Guarantor deceased

godtabh

If a loan is secured with the help of a guarantor what happens if the guarantor passes away.

Assuming the loan is up to date I assume there is no issues.

What happens if the loan goes into default?

I'm asking because it appears that a lot of people have 40 year loan terms when bought during the boom but those 40 year terms could easily last longer than the guarantor.

dermot_sheehan

Guarantor's estate can only be pursued for two years from his death after which it is statute barred.

godtabh

what does that mean?

seamus

If there is no claim against the guarantor's estate for two years after their death then their guarantor-ship effectively expires and the bank has no-one else they can pursue if the mortgageholder defaults.

The whole guarantor concept was something cooked up as a way to give people more money without having to justify it properly.
In reality, extracting funds from a guarantor will always be difficult because the bank would have to chase the guarantor's family home to secure their debt.

godtabh

seamus wrote: »

If there is no claim against the guarantor's estate for two years after their death then their guarantor-ship effectively expires and the bank has no-one else they can pursue if the mortgageholder defaults.

The whole guarantor concept was something cooked up as a way to give people more money without having to justify it properly.
In reality, extracting funds from a guarantor will always be difficult because the bank would have to chase the guarantor's family home to secure their debt.

so what happens in that eventuality? Joe Bloggs stops paying his loan repayments (house, car what ever) for what ever reason (cant/wont pay) which was guaranteed by a guarantor. Can he be touched? Long term could this be a problem? Is it a problem now?

dermot_sheehan

If guarantor is dead more then two years the lender has no recourse against the guarantor but of course can sue Joe Bloggs.


The reason is to allow the guarantor's estate to be distributed to his heirs, if there was a risk of litigation against it indefinitely, it could never be distributed.

seamus

Where the guarantor is still alive, he is effectively still liable for the entire lifetime of the mortgage, unless he can convince the bank to remove him as guarantor on the loan.

From what I understand though, the guarantor is actually quite insulated. The bank would need to foreclose on the original asset and have the loan declared in default before they could chase the guarantor for it.

Though the guarantor would then become obligated to the debt, it would be unsecured and the bank would likely be unable to get any kind of judgement against the guarantor's PPR, and would have to make do with whatever the guarantor is capable of paying.

Omphin

If the mortgage protection insurance is not assigned to the bank, into which the guarantor was paying before becoming deceased. Then does the payment of the insurance go to the estate? or would it go to paying off the mortgage?

NipNip

A guarantor scenario (not deceased) is where I first came across the now dreaded term 'jointly and severally'.. Under law, they may aswell have co-signed for the loan if it goes into a situation of default. If a guarantor was required, presumably the signatory on the loan was not in a strong enough financial position to go it alone. The guarantor will be pursued in default. If they are dead, then it is an interesting question. Essentially the bank no longer has a guarantor.
Banks love guarantors! Though clearly not deceased guarantors!

Omphin

So suppose my guarantor died, the mortgage protection insurance would by default go to the estate if no will was made.
In that case would the bank try to get hold of the payment or can they if it was never "assigned" to them?

Fred Swanson

This post has been deleted.

drunkmonkey

Sorry know it's an old thread but your all still around, think the bank are trying to pull a fast one, wondering if any of you have advice. I'm not happy with what there trying to do.

First off there was no payment ever missed or delayed, paid by dd with no issues by me from my account.

Took out a loan 10yrs ago with my dad as guarantor and they used the deeds of one of his properties as collateral. He passed away last year, now my mums solicitor is trying to get the hold over the deeds released and get them back.

There's 2 years left on the loan and I'm in good standing with the bank and healthy balances.
The bank are refusing to release the property they want me to take out a new loan to clear the balance at nearly triple the current interest rate I'm paying.
Can they actually do this, wouldn't have a problem if the rate was the same but really feel there taking advantage in the circumstances on a performing loan.
I've a lot more sitting on deposit with them than is owed on the loan.

My name isn't on the deeds they were 100% my dad's.

seamus

I think they probably can do this. At the end of the day the deeds form part of the collateral of the loan. If you're trying to retrieve the deeds, then in effect you are attempting to change the terms of the loan. And you can't do that without the bank agreeing.

Lumping on a ridiculous rate is purely because the loan amount is smaller; smaller loan, bigger rate.

I'd be inclined to get pushy about it. Make an appointment with the manager of your branch, and tell him that you're happy to take out a new loan, but not at that rate. And if they continue to insist, then you're going to move all of your money to another bank and take a loan out with that bank to clear the existing one.

That doesn't sound unreasonable - they had a charge over a (by the sounds of it) otherwise unburdened asset. Now you want to convert it to a personal loan with nothing to back it. Personal loans have high rates of interest.

If you want to keep your savings and aren't happy with the rate of interest being offered shop around and find someone else to lend you the money to clear the old loan and release the charge on the property.

drunkmonkey

Think they know I'm about to move bank anyway, gave them over 10k in fees last year and tried to get it down a few months ago but couldn't even get a penny off.

cstaff

If you have enough money in savings to pay off the loan I would go ahead and pay it as you are probably getting 1% interest at most on your savings whereas you are probably paying 3% or more interest on your loan and that doesn't make sense.

I don't agree with what the bank are trying to do but like I said it is in your interest to clear the loan if you have the funds to do so. This also means that your Mam has no issue getting hold of the title deeds to her house.

drunkmonkey

It's not her house it's a commercial property, loan was some imf bail out fund or something the old bank manager managed to wrangle for me.

Glass fused light

drunkmonkey wrote: »

Sorry know it's an old thread but your all still around, think the bank are trying to pull a fast one, wondering if any of you have advice. I'm not happy with what there trying to do.

First off there was no payment ever missed or delayed, paid by dd with no issues by me from my account.

Took out a loan 10yrs ago with my dad as guarantor and they used the deeds of one of his properties as collateral. He passed away last year, now my mums solicitor is trying to get the hold over the deeds released and get them back.

There's 2 years left on the loan and I'm in good standing with the bank and healthy balances.

The bank arent pulling a fast one it's the same as if you offered up a property. Nothing has changed on their side, just unfortunately on yours.

From memory the solicitor should have followed a formal process to seek out unknown/undeclared creditors to the estate, notices in papers etc, and this would set and stop the clock for the two years given to creditors to make a claim on the estate. If so and the bank currently have no standing to make a claim as you have not breached the terms, the bank may be obliged to release the deeds next year, rather than when the loan is paid off.
It may be possible for you or your mothers solicitor to make a formal complaint then and progress but by the time the Central Bank got involved you could be fully paid up on the loan.
I would discuss your options with the solicitor in detail before having any more meetings.

Glass fused light

drunkmonkey wrote: »

Think they know I'm about to move bank anyway, gave them over 10k in fees last year and tried to get it down a few months ago but couldn't even get a penny off.

The banks are charging people for holding money so I would not have expected them to be open to reducing fees.

drunkmonkey

That's what I was thinking, just leave it there and don't play ball with them there not going to go legal with me being a good customer with a performing loan.

drunkmonkey

Glass fused light wrote: »

The banks are charging people for holding money so I would not have expected them to be open to reducing fees.

I save about 9k a year by moving my business accounts to Ulster Bank, they know this.

Glass fused light

drunkmonkey wrote: »

I save about 9k a year by moving my business accounts to Ulster Bank, they know this.

For a lot of the banks it's all about the capital and regulation, and what bucket you fall in to, you may be a profitable account but are in the wrong bucket.

Glass fused light

drunkmonkey wrote: »

That's what I was thinking, just leave it there and don't play ball with them there not going to go legal with me being a good customer with a performing loan.

It's got nothing to do with you being a good customer but rather are you abiding by the terms of the loan (or not), unless the contract holds a provision for the death of a guarantor. Other than paying it off early letting it run the term may be the cheapest, easiest option. If there is a commercial reason (or family issues) for needing the deeds that's a run the numbers for each outcome.

drunkmonkey

Glass fused light wrote: »

It's got nothing to do with you being a good customer but rather are you abiding by the terms of the loan (or not), unless the contract holds a provision for the death of a guarantor. Other than paying it off early letting it run the term may be the cheapest, easiest option. If there is a commercial reason (or family issues) for needing the deeds that's a run the numbers for each outcome.

No it's healthy, 3 years ahead of schedule due to overpaying it earlier on.

It's the solicitor looking for them back to tidy up the estate, nothings happening with it or anything, everything is mams now. There still in dad's name though.

Glass fused light

drunkmonkey wrote: »

No it's healthy, 3 years ahead of schedule due to overpaying it earlier on.

It's the solicitor looking for them back to tidy up the estate, nothings happening with it or anything, everything is mams now. There still in dad's name though.

In that case if your mam is happy, discussing with and instructing the solicitor to take no further action ie fee charaging letters until the loan is paid off may be the best.

drunkmonkey

Glass fused light wrote: »

In that case if your mam is happy, discussing with and instructing the solicitor to take no further action ie fee charaging letters until the loan is paid off may be the best.

She doesn't seem too concerned, any legal reason they would need to be taken out of his name if we're all happy to leave it as is.
Bank would still not be happy though I presume, they have the deeds but what can they do with them.
The bank where the first to mention it before the solicitor started moving on anything.

seamus

Should the bank actually need to call in the loan and exercise the guarantor clause, it would be a complicated and convoluted process indeed. How much those deeds are actually worth to bank is questionable.

I agree above that in terms of overall monetary value, just paying off the loan from savings is the most cost efficient thing to do right now, unless you had those savings earmarked for something else. Then just redirect your loan payments into your savings account and within 2 years, you're back to where you were.

Glass fused light

drunkmonkey wrote: »

She doesn't seem too concerned, any legal reason they would need to be taken out of his name if we're all happy to leave it as is.
Bank would still not be happy though I presume, they have the deeds but what can they do with them.
The bank where the first to mention it before the solicitor started moving on anything.

The only reason is to settle the probate and thereafter make it quicker for her to sell or mortgage. Plus when she passes, its clearly part of her estate.

The bank are actively monitoring how secure the security is.
They have gotten stung where the default after they can legally claim from the guarantors estate so this may be new policy not a personal review of your accounts.
I would be checking that there is no term in the contract which made the loan repayable as a result of your dads death, or that you have to have a level or activity or funding in your accounts. It's easier to offset the loan against cash held in other accounts than do the court work with the deed. but by the time you end up in court the loan should be paid so, until you get a court date, nodding wisely in meetings or sending a generic I am in receipt of and will respond in due course, may be the best.

drunkmonkey

It's probably better call it free cash flow than savings, don't know what's around the corner and if things turned i'd rather have my money than having to go ask for a loan to tide me over

Yea I don't see what value they are to them even if I defaulted which I've no intention of doing.

drunkmonkey

Glass fused light wrote: »

The only reason is to settle the probate and thereafter make it quicker for her to sell or mortgage. Plus when she passes, its clearly part of her estate.

She has no reason to sell or mortgage it, the intention is to pass it on to one of us at some stage. That's a good few years away I hope.

antoinolachtnai

It is more of a commercial issue then a legal issue. Can you offer alternative equivalent collateral? Money sitting in a deposit account is not collateral. You can always move the loan to another bank if you think you can get better terms.

drunkmonkey

Well they already have my house and 2/3 of that is paid for.

This isn't a huge amount it was starting off but not now, I don't get the problem, I could walk in tomorrow and get more than it with no guarantee needed.
Really stinks of them trying to sell a new loan.

antoinolachtnai

drunkmonkey wrote: »

Well they already have my house and 2/3 of that is paid for.

This isn't a huge amount it was starting off but not now, I don't get the problem, I could walk in tomorrow and get more than it with no guarantee needed.
Really stinks of them trying to sell a new loan.

Your home isn’t a great piece of collateral really, if it is for something other than a home purchase.

If you can get the money cheaper somewhere else, why not do that?

You could look at this. It is problematic though. http://www.creditreview.ie

drunkmonkey

antoinolachtnai wrote: »

Your home isn’t a great piece of collateral really, if it is for something other than a home purchase.

If you can get the money cheaper somewhere else, why not do that?

You could look at this. It is problematic though. http://www.creditreview.ie

This isn't a credit problem there not refusing credit just trying to get me off a very cheap loan for the last 2 years of it. It was taken out over 15yrs, I'm 10 years into it with only 2 years left as I overpaid at the start.
Can't get the loan cheaper they won't be offering anything like that again.

Don't think this is my problem it's theirs. They may come up with a solution that doesn't involve me being at a loss.

antoinolachtnai

If your relative wants the deeds back it sounds like it might turn out to be your problem.

At the end of the day it looks like an issue with the advancing or pricing of credit to me. You feel that the collateral is adequate for the low rate loan and the bank doesn’t. I think CR will deal with this though you might not be successful.

Glass fused light

antoinolachtnai wrote: »

If your relative wants the deeds back it sounds like it might turn out to be your problem.

At the end of the day it looks like an issue with the advancing or pricing of credit to me. You feel that the collateral is adequate for the low rate loan and the bank doesn’t. I think CR will deal with this though you might not be successful.

No need the bank have to prove a breach of the current contract, before they have a right to change the current agreement.

Money in a deposit account is the best sort of collateral. If you have cash and a loan with the same bank, the bank will normally have the right to offset, by just taking the money from your deposit account and knocking off the same amount from the loan with no need for any court action as you agree when you open the accounts.

drunkmonkey

No they want to jack up the interest rate, like trying to get someone off a tracker. They don't want a guarantee for the new loan.
They made the first call to me a few days after he died, sorry about your dad but we'll have to get you to take out a new loan at a higher interest rate.
As I said there's no credit issue here, there more than willing to give me money but I don't need any new loans.

drunkmonkey

Glass fused light wrote: »

No need the bank have to prove a breach of the current contract, before they have a right to change the current agreement.

Money in a deposit account is the best sort of collateral. If you have cash and a loan with the same bank, the bank will normally have the right to offset, by just taking the money from your deposit account and knocking off the same amount from the loan with no need for any court action as you agree when you open the accounts.

Is the guarantor passing away a breach of contract, to be honest don't think I read the contract back then or neither of us asked the question of what would happen. I suppose I should ask for a copy of the signed contract and see what it says.
I doubt it says they can force me to take a new loan on different terms.

antoinolachtnai

So the current situation is that you want the deeds back and they don’t want to give them up?

drunkmonkey

antoinolachtnai wrote: »

So the current situation is that you want the deeds back and they don’t want to give them up?

No they want to give them back and give me a new loan at a higher interest rate.

Glass fused light

drunkmonkey wrote: »

Is the guarantor passing away a breach of contract, to be honest don't think I read the contract back then or neither of us asked the question of what would happen. I suppose I should ask for a copy of the signed contract and see what it says.
I doubt it says they can force me to take a new loan on different terms.

Ten years ago you could not go into any reasonable form of bankruptcy. Plus the use of a guarantor only became common due to the lending environment where it was used to bump up the lending sometimes with the false assurance it could not be used.

I suggest letting the bank do the running and not ask for the contract yet. let them explain in writing eg why they are changing the interest rate or why the new loan is required.

drunkmonkey

Glass fused light wrote: »

Ten years ago you could not go into any reasonable form of bankruptcy. Plus the use of a guarantor only became common due to the lending environment where it was used to bump up the lending sometimes with the false assurance it could not be used.

I suggest letting the bank do the running and not ask for the contract yet. let them explain in writing eg why they are changing the interest rate or why the new loan is required.

That's the way it was pitched, it was never going to be called in, it was just a bit higher than the amount they were willing to go with a personal guarantee from dad, coleratal was needed, i'd nothing but hopes, dreams and a business plan.

Your right i'll let them do the running, thanks for help.