Mortgage default - what happens

mozattack · 28-02-2011 6:03pm #1

Hi all,

I have a friend of a friend who is in serious difficulty which was just compounded today by Kilkenny Council Council.

Basically she co-owns a house with an ex and he pays the mortgage as maintenance. She now lets her old home with a good tenant who was paying €650 per month, around €300 over the bank repayment (loan is on capital plus interest) and that excess was used to help with the mortgage on the house she lives in and for living expenses. She is on the dole with no work being available and barely makes end meat.

The house that is let is probably worth €150k and the loan is €194k - the interest only period is set to expire very soon and there is no way she can repay capital at this time. However, the rent was ok and the tenant was brilliant.

Kilkenny Co. Council writes to her bullying her into accepting €600 p.m. under the RAS scheme subject to inspection. The inspection is carried out and they write down a load of trival things which will cost an arm and leg to finish. It has driven her to spare and could push over the edge as she has it hard with a 1 year old child. She doesn't have the money to fix the house (the house is 3 yrs old and fitted out lovely - Kilkenny Co. Council are taking the p*ss) nor can she borrow to do the "repairs" so she will lose the tenant now and have an empty house out there.

She has to meet the bank tomorrow and doesn't know what to do and is thinking of "handing back the keys". What can happen in this circumstance? Presume the house will be taken back and then sold at a discounted price but what will the bank do or what can they do? I hear it will be a common trend over the next 2 years as landlords simply cannot maintain the bank payments.

She has a house which is with another bank and co-owned with her ex. The ex pays a large chunk of the mortgage as maintanence - how will this house be effected by the events re the rental property.

This is not a cop out - how the hell can someone afford to carry out so much repairs for a County Council inspection when the repairs are not necessary. You should see this letter, it is pathetic. The tenants were happy there so what was the point - it is putting a gun to someone's head.

quozl · 28-02-2011 6:08pm

mozattack wrote: »

She has to meet the bank tomorrow and doesn't know what to do and is thinking of "handing back the keys". What can happen in this circumstance?

Mortgages in Ireland are recourse. If the bank repossess and the sale of the house is less than the out-standing amount on the mortgage then your friend is responsible for the shortfall.

There's no handing back the keys in Ireland.

mozattack · 28-02-2011 6:16pm

Yes but what can they do if the person is on social welfare... no point chasing someone who isn't working?

n900guy · 28-02-2011 9:47pm

mozattack wrote: »

Yes but what can they do if the person is on social welfare... no point chasing someone who isn't working?

She goes bankrupt and has no credit for 12 years is what happens.

mozattack · 01-03-2011 10:14am

Can you go bankrupt in Ireland - seems a better option that paying €400k back on a house which is only worth €150k (€400k being loan x 2 when interest is factored in)

Slydice · 01-03-2011 11:15am

it sounds like they can try to chase her and are entitled to do so

but if she can't pay... then she can't pay.

it'd prolly be different if it was a case of she could pay... but just wont pay.

best advice would be to talk to a soliciter or maybe try www.flac.ie

seamus · 01-03-2011 11:27am

mozattack wrote: »

Can you go bankrupt in Ireland - seems a better option that paying €400k back on a house which is only worth €150k (€400k being loan x 2 when interest is factored in)

Yes, but you will still be required to pay back the money even during bankruptcy. Declaring oneself bankrupt is just a way of getting courts involved. The court will effectively figure out a way of making the bankrupt party pay as much of their debt off as possible within a 12 year timeframe. You'll not be able to get any kind of credit facility in those twelve years and you'll be living on baked beans and toast.

Once the 12 years is up, the remainder of the debt is effectively written off. 12 years is a long time. What were you doing in February 1999?

mozattack · 01-03-2011 2:27pm

Look it is not a great position to be in, no-one said it was but what other options are there.. there is no point in pissing away money against a mortgage when the whole amount can never be repaid anyway...

watch this space, I reckon the banks will be blown out of the water with unwanted houses and chasing former landlords and house owners for money which they dont have bringing the country further and further down.

BostonB · 01-03-2011 6:43pm

mozattack wrote: »

.... she will lose the tenant now and have an empty house out there.....

Why doesn't she move back into it.

The banks at some point are going to have to come up with some why of resolving all these bad loans/mortgages they gave out.

Godge · 01-03-2011 7:19pm

Do I understand this correctly?

She is unemployed but has one and a half houses?

You started off saying the house is worth 150k but the mortgage is 194k. What is the mortgage on the second house?

Sorry if this sounds harsh but could she sell both houses and use the maintenance payments towards any outstanding debt? She can then get a house from the council and live off her social welfare as hundreds and thousands others are doing.

Serbian · 04-03-2011 5:05pm

Declare bankruptcy in the UK. It's a realistic option with much leaner penalties than Ireland (you're debt free in 12 months). She would have to live in the UK for 6 months to prove that it's her "centre of interest", then she could declare bankruptcy there, live there for another 6 months, then come back to Ireland if she wanted, absolutely debt free.

The Guardian did a write up about 'Bankruptcy Tourism' a month or two ago.

She would lose both houses in this case however.

Mortgage default - what happens

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