed contracts to buy the apartment and my current home is "Sale Agreed".

Last week I began the process of trying to start drawing down the funds as my new apartment is nearly ready.

Today the bank got back to me and told me that they were withdrawing their mortgage offer. They initially told my broker that it was because my
guarantor had defaulted on a loan a few times and had three months arrears, all since last Christmas.

I asked my guarantor about this and he stated unequivocally that this was 100% not true, which I believe as I have a copy of his credit report and it is not on that. He is so angry about it that he is planning on taking legal action over it.

As a result of this I tried contacting the bank directly. I got talking to the "manager" who had claimed to my broker that the guarantor had defaulted. When confronted with this, and the fact that neither of our credit reports show anything untoward since February, he backed down a bit but then claimed that he could only talk to my broker and not me.

I asked him what had changed since February that had made them withdraw their offer which is meant to last for a year. He couldn't tell me. I explained that as a result of their offer I had paid 10,000 euro signed contracts and have my own place "Sale Agreed" and that I will be seeking legal recourse for them withdrawing like this. Again he didn't say too much bar he will be in touch with my broker.

At the moment I have lost ten grand, I'm at the mercy of the builders of my new apartmen who could sue me for a lot more than ten grand and I have racked up thousands more in legal and estate agent fees as a result of the bank backing out for absolutely no reason.

Do banks often withdraw mortgage offers like this? Has anything similar happened to anyone else? Do I have any recourse? Any advice on what to do would be appreciated.

RAFC

Not sure if this will ease your mind - well I know it probably won't. My friend is in a similar position, the bank only approves mortgage for six months, so 2 years after putting a deposit on a house NOT YET ready, she has had to re-apply for her mortgage every six months. Her problem now is the house value has dropped while the price has stayed the same BUT the mortgage will only be approved for todays house value which leaves her up the creek 30k short.

The banks are calling all the shots here, and I really don't envy your situation. Best of luck though and I hope it all works out for you

kmick

Go to another bank?

loyatemu

you have the mortgage approval in writing, where it states that its valid for 12 months?

if so, I think you're looking at suing the bank and\or the broker to recoup your losses. What does your solicitor have to say about it? They must be able to give you some sort of useful advice...

The_Conductor

Its called "approval in principle" and is worded in such a way to allow sufficient legal wriggle room.
While the OP's guarantor may have a case for defamation of character concerning an allegation of unpaid or defaulted loans- the OP herself unfortunately has very little comeback.

ntlbell

Just out of curiosity

Has the property you put the deposit down on lost much in value since?

astrofool

The contract signed with the developer should be subject to finance, I don't understand how it got to a situation where people could sign away their life subject to finance that may or may not be available when the apartment was completed.

The_Conductor

astrofool wrote: »

The contract signed with the developer should be subject to finance, I don't understand how it got to a situation where people could sign away their life subject to finance that may or may not be available when the apartment was completed.

Irrational euphoria on the part of people when property transactions are being signed. They don't actually read the documentation- just sign the dotted line. It suits solicitors/banks/developers for people to do this. Caveat emptor.....

eth0_

RAFC wrote: »

2 years after putting a deposit on a house NOT YET ready, she has had to re-apply for her mortgage every six months.

TWO YEARS and the house isn't ready?? Your friend should demand her deposit back and take legal action if the builder refuses. That is just incredible.

mrgaa1

Agreed. Also if the banks are refusing to give out mortgages and you believe you are bona fide then contact Mr Brian Lenihan
Department of Finance,
Government Buildings,
Upper Merrion Street,
Dublin 2,
Ireland.
Telephone: 353 - 1 - 6767571
LoCall: 1890 66 10 10
Fax: 353 - 1 - 6789936
Email: webmaster@finance.irlgov.ie
Telex: 30357

This is public information - taken from http://www.finance.gov.ie/ViewDoc.asp?fn=/contact/contact.htm&CatID=38&m=m
Banks need to lend so lets force the hand that feeds them. And I suppose as we are all shareholders in these banks we have the right to ask questions

what2do

Its unfortunate for people applying for mortgages but times have changed. Mortgage approval was relatively easy to obtain up to recent times however with the current increase in defaults banks are having to tighten up their criteria and actually look at figures carefully before granting them. People who haven't drawn down their mortgages are being affected by this.

Jo King

Ellie32 wrote: »

Do banks often withdraw mortgage offers like this? Has anything similar happened to anyone else? Do I have any recourse? Any advice on what to do would be appreciated.

You may have recourse if you relied on the banks written approval. They may be estopped from failing to advance the loan. Your guarantor has a cause of action in defamation. A good solicitor would write to the bank on behalf of both of you threatening brimstone and fire. The bank may not wish to have the publicity of a court case and may change their minds. You should also complain to the banking ombudsman.

The_Conductor

Jo King wrote: »

You may have recourse if you relied on the banks written approval. They may be estopped from failing to advance the loan. Your guarantor has a cause of action in defamation. A good solicitor would write to the bank on behalf of both of you threatening brimstone and fire. The bank may not wish to have the publicity of a court case and may change their minds. You should also complain to the banking ombudsman.

You have no idea what the "approval in principle" actually states. By going down the legal route you are just as likely to incur additional costs on your own part, without anything to show for it. Over 40 properties were reposessed last week- including 8 by BOI and 6 by AIB- they are not afraid to go have the publicity of going to court. It all boils down to the wording of the "approval in principle" document.

Jo King

smccarrick wrote: »

You have no idea what the "approval in principle" actually states. By going down the legal route you are just as likely to incur additional costs on your own part, without anything to show for it. Over 40 properties were reposessed last week- including 8 by BOI and 6 by AIB- they are not afraid to go have the publicity of going to court. It all boils down to the wording of the "approval in principle" document.

There is no mention of "approval in principle" by the o/p. A consultation with a solicitor may cost some money but may be a good investment rather than be financially destroyed by a specific performance suit from the builder. I would not be inclined to use the solicitor to whom the contract was sent either. That solicitor should have checked the loan offer before allowing the o/p to sign an unconditional contract. The fact that the bank have told outrageous lies in an attempt to avoid giving the loan makes it seem more likely that they are indeed bound by the written loan offer. The publicity of a defamation action coupled with a breach of contract action which shows that the banks word is not to be trusted is in an entirely different league to recovering possession of houses from loan defaulters.