Failure to keep up payments on unsecured loan

Mr. Happy

Hi,

5 years ago, when in their late fifties my parents managed to secure a loan from a bank for a buy-to-let property. It was interest only for the first 4 years with the total redeemable at the end of an 11 year period. They expected to sell it off at a profit before then but the market turned and they didn't read the fine print so they were left holding the 'baby'. A key point here is that the loan was not secured expect against the rental property.

The interest only period expired about 12 months ago and the payments jumped from €750 to €2,200 per month unfortunately straight after after my dad lost his job. Any redundancy money went into clearing their own personal mortgage (another story). So all they could pay towards the mortgage was the rental income.

Now though the bank is turning up the pressure. They have been asked to provide detail lists of their expenditure and have been told they can live on less! In short the bank want them hand over every bit of income they have by signing a new agreement which just moves the end period back a few years. The bank have failed to even consider that they will be retiring on state pensions from the end of next year. They have nothing except their primary residence.

As stated before they are currently paying the interest on the loan plus a small amount to capital which equates to 100% of the rental income. The estimated gap between the current property realisable value and the outstanding mortgage is approximately €50k. But the bank want more ....... they want it all and are using phone calls to increase the pressure.

The questions I have are:

(1) how difficult would it be for the lending bank to pursue the primary residence given the circumstances? I understand that even though it is not was not used as security it still forms part of their assets and as such is still up for grabs (there is no doubt that this was used to encourage them - a key selling point - to buy originally becuase if they actually knew it was at risk they would never have gone ahead).

(2) So the bank gave an unsecured loan of over 250k to 2 individuals, who were within 7 years of retirement, who had no assets, who did not have the income to support the loan and in fact didn't even own their own home at the time. In light of this fact how likely is the court to grant such things as judgement mortgages against these individuals?

Thanks,

Mr. Happy

MagicSean

Mr. Happy wrote: »

Any redundancy money went into clearing their own personal mortgage (another story).

Mr. Happy wrote: »

who had no assets, who did not have the income to support the loan and in fact didn't even own their own home at the time.

I don't follow

Mr. Happy

Hi,

"Any redundancy money went into clearing their own personal mortgage (another story)." .......

- another story - just highlighting the fact that they did actually have a substantial outstanding mortgage on their primary residence which was the result of another 'skirmish' with the banking community back in the 90's. In other words they have been burned before!

"who had no assets, who did not have the income to support the loan and in fact didn't even own their own home at the time."

..... at the time they got the loan they still owed a significant amount on their own primary mortgage, they wouldn't have been able to meet both sets of repayments (their own mortgage and the post-interest only buy-to-let) and they had no other assets.

Thanks,

Mr. Happy

Kosseegan

Mr. Happy wrote: »

Hi,


(2) So the bank gave an unsecured loan of over 250k to 2 individuals, who were within 7 years of retirement, who had no assets, who did not have the income to support the loan and in fact didn't even own their own home at the time. In light of this fact how likely is the court to grant such things as judgement mortgages against these individuals?

Thanks,

Mr. Happy

Courts don't grant judgement mortgages. Courts grant judgements which can then be registered as judgement mortgages.

Your parents were absolute idiots to obtain a large mortgage so close to retirement, particularly when they had been in a skirmish before.

Mr. Happy

Courts don't grant judgement mortgages. Courts grant judgements which can then be registered as judgement mortgages.

Thank you for the finer detail.

Your parents were absolute idiots to obtain a large mortgage so close to retirement, particularly when they had been in a skirmish before

I am not sure why you actually bothered to reply to my original thread. Your first comment was factually correct but particularly irrelevant in the context of the question being asked. However I presume you had to add it in in order to then make the second self-righteous comment about 'idiots' without being branded a 'moron' yourself.....you moron!

If you don't have something useful to say step away from the keyboard please.

Jimdagym

Mr. Happy wrote: »

(2) So the bank gave an unsecured loan of over 250k to 2 individuals, who were within 7 years of retirement, who had no assets, who did not have the income to support the loan and in fact didn't even own their own home at the time. In light of this fact how likely is the court to grant such things as judgement mortgages against these individuals?

You seem to be angling this as a mitigating factor which might sway favour with your parents from the Judge, but I sincerly doubt this is the case. The bank approved the mortgage that your parents applied for. Responsibility must lie with them.

Finnbar01

Jimdagym wrote: »

You seem to be angling this as a mitigating factor which might sway favour with your parents from the Judge, but I sincerly doubt this is the case. The bank approved the mortgage that your parents applied for. Responsibility must lie with them.

But isn't borrowing and lending a two way street. Isn't their a duty on both parties involved in the transaction? Yes, you could argue that Mr Happy's parents were idiotic in their borrowing but likewise we could say that the bank in question were reckless in their lending.

I am a friend

Mr. Happy wrote: »

have a substantial outstanding mortgage on their primary residence which was the result of another 'skirmish' with the banking community back in the 90's.

People need to take responsibility for their own actions... They borrowed the money and they should repay it. Thats what has the country in the state its in - everyone blames someone else for the mess. Just because your parents are early 60's means diddly - they should live minimum 25+ years and thats the term of a mortgage.

The Bank should get a judgement mortgage against the borrowers assets so if any are sold they get paid back before any proceeds are given to the borrowers.

Stop blaming everyone else for their mess.

I am a friend

Finnbar01 wrote: »

But isn't borrowing and lending a two way street. Isn't their a duty on both parties involved in the transaction? Yes, you could argue that Mr Happy's parents were idiotic in their borrowing but likewise we could say that the bank in question were reckless in their lending.

Thats depends on the information provided to them at the time by his parents... In a lot of cases, the info given was less than honest and people obtained (with the help of accountants / auctioneers etc) more money than they could afford with the view of turning a quick buck before they had to pay it back.

Tough - they got burnt and they should pay back what they owe...

234

Finnbar01 wrote: »

But isn't borrowing and lending a two way street. Isn't their a duty on both parties involved in the transaction? Yes, you could argue that Mr Happy's parents were idiotic in their borrowing but likewise we could say that the bank in question were reckless in their lending.

There is no such thing as reckless lending (legally speaking); Laffoy J (or it might be Dunne) has been clarifying this repeatedly in the High Court recently. The bank has certain duties to discharge when giving mortgages- undue influence, etc- but it not some kind of parent. If the applicant meets the criteria set down by the bank and there was nothing else wrong with the creation of the mortgage then you can't suddenly bring up "reckless lending" as a means of getting you of your obligations.

OP- none of this is personal to your case, I'm not attacking your parents or their decisions.

mstq

Mr. Happy

If the money bank wants is 100% of money they get from renting the other place and they have a home to live in, plus they are retiring and will receive money from government, aren't they in good situation?

There is a piece of law that could be used to prevent bank seeking to cease the main house, but I'm not going to tell you what it is, just on principle that I don't really trust you with that question [see p.1]

Also, social welfare is unfortunately quite extensive in this country - worst case scenario, your parents would receive a "social house".

If I may join the topic...

My parents have mortgage on a house and security for mortgage was the property bought. We don't want to live there anymore [bad neighbours]. Can we just tell the bank to take the house without being subjected to having pay the rest of the money [it was being paid over the years, but there would be difference between outstanding amount / market value].

sincerely
mstq

Finnbar01

234 wrote: »

There is no such thing as reckless lending (legally speaking); Laffoy J (or it might be Dunne) has been clarifying this repeatedly in the High Court recently. The bank has certain duties to discharge when giving mortgages- undue influence, etc- but it not some kind of parent. If the applicant meets the criteria set down by the bank and there was nothing else wrong with the creation of the mortgage then you can't suddenly bring up "reckless lending" as a means of getting you of your obligations.

OP- none of this is personal to your case, I'm not attacking your parents or their decisions.

This is a load of bull****e. The banks actively conspired to give out as much money as possible. I'm not saying that those who borrowed are not at fault.. they are.. but the banks have to accept some responsibility as well.

mstq

Finnbar01 wrote: »

This is a load of bull****e. The banks actively conspired to give out as much money as possible. I'm not saying that those who borrowed are not at fault.. they are.. but the banks have to accept some responsibility as well.

They are losing money by borrowing some to people who then don't paid it back without having assets to cease

chopser

Finnbar01 wrote: »

This is a load of bull****e. The banks actively conspired to give out as much money as possible. I'm not saying that those who borrowed are not at fault.. they are.. but the banks have to accept some responsibility as well.

Banks are a business, they are out to make money. You and me and everyone else has free will to allow is the option of not taking the money they are offering.

It's a much easier option to not apply and even refuse to accept the "free" money than to complain after that you were somehow forced into taking it.

234

Finnbar01 wrote: »

This is a load of bull****e. The banks actively conspired to give out as much money as possible. I'm not saying that those who borrowed are not at fault.. they are.. but the banks have to accept some responsibility as well.

I don't think you understand; I was not discussing the morality of the banks' lending policies, I was clarifying that "reckless lending" has no legal status and you can bring it up in court if you like but it won't make a bit of difference.

glic71rods46t0

Mr. Happy wrote: »

They expected to sell it off at a profit before then but the market turned and they didn't read the fine print so they were left holding the 'baby'.

What fine print are you talking about? You seem to be suggesting that your parents signed up for something that forced them into their current situation and left them "holding the baby". It sounds like they signed a standard buy to let mortgage with all the risks and rewards that owning property entails. It would seem to be quite unreasonable to expect to get all the potential rewards without any risk - do you hold a different view?

Mr. Happy wrote: »

Now though the bank is turning up the pressure. They have been asked to provide detail lists of their expenditure and have been told they can live on less! In short the bank want them hand over every bit of income they have by signing a new agreement which just moves the end period back a few years. The bank have failed to even consider that they will be retiring on state pensions from the end of next year. They have nothing except their primary residence.

You seem to be contradicting yourself.. First you say your parents have had to list their expenditure and live on less, then you suggest that the bank expects them to hand over all their income - clearly the bank are making allowances for the basic costs of living (food, heat etc). I dont think it is unreasonable for the bank to ensure your parents are paying over as much of their income as possible to service their mortgage while ensuring they have enough for the basics. Your parents are, after all, in default of their contractual obligations.

Your parents have an unencumbered primary residence. The obvious solution is to sell the investment property and make up the negative equity by taking out a "lifetime loan" on their primary residence. This allows them the comfort and security of their own home without having to make monthly payments - the loan would eventually be paid off from the sale of the primary residence after your parents pass away.

The only problem is that this solution doesnt involve having your cake and eating it too

Mr. Happy wrote: »

(1) how difficult would it be for the lending bank to pursue the primary residence given the circumstances? I understand that even though it is not was not used as security it still forms part of their assets and as such is still up for grabs (there is no doubt that this was used to encourage them - a key selling point - to buy originally becuase if they actually knew it was at risk they would never have gone ahead).

(2) So the bank gave an unsecured loan of over 250k to 2 individuals, who were within 7 years of retirement, who had no assets, who did not have the income to support the loan and in fact didn't even own their own home at the time. In light of this fact how likely is the court to grant such things as judgement mortgages against these individuals?

1. Not too difficult at all. As another poster said, the bank gets a judgement and registers a judgement mortgage on your parents house.
You seem to infer that your parents were somehow tricked into buying the investment property. I take it that the bank did not sell the property to your parents? They just provided the finance, right? I assume your parents used a solicitor when signing the mortgage contract - maybe the solicitor didnt advise them properly regarding what they were signing up for? Or maybe s/he did explain the contract but your parents didnt listen?

2. The bank gave a secured loan to your parents. The loan was secured on the new property and the bank also had the security of knowing that your parents had a primary residence with only a small mortgage. Describing the loan as unsecured is misleading - its not like it was a personal loan!
The courts are taking a pretty dim view of borrowers coming in pleading that they thought they were signing up for all the rewards and none of the risk of property ownership now that things have gone bad.
Get your parents to talk with BOI lifetime loans or seniors money.