Help on mortgage restructuring or write down

Blankety

I was talking to a mate about mortgages and banks restructuring or writing down some value off negative equity properties, there appears to be a lot of “hear say” about banks taking a hit on mortgages but I can’t find much in the way of firm evidence that banks will agree to a restructure and write off.

My mate is about to come off interest only having been on it for 2 years and is in negative equity. His household income has reduced by a third and there is no chance of being able to go back to full repayments for the foreseeable future, the interest only option is all the banks are offering but this is unsustainable as a solution. Has anyone already negotiated a better deal i.e. write down of part of the debt or shared equity with their bank in these circumstances, interested in your experiences as he wants to approach the bank and come up with a workable long term solution ?
AFAIK he is with an Irish bank, probably BOI.

Is this something MABS would work with him on? Or something for a financial advisor?

peesee

Hi , I am that friend and want to add that we are stupidly on a variable rate

theteal

Blankety wrote: »

there appears to be a lot of “hear say” about banks taking a hit on mortgages

this is pretty much it, there is no firm evidence, it is all hearsay and highly unlikely to happen

Blankety

Yeah it would seem stretching the term of the loan is the preferred option by the banks. This only makes sense for the banks as they get more interest.

Still we are interested in hearing from anyone who negotiated with the banks and actually came out better, equity share, partial write-off etc....

chris85

There wont be any write down if wants to keep living there. basically if he wants to keep lthe house he will need to keep up as per contract of mortgage to pay back full amount, the interest only period is an option which will come to an end and one point or another, it has to.

The occasional write down is occuring but only really at the stage where the bank has repossessed the house and the customer has no foreseeable future to be able to repay the debt remaining.

Why should your friend get a write down and not someone else? A lot of people are in same situation with negative equity, loss in income, trouble with payments, cant write down debts for everyone. Wont happen for your friend. He needs to take it on the chin and get on with it. A longer term restructuring may reduce the payments a bit.

A visit to MABS would help with the situation but wont get a write down on the debt.

cookie1977

There's a lot of re structuring where they'll max your mortgage up to your retirement age (if it's not that already). It really depends on what the person says in their SFS (Standard Financial Statement) under the MARP process. You can look to enter MARP whether you're in arrears or in pre arears. Get him to communicate with his bank and ask to fill in their SFS form.

Under MARP he has protections like he wont loose any benefits (such as tracker mortgages etc...) without agreeing to it. If he's unhappy with the deal proposed to him by his bank he can initially formally appeal to the bank and if necessarily formally appeal to the financial services ombudsman.

Blankety

Hi Chris, thanks for the reply, much as I expected, Peesee (second on thread) had asked me to open the thread as his posts were less than 25 so can't open a thread.
I appreciate the whole moral hazard argument but then you hear so many stories of folk getting write offs and better terms, still there is little hard evidence of the banks really engaging with customers in this manner.
Peesee is a hard working chap but the mortgage is really killing him now and that will only get worse as the fixed rate interest creeps up. Anyone with advise stick it on reply.
Thanks

Blankety

Thanks Cookie, I'll pass it on. I don't think Peesee is on anything beneficial at all, full blast fixed rate. His problem like many relates to the capacity to repay reducing all the time while on fixed rate the the repayment amounts are increasing. At least he is not in his forties for a few years so extending out the mortgage is an option but the banks really win on that front too......

all advise greatly appreciated.

cookie1977

The banks win yes if he stays on the fixed rate for the entire time but maybe they can agree to switch him to a variable rate earlier and if he gets back on his feet sooner he could shorten the mortgage term himself by selling at the right time or by paying off some capital.

Yes the banks have caused a lot of this mess but I really think (and this is from personal experience) that they are trying to work towards workable agreements with customers who are struggling. I dont think they're in to right downs or right offs (at present anyway) but other options such as extending the mortgage life are what they appear to be going for where possible.

Again all of this depends on the SFS filled out by the mortgage holder.

chris85

Blankety wrote: »

Hi Chris, thanks for the reply, much as I expected, Peesee (second on thread) had asked me to open the thread as his posts were less than 25 so can't open a thread.
I appreciate the whole moral hazard argument but then you hear so many stories of folk getting write offs and better terms, still there is little hard evidence of the banks really engaging with customers in this manner.
Peesee is a hard working chap but the mortgage is really killing him now and that will only get worse as the fixed rate interest creeps up. Anyone with advise stick it on reply.
Thanks

These stories, some are which are just rumours and most dont happen, are the few and not the majority. The banks will work with customers to restructure if required and help out as much as they can but a write off for a house due to tough times will not happen.

As I mentioned most write offs are happening when the house has been repossessed and sold and the customer has no real prospect of ever clearing the shortfall of the mortgage amount after the sale of the property.

I dont agree with write offs and if you should get one why shouldnt everyone and that wont happen for obvious reasons.

My advise would be to go to MABS and engage with the lender to restructure the terms of the mortgage, longer term maybe. However a longer term will make the mortgage more expensive over the entire term of the mortgage.

NIMAN

A lot of it is media talk at the minute, and there is nothing concrete out there. We hear of cases of people who simply cannot pay handing keys back to the banks, and the houses going to auction but I am sure the banks will not let those people off scot free.

No one knows how the banks are going to tackle the problem of mortgage debt in this country, because for now they seem to be burying their heads in the sand and not worrying about it. They will of course have to address it, and soon, as the numbers who cannot pay rises.

You will find they may come up with different ideas, but which ones are implemented are anyone's guess at the minute.

Perhaps they might:
1) If you owe €300k they might allow you to owe €150k, but they own half the house.
2) Allow people to continue on interest only for many more years
3) Extend the term so the repayments come down
4) Extend the term out so far that it becomes an inter-generational mortgage (40 - 50yrs?)
5) Repossess your house but let you rent it back

These are all just off the top of my head, so it may be none of these ideas.

Its not really in the banks interest to repossess houses now because they won't get much for them. Probably better to let people stay in them and negotiate a payment plan, and thats what they have been doing.