Handing the keys back

Procrastastudy

Appoligies if this seems like keeping open a mod-closed thread but its actually an element I've been meaning to ask about for some time...

I heard on the news a while back that there are plans for some sort of legislation to allow people in financial difficulties to hand back the keys of their property - does anyone have any further information on this and how the costs will be met. (I realise it will ultimately be the tax payer)

I know people did this in the 80's recession in the UK but someone on the other thread has pointed out this was probably a bad idea as other methods would have been more advatageous.

Jimdagym

Have you a link to this? I don't see our or any government trying to make it easier to default on a mortgage.

johnnyskeleton

Handing back the keys is a symbolic gesture of voluntarily surrendering the property. Bu it does not get rid of the rest of the debt. A mandatory law that a mortgage is satisfied by repossession of a house worth less than the loan would not, IMO be constitutional.

Procrastastudy

Jimdagym wrote: »

Have you a link to this? I don't see our or any government trying to make it easier to default on a mortgage.

Sorry I don't it was something I saw or read in passing - wish I'd paid more attention now.

DeSourire

Just reiterating what was said above, if you hand back in the keys it is deemed voluntary surrender but the negative equity on the house is still owed to the bank, this is unlike the US where if you hand back in the keys that's that. The media are continuously talking about 'debt forgiveness'. I can tell you now there is no such thing. Debt settlement perhaps. The heads of the personal insolvency bill were published last month which outlines different ways of dealing with debt. It outlines a process of getting a Debt relief certificate if you have less than €20,001. Debt cleared. However if you have greater than this then you can enter into a debt settlement arrangement but all your creditors have to agree on it. They are planning on setting up a service to deal with this. There is obviously a lot more in the heads and the bill won't be published until the end of April.

There are obviously a lot more people on boards that know a lot more than me so I'm putting a disclaimer on this!! Hope this helps though.

mitzicat

Perhaps you are thinking of the new, negative equity mortgage the banks are offering?

That is, if a home-owner wants to sell their original property - which is in negative equity - to move locations or purchase a larger property, they can sell their original property for less than the mortgage amount and transfer the remaining mortgage onto the new house loan.

Paddycrumlinman

Been reading this form for a while now and with regards handing back the keys in the US that is a misunderstanding. In SOME States you can hand back the keys and the State legislation will protect you. I'm in Florida, and Florida will work with the bank in the case you don't pay your mortgage.

The bank will gladly take back the keys, then place a Judgement for repayment of the mortgage with the Courts. At this point you can give them two fingers and then the courts will move to Garnish your wages via your employer so on and so Forth. Not sure if the exact break down but not every State in the US where you can simply hand back the keys and think that's that. I tired it believe me with Bank of America and they took me to Court. I was able to renegotiate with BOA as the had a hard time finding who held the deeds to my house. Still pursing them on that and I'm filing with the Courts and right back at you Bank of America.

It's misinformation with regards handing back the keys to the Bank here in the US, if anything, the Banks and the system over on this side of the pond are more ruthless than what ye guys are dealing with back home.

Just an FYI guys.

Cheers,

Procrastastudy

mitzicat wrote: »

Perhaps you are thinking of the new, negative equity mortgage the banks are offering?

That is, if a home-owner wants to sell their original property - which is in negative equity - to move locations or purchase a larger property, they can sell their original property for less than the mortgage amount and transfer the remaining mortgage onto the new house loan.

That seems like a practical solution and one I need to look into! Well the wife does as I dont earn anymore - any idea which bank is offering this?

On the handing back keys I am aware of what the law is at the moment - I am wondering about legislation I've heard of. Looks like it was pie in the sky as no one else seems to have heard of it to be fair.

BornToKill

Legislative measures are promised in response to the recommendations contained in the Keane report on mortgage arrears.

Peregrinus

It’s common, but by no means universal, for housing loans in the US to be “limited recourse” - i.e. there’s a term in the loan which stipulates that, in the event of default, the lender can have recourse only to its security over the mortgaged property. Thus, if you stop paying the loan for any reason, the bank can seize and sell the property, but that’s all they can do. (Your credit rating is buggered, of course, but the bank can’t actually pursue you for any more money.)

This kind of loan is more common in some parts of the US than others; in some places it’s the norm. To some extent the popularity of this kind of loan depends on the extent to which state law favours it.

From one point of view, the non-recourse loan is fundamentally unbalanced. If your house value goes up, you get the benefit. But if your house value goes down, the bank bears the loss.

Under a loan of this kind, the bank is obviously carrying a high degree of risk, and this has two consequences. First, the bank charges a higher interest rate than it otherwise would, to compensate itself for the higher risk it is carrying. Secondly, if you do stop paying, the bank moves much more quickly to foreclose, evict and sell, because the longer the situation goes on the more the bank’s loss will be. The loan plus interest goes up, while the value of the security is at best static, and typically declining. (Among other things, the willingness of the bank to offer non-recourse loans will depend on whether local laws makes rapid eviction and sale possible.) There are other consequences; if your financial situation becomes stressed, it is much more difficult to negotiate, e.g., forbearance from the bank or an extension of your loan terms.

These loans are perfectly legal in Ireland but, in the housing market at any rate, rare or unheard of. Banks don’t like to make them, and consumers don’t like to pay the higher interest rates involved, and nobody really likes the fairly ruthless sequence of events which follows rapidly once you can’t make your loan repayments.

The Keane report, mentioned above, did not favour legislation which would, in effect, convert existing Irish mortgages into non-recourse loans, giving owners the right to hand back the keys and walk away. It didn’t even favour changes to facilitate or encourage non-recourse loans in the future. So, whatever legislation comes down, I wouldn’t expect this.

krd

Paddycrumlinman wrote: »

I was able to renegotiate with BOA as the had a hard time finding who held the deeds to my house. Still pursing them on that and I'm filing with the Courts and right back at you Bank of America.

You know. If you still had the keys to the house. And you challenge them for the deeds, you could be in a position where the house belongs to you in its' entirety, and Bank of America has nada.

A lot shenanigans that went on with securitization of mortgages meant that paperwork got lost. If the bank can't produce the paperwork, they have to write the loan off, if you're not willing to pay it. And they don't have a claim on the house.

krd

I think in the past, very few repossessions went to court. I think there were less than 30 a year throughout the 90s.

I think the deal in the past, is you negotiated with the bank. Recourse wasn't really an issue, as the homes would sell on the market for near enough, or over the value of the mortgage. So, it was done quietly.

Irish banks do not really want to, or have the resources to deal with thousands of repossessions.

Whatever the law is, it's immaterial if 100,000 people have stopped paying their mortgages, in a country the size of Ireland. They'd have to run the courts around the clock to process a fraction of them.

The public doesn't know the full extent of what's going on. There is something funny going on. I know property speculators who the banks should have confiscated the houses from by now, but they haven't.