Repossession Aftermath

outforlunch

Hi all,

I was wondering, once a bank repossesses a property due to mortgage default and sells that property, are the banks actively pursuing the defaulter for the amount arising from the shortfall between the sum they sold the property for, and the amount owed under the original mortgage agreement?
I reckon I'm facing negative equity to the tune of approximately €70 grand at the moment. I realise the economic realities here and the contract commitments but was hoping maybe the bank after recouping a large amount of the sum owed would be satisfied to cut their losses and maybe leave it at that, or maybe I'm dreaming?
If there are people out there with court experience of these matters I would appreciate an insight.

Thanks!

ABajaninCork

I'm afraid the banks can and will chase the defaulter for any shortfall...

This happened to a friend of mine in the UK. He gave back the keys to his flat, and buggered off to Japan for a couple of years. He came back to the UK, and the bank caught up with him a couple of years after he returned.

In the UK, the banks can charge compound interest on any shortfall if you don't arrange to pay. I'm not sure what the case would be here, given the fact that more people than not are in negative equity, and more people are either in huge arrears or have had their homes repossessed by the banks.

Hopefully a solution can be found to the problem.

johnnyskeleton

Banks will sometimes do a deal on negative equity such as the following:

1) house sells for 200k, mortgage 300k person is stoney broke so they write off the remaining 100k;
2) house sells for 200k, mortgage 300k, person's parents give them 20 which the bank accepts in full and final settlement;
3) house sells for 200k, mortgage 300k, person has a job so they ask them to repay 30k of the 100k over the next 5 years;
4) house sells for 200k, mortgage 300k, the remainder is outstanding to be paid back whenever the person has funds.

Whether they will offer any of the above depends on the lender and how you approach them. They will be more inclined to do business with someone who is honest and causes them the least amount of hassle. However, you won't know unless you ask the bank.

If you are in such a situation, speak to a solicitor who might be able to negotiate on your behalf (for a fee, of course).

FreudianSlippers

outforlunch wrote: »

Hi all,

I was wondering, once a bank repossesses a property due to mortgage default and sells that property, are the banks actively pursuing the defaulter for the amount arising from the shortfall between the sum they sold the property for, and the amount owed under the original mortgage agreement?
I reckon I'm facing negative equity to the tune of approximately €70 grand at the moment. I realise the economic realities here and the contract commitments but was hoping maybe the bank after recouping a large amount of the sum owed would be satisfied to cut their losses and maybe leave it at that, or maybe I'm dreaming?
If there are people out there with court experience of these matters I would appreciate an insight.

Thanks!

Are you actively looking for the house to be repossessed?

Just wondering because as of mid-January, there are new rules and regulations regarding outstanding debts on mortgages. I haven't read it yet, but the Master of the High Court was talking the other day about it and he said that there are pretty strict rules in place now regarding the lender coming up with a payment plan with the borrower and you can keep going up the line to the ombudsman if you're not happy with the plan.

Of course this is moot if you want the place repossessed... but in fairness, €70,000 in negative equity may not be too bad depending on the value of the home and if you can afford repayments.

Tom Young

Ah yes, you've got to love statutory appeals from decisions of the FS Ombudsman.

"Dear Lending Institution,

Mary and Joe Bloggs are nice. I hereby direct you to give them back all the penalty interest that was subject to contract. I also direct a ridiculously low rate, such as the lock in to the fixed tracker be applied retrospectively, etc.

Thanks,

FSO XX."

The problem with that is a thing known as the flood gates approach.

Tom

FreudianSlippers

Tom Young wrote: »

Ah yes, you've got to love statutory appeals from decisions of the FS Ombudsman.

"Dear Lending Institution,

Mary and Joe Bloggs are nice. I hereby direct you to give them back all the penalty interest that was subject to contract. I also direct a ridiculously low rate, such as the lock in to the fixed tracker be applied retrospectively, etc.

Thanks,

FSO XX."

The problem with that is a thing known as the flood gates approach.

Tom

Oh I totally agree.

I think from the sounds of it, the important thing is that the lender now has to come up with a workable plan and present it to the lender... so the banks can't come in now and say "well, the borrower hasn't approached us with a good plan yet... we want the repossession."

IMO it's delaying tactics overall preventing repossession without legislating that direction. Whether or not this is agreeable is debatable, but the point (and of importance to the OP) there is hope to avoid repossession.

johnnyskeleton

FreudianSlippers wrote: »

I think from the sounds of it, the important thing is that the lender now has to come up with a workable plan and present it to the lender... so the banks can't come in now and say "well, the borrower hasn't approached us with a good plan yet... we want the repossession."

It is completely unworkable for a bank to do so. Unless the borrower contacts the bank or is open with them, all the bank can do is say "you have contracted with us to pay €X amount please pay €X per month." Now, if the borrower comes to them and says that one of them has lost their job, the other has a paycut and they can only afford to pay €Y per month until next May, when they might get a new job, then the lender can deal with that.

Likewise, if two people have a massive mortgage, no jobs and no immediate prospect of jobs, then the bank is doing them no favours by adopting an "extend and pretend" approach. So in that scenario, it is pointless for the bank to make the offer, because the offer would be "OK, you pay us €20 per week out of your social welfare and we will ignore the other €1,500 p.m. that you owe us for as long as it takes for you to get back on your feet".

Sometimes people just lose their houses, that's the reality of the situation.

FreudianSlippers wrote: »

IMO it's delaying tactics overall preventing repossession without legislating that direction. Whether or not this is agreeable is debatable, but the point (and of importance to the OP) there is hope to avoid repossession.

From the sounds of it, the OP is not concerned with expensively avoiding repossession, but rather trying to minimise his losses. IMO the OP is taking a very sensible approach to the situation. Sure, he may lose a house that he never really owned anyway, but if he negotiates his way out of debt without too much of a black mark against him, he can rent for a few years, get rid of much stress, and perhaps in a few years time buy a simliar or better house for less than he currently owes.

outforlunch

johnnyskeleton wrote: »

It is completely unworkable for a bank to do so. Unless the borrower contacts the bank or is open with them, all the bank can do is say "you have contracted with us to pay €X amount please pay €X per month." Now, if the borrower comes to them and says that one of them has lost their job, the other has a paycut and they can only afford to pay €Y per month until next May, when they might get a new job, then the lender can deal with that.

Likewise, if two people have a massive mortgage, no jobs and no immediate prospect of jobs, then the bank is doing them no favours by adopting an "extend and pretend" approach. So in that scenario, it is pointless for the bank to make the offer, because the offer would be "OK, you pay us €20 per week out of your social welfare and we will ignore the other €1,500 p.m. that you owe us for as long as it takes for you to get back on your feet".

Sometimes people just lose their houses, that's the reality of the situation.



From the sounds of it, the OP is not concerned with expensively avoiding repossession, but rather trying to minimise his losses. IMO the OP is taking a very sensible approach to the situation. Sure, he may lose a house that he never really owned anyway, but if he negotiates his way out of debt without too much of a black mark against him, he can rent for a few years, get rid of much stress, and perhaps in a few years time buy a simliar or better house for less than he currently owes.

Hi all,

Thanks for your replies. I think Johnny Skeleton has summed up how I feel about things at the moment and my motivation. To elaborate on my circumstances I have engaged with the bank from day one and to their credit they have accomodated me with a renegotiated payment plan.

However, to cut a long story short I will shortly be unable to meet the repayments after two years under the new agreement and default is on the horizon I feel.
So I'm I should surrender the property and seek to come to an arrangement with the bank where I agree to repay a sum after the sale of the property that I can afford, and so not be seen to be completely walking away from my side of the original bargain as after all I should have realised the full consequences of it.

Thanks.

johnnyskeleton

outforlunch wrote: »

However, to cut a long story short I will shortly be unable to meet the repayments after two years under the new agreement and default is on the horizon I feel.
So I'm I should surrender the property and seek to come to an arrangement with the bank where I agree to repay a sum after the sale of the property that I can afford, and so not be seen to be completely walking away from my side of the original bargain as after all I should have realised the full consequences of it.

Unfortunately, no one on this forum can advise you of that. My advice is to contact your local FLAC:

http://www.flac.ie/gethelp/legaladvicecentres/bycounty.html

They can go through the specifics with you and might even help you draft a letter of proposed terms. Alternatively, speak to MABS but as far as I'm aware, MABS are only interested in trying to arrange moratoria or interest only periods for people struggling with debt.

outforlunch

Thanks!