# Negative equity. Can the bank sue me for the balance?



## euclid (7 Nov 2009)

I am 64 years old and retired.

In 2004 my wife and I bought an apartment with the intention of selling it again in a few years for a profit. (Don’t laugh)

We bought for 350,000 euro with a mortgage of 250,000 and cash of 100,000.

My understanding at the time was that the apartment was (the only) collateral on the loan.

Now, due to pressure from the bank to pay back the mortgage, I have placed the property on the market. We have been offered 200,000 euro for it.

If I accept the offer, I will lose my own investment and we will still owe the bank 50,000.

My solicitor tells me that the loan is “unsubordinated” which he says means that the bank can sue me for the 50,000. I always thought that, as the apartment was the collateral on the loan, I could simply hand the keys to the bank and walk away, but apparently not. 

Is this true?

Do we have a case in law against our solicitor?

Should we wait another year or two in the hope that the market recovers?


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## Brendan Burgess (7 Nov 2009)

*Re: Unsubordinated?*

You have no case against your solicitor. 

Loans in Ireland and the UK are to the person. You have to pay off the loan. 

The bank can pursue you for the balance. 

No one knows when and whether the market will recover. Further falls would just make your problem worse. You can't handle further falls, so you should probably try to sell now.  

Brendan


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## mercman (7 Nov 2009)

*Re: Unsubordinated?*

My heart goes out to you and thousands like you that are in the same position, The problem as I see it is that the loan is in your own personal names and for which the Bank will chase you for every last cent (unless you are able to come to a deal).


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## euclid (7 Nov 2009)

Thanks, Brendan and Mercman.

That's what I thought.

(and thanks, Brendan for improving the title of the thread)


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## Buddyg (7 Nov 2009)

Pressure from the bank to pay?

Are you paying into your mortgage? Why not continue to do so?


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## John Rambo (7 Nov 2009)

Sorry to hear about your situation. I would tread carefully if I were you. Unlike (say) the US where loans are generally non recourse (i.e. you can simply hand the keys back), as other posters have stated you are liable for the loan. However, given the present climate there may be merit in engaging with the bank. Play the "poor pensioner card". Tell them you'll be taking a €100,000 hit and that you expect them to take a €50,000 hit. An 80% recovery on the loan (i.e. €200,000 of the €250,000) may be acceptable to the bank. Tell them you simply cannot repay the €50,000 (I'm assuming doing so would put you in a difficult situation). Put it this way, if I were you my starting point would be that I am not repaying that €50,000.


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## pjmn (7 Nov 2009)

John Rambo said:


> Sorry to hear about your situation. I would tread carefully if I were you. Unlike (say) the US where loans are generally non recourse (i.e. you can simply hand the keys back), as other posters have stated you are liable for the loan. However, given the present climate there may be merit in engaging with the bank. Play the "poor pensioner card". Tell them you'll be taking a €100,000 hit and that you expect them to take a €50,000 hit. An 80% recovery on the loan (i.e. €200,000 of the €250,000) may be acceptable to the bank. Tell them you simply cannot repay the €50,000 (I'm assuming doing so would put you in a difficult situation). Put it this way, if I were you my starting point would be that I am not repaying that €50,000.




Interesting advice....

If the OP stood to sell at say E500k (i.e. E150k profit, and bank laid claim to E50k on the basis that OP was making a profit and that they (the bank) felt they should share in this profit, would you say that was fair and reasonable...?

If we follow your logic, then everybody should take your advice and tell bank 'I'll only pay you x%' - upshot bank's go belly-up and Joe Citizen has to carry the cost in some form or another...


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## euclid (7 Nov 2009)

Buddyg said:


> Pressure from the bank to pay?
> 
> Are you paying into your mortgage? Why not continue to do so?


 
It was an interest only mortgage over a very short term (4 years) because of my age.

The bank is happy for me to carry on paying interest only for another 12 months, and they would review the situation again after that. The problem is, as Brendan said, futher falls in the market would make my situation worse.


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## euclid (7 Nov 2009)

John Rambo said:


> Sorry to hear about your situation. I would tread carefully if I were you. Unlike (say) the US where loans are generally non recourse (i.e. you can simply hand the keys back), as other posters have stated you are liable for the loan. However, given the present climate there may be merit in engaging with the bank. Play the "poor pensioner card". Tell them you'll be taking a €100,000 hit and that you expect them to take a €50,000 hit. An 80% recovery on the loan (i.e. €200,000 of the €250,000) may be acceptable to the bank. Tell them you simply cannot repay the €50,000 (I'm assuming doing so would put you in a difficult situation). Put it this way, if I were you my starting point would be that I am not repaying that €50,000.


 
That wouldn't work in our case as we are house owners with obvious means. I've been advised that the bank will pursue us for every penny. Apparently, the only way to get away with paying less than the full amount is to skip the country!


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## Buddyg (7 Nov 2009)

euclid said:


> It was an interest only mortgage over a very short term (4 years) because of my age.
> 
> The bank is happy for me to carry on paying interest only for another 12 months, and they would review the situation again after that. The problem is, as Brendan said, futher falls in the market would make my situation worse.


Right.

You took a gamble to make money and you lost so pay up.

I could also say to the bank that they took a gamble on you paying up given your circumstances so they can't feel too hard done by. Legally they have you though.


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## John Rambo (7 Nov 2009)

pjmn said:


> Interesting advice....
> 
> If the OP stood to sell at say E500k (i.e. E150k profit, and bank laid claim to E50k on the basis that OP was making a profit and that they (the bank) felt they should share in this profit, would you say that was fair and reasonable...?
> 
> If we follow your logic, then everybody should take your advice and tell bank 'I'll only pay you x%' - upshot bank's go belly-up and Joe Citizen has to carry the cost in some form or another...


 
Post as many ridiculous little blue faces as you like...if the OP cannot repay the €50,000 (which for a retired 64 year old isn't a massive assumption), then he's perfectly entitled to put a proposal to the bank. MBNA can pursue people who owe them €10,000 so why are they settling for 50% of that amount when pushed? My suggestion to the OP is to negotiate with the bank on the basis that repaying this €50,000 would cripplie the OP financially. As I said earlier, an 80% recovery for the bank in the present climate isn't to be sniffed at.


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## mercman (7 Nov 2009)

The OP has not declared if he has other assets. Whilst I am not a great believer in doing the Banks they will do everything in ensure that they do not lose money. No point in playing hard ball to open a can of worms. Sure Banks are doing deals in circumstances when the borrowers do not have an asset base. In this case we do not know, but it's a bit risky to try it on with a Bank just in case they dig their heels in and cause more and bigger problems down the line.


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## euclid (7 Nov 2009)

Buddyg said:


> You took a gamble to make money and you lost so pay up.


 
That's a bit harsh. 

I took a gamble on the stock market, too, and lost. I also bought a "fully tradable" share in Se(ll)afield Golf Club and when I tried to sell that (for 40% of what I paid) the golf club stepped in and vetoed the sale. I have found lots of interesting ways to lose money!


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## Marietta (7 Nov 2009)

euclid said:


> That's a bit harsh.
> 
> I took a gamble on the stock market, too, and lost. I also bought a "fully tradable" share in Se(ll)afield Golf Club and when I tried to sell that (for 40% of what I paid) the golf club stepped in and vetoed the sale. I have found lots of interesting ways to lose money!


 

I am reading down through these posts and  I am at a loss for words. Did you get proper financial advice in all of this.    You paid  350,000 for an apartment and then some bank was smart enough to gave you 200,000 of a mortgage when you were approaching *60* years of age, utter and complete madness and I think both you and the bank are equally responsible for the situation you now find yourself in.


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## D8Lady (7 Nov 2009)

Marietta said:


> Did you get proper financial advice in all of this.    You paid  350,000 for an apartment and then some bank was smart enough to gave you 200,000 of a mortgage when you were approaching *60* years of age, utter and complete madness and I think both you and the bank are equally responsible for the situation you now find yourself in.



+1
Assuming the mortgage was for min 25 years, so bank thought you were ok to pay until you were 80? Something definitely off here.

Is the apartment rented out - how much extra would you have to put in every month to meet mortgage payments?


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## Brendan Burgess (7 Nov 2009)

> we are house owners with obvious means. I've been advised that the bank will pursue us for every penny. Apparently, the only way to get away with paying less than the full amount is to skip the country!



Negative equity is a meaningless concept in this case. Euclid has another home and obvious means.

There is absolutely no reason for the bank to take a hit here. Euclid took a risk with a view to making a profit. It didn't work. He has to take the loss. 

By all means, ask the bank to do a deal, but they would not be under any commercial, moral or legal requirement to do so.


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## euclid (7 Nov 2009)

Marietta said:


> I am reading down through these posts and I am at a loss for words. Did you get proper financial advice in all of this. You paid 350,000 for an apartment and then some bank was smart enough to gave you 200,000 of a mortgage when you were approaching *60* years of age, utter and complete madness and I think both you and the bank are equally responsible for the situation you now find yourself in.


 
Yes, I got the very best financial advice available at the time. Remember that the housing market was booming then. I was advised to put as much as possible into "bricks and mortar". I was also advised to "leverage" as much as I could, and went looking for (and found) a mortgage. To their credit, the bank refused to give me a mortgage on a second property, so I had to invest the remainder in stocks and shares. The best advice told me to put it into safe "blue chip" banking shares, like Anglo Irish, which were breaking new ground at the time... The alternative to investing it was to leave it in an interest-bearing bank account, but the interest rate on offer was less than the rate of inflation at the time.

I accept responsibility for my actions, of course, but I was misinformed by my solicitor about the meaning of the term "collateral". No mention was made then of "unsubodinated" loans. I thought the risk was limited to the cash I invested and that the apartment would revert to the bank if the worst happened.


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## euclid (7 Nov 2009)

Brendan said:


> Negative equity is a meaningless concept in this case.


 
Believe me, negative equity is by no means a meaningless concept here.


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## Palabra (7 Nov 2009)

Crazy situation man!! You have my sympathy. 

What really galls me is that the banks who are primarily responsible for the appalling mess the property market is in now, they want to take no hit whatsoever on these deals.

Like you I chose to buy a property, but I had no idea the lunatics were running the asylum


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## euclid (7 Nov 2009)

I agree the banks carry a lot of the blame (for the appalling mess that is the present property market), but don't forget the planning people who were ultimately controlled (or not) by the government. Bertie and his finance minister have a lot to answer for.


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## scrivere (7 Nov 2009)

Oh please don't let this turn into another blame the banks thread.

Have you spoken to the bank, unlike John Rambo I suggest you are very honest with them. No point in telling the you are only getting x for the app when you are getting y. They will ask for proof. Have the bank declined to allow you sell house and take the lost or even some of the loss. (50/50) You may need to go high up in the bank... senior mgt but worth it. 

If that doesn't work: 
Yes they can "come after you" for the 50k but don't let it come to that they should come to an arrangement with you, ok so its not great that you have to pay even though you have no house but not much you can really do.


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## John Rambo (7 Nov 2009)

scrivere said:


> Oh please don't let this turn into another blame the banks thread.
> 
> Have you spoken to the bank, unlike John Rambo I suggest you are very honest with them. No point in telling the you are only getting x for the app when you are getting y. They will ask for proof. Have the bank declined to allow you sell house and take the lost or even some of the loss. (50/50) You may need to go high up in the bank... senior mgt but worth it.
> 
> ...


 
I never suggested being dishonest. I merely confirmed that although the OP clearly owes the bank the €50K, in reality he should be able to negotiate a settlement. And by the way. that would involve a 67/33 split of the losses, not 50/50 as you've suggested.


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## scrivere (7 Nov 2009)

Sorry could have picked my words more carefully, didn't mean to offend you at all. Worth trying 67/33 with them however getting the bank to agree to any loss when the OP has an other house(s) will be an achievement.


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## dereko1969 (7 Nov 2009)

euclid said:


> To their credit, the bank refused to give me a mortgage on a *second* property, so *I had to invest* the remainder in stocks and shares.


 
I'm confused. Is the mortgage actually on your home or on the apartment? Did you *have* to take all the money suggested?

Either way, blaming anyone other than yourself, while the easy way out, is wrong. It was your decision, no-one elses, blaming your solicitor now is also wrong, did you ask the relevant questions at the time?


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## euclid (7 Nov 2009)

dereko1969 said:


> I'm confused. Is the mortgage actually on your home or on the apartment? Did you *have* to take all the money suggested?
> 
> Either way, blaming anyone other than yourself, while the easy way out, is wrong. It was your decision, no-one elses, blaming your solicitor now is also wrong, did you ask the relevant questions at the time?


 
1. Read the thread. It's perfectly clear.

2. I'm not blaming anyone, as you'll see if you read the thread. I am simply highlighting the point that I thought the apartment was (the only) collateral for the mortgage. It was quite a shock to discover that my family home would be at risk now if I couldn't afford to pay off the balance of the loan.

3. I asked every question I could think of at the time, but the word "unsubordinated" was not in my vocabulary until a couple of weeks ago.


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## mercman (8 Nov 2009)

euclid said:


> the government. Bertie and his finance minister have a lot to answer for.



Another one, Blame the Government. I bet if you had of been making an extra €100 you wouldn't be running to give them an extra lump of tax. Nobody forced you to purchase the property. Basic rules of business and in fact life. If you borrow you have to pay it back, In the case of Banks they hold a licence to lend money at a legal rate instead of high cost moneylenders. They may do a deal or they may not. I'm no lover of the Banks but I do know if I owe them they will have to be repaid. And as long as there is an issue of outstanding loans they have a hold. Quite simple really.


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## Brendan Burgess (8 Nov 2009)

euclid said:


> 1. Read the thread. It's perfectly clear.



Euclid

It might be perfectly clear to you, but I am confused as hell. 



> To their credit, the bank refused to give me a mortgage on a second property, so I had to invest the remainder in stocks and shares.



The remainder of what? 



> we are house owners with obvious means.



I guess that this means that you and your spouse own another house. But it could mean that you own a few houses. 

If you have obvious means, then just pay off the loan.


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## chlipps (8 Nov 2009)

Euclid...is selling your own house an option and move into the apartment? Is your own house worth more than the apartment?


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## Palabra (8 Nov 2009)

scrivere said:


> Oh please don't let this turn into another blame the banks thread.


My problem with the banks is that they were the key players in all of this, yet they think that they should take no hit whatsoever on these deals.

Yes I *chose *to buy a house to live in.(or even as an investment!!)

But the banks *chose *to lend shed loads of money they didn't have.

The banks *chose *to run up massive debt to asset ratios

The banks *chose *to finance any hair-brained, back of beyond, middle of nowhere development that applied to them.

The banks *chose *shovel money into the property market to keep the gravy train fueled.

In effect they *chose* to stop behaving like banks

They* chose*  to do this because it meant they could gorge themselves on obscene bonuses and profits.

Now the manure has hit the fan their attitude to the OP and the rest of us in this sorry mess is "thats your problem pal, we're ok the government is sorting us out"


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## pjmn (8 Nov 2009)

Palabra said:


> My problem with the banks is that they were the key players in all of this, yet they think that they should take no hit whatsoever on these deals.
> 
> Yes I *chose *to buy a house to live in.(or even as an investment!!)
> 
> ...



... but it doesn't take away from the fact that, you, me and the OP, made the initial decision, and for that reason I don't believe any of us can walk away from that decision and blame bankers, developers and/or Govt, we are all to blame and each of us needs to take responsibility for our own actions... IMHO.


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## irishmoss (8 Nov 2009)

From my reading of this the OP had some cash.

Rather then invest the full amount of money he was advised to leverage as much as possible so he got an interest only mortgage for 4 years in the hope he could gain money and clear it off.

The ramainder of money he invested in Anglo

I can't answer his question but offer my sympathy


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## queenlex (8 Nov 2009)

euclid said:


> Yes, I got the very best financial advice available at the time. Remember that the housing market was booming then. I was advised to put as much as possible into "bricks and mortar".



God who gave you this advice as best advice a bank salesperson?  I have never heard an adviser give advice to put all your eggs in one basket which is what is implied here???


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## mercman (8 Nov 2009)

The contents of this thread is the full extent of the boom bust scenario we are all experiencing. They fueled the supply /demand curve. Simple as that. If we all chose to read the applications, it said 'you must keep up with your mortgage payments or else your property could be at risk or words to that effect.


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## Marietta (8 Nov 2009)

Yes you are right Mercman, however I can't help but wonder about the advice this man received, he got a quarter of a million euros of a loan from a bank when he was approaching 60 years of age. It is not that long ago that once a person went past the ages 45 - 50 they were refused a mortgage based on their age alone.  The OP has to take individual responsibility but also the bank that so recklessly gave him this money  has to take some responsibility in the matter.  Where were the financial regulators during all these celtic tiger years that nobody shouted stop to what was going on.  How many thousands more people are now in exactly the same situation.

The Op didnt say where he got the money to invest maybe it was a redundacy deal, a inheritance or his life savings but it is hard not to feel sorry for him for it is a huge amount of money to lose.


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## Brendan Burgess (8 Nov 2009)

> It is not that long ago that once a person went past the ages 45 - 50 they were refused a mortgage based on their age alone.



Yes, they were the good old days before the Equality Act. If a bank tried to refuse somoene a loan on the grounds of age alone, they would be found guilty of age discrimination. 

Brendan


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## mercman (8 Nov 2009)

Marietta said:


> however I can't help but wonder about the advice this man received, he got a quarter of a million euros of a loan from a bank when he was approaching 60 years of age.



The OP is over 60. He is 64 and retired. See the original first post. The main problem here was that €1 million was not a lot of money and every Joe was spitting out these kind of ridiculous numbers and values like Confetti at a wedding. 

The entire Irish society made it all too easy and anybody that was in doubt it was clearly dismissed as thoughtless. From where we all are now, we all need to wake up and smell the coffee. Just have a look at all the other European countries and the apportionment of wealth.


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## Marietta (8 Nov 2009)

Brendan said:


> Yes, they were the good old days before the Equality Act. If a bank tried to refuse somoene a loan on the grounds of age alone, they would be found guilty of age discrimination.
> 
> Brendan


 

So Brendan, was it normal practise for a bank to give a 1/4 million euro loan to an elderly man during the boom years??  Surely this cannot be right.........


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## Gervan (8 Nov 2009)

It's not unlikely that the OP could be expecting a large tax-free lump sum from pension maturation, with which he would pay off the interest only mortgage. He did say it was only a 4 year loan, so the bank obviously did expect him to be able to pay it off.


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## Palabra (8 Nov 2009)

Marietta said:


> The OP has to take individual responsibility but also the bank that so recklessly gave him this money  has to take some responsibility in the matter.



My point exactly


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## bacchus (8 Nov 2009)

*Re: Unsubordinated?*



mercman said:


> My heart goes out to you and thousands like you that are in the same position,



Why? Business is business, the OP simply made a bad investment and can only blame himself, not the facilitators, e.g. bank for agreeing to lend money. Don't invest what you can not afford to loose.


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## mercman (8 Nov 2009)

*Re: Unsubordinated?*



bacchus said:


> Why? Business is business, the OP simply made a bad investment



In fairness to to OP, he similar to many others thought it was a good Investment. The manner in which the Bank were slushing money around was disgusting and perverse. And now we all, not just in Ireland but worldwide are being asked to pay for individual mistakes and greed of others. But it doesn't give anyone who borrowed the right to wriggle away from their own liabilities.


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## dodo (8 Nov 2009)

OP, I would sell the apartment and pay them with that, the amount due I would not ,They really do not expect to get 100% of any big size loan taking out in the last few years and if they do then they really are stupid.Stupid in the first place to give you such an amount.
If you have any other assets I would do what the big guys do and put it in somebody else's name. 
Look at your age Spain looks like a good place to retire to no disrespect to your age or anything but you don't deserve to live like a pauper,contact a good tax adviser / solicitor and see what they say.


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## alana (9 Nov 2009)

dodo said:


> OP, I would sell the apartment and pay them with that, the amount due I would not ,They really do not expect to get 100% of any big size loan taking out in the last few years and if they do then they really are stupid.Stupid in the first place to give you such an amount.
> If you have any other assets I would do what the big guys do and put it in somebody else's name.
> Look at your age Spain looks like a good place to retire to no disrespect to your age or anything but you don't deserve to live like a pauper,contact a good tax adviser / solicitor and see what they say.


 
Sweet Jaysus! Please ignore that advice. The loan process is very very simple to understand. You borrow the money and you pay it back. Thats it.
One good bit of advice from dodo - please talk to a solicitor, or preferably a financial advisor - please don't ignore your loan as dodo suggests.


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## Bluebells (9 Nov 2009)

*Re: Unsubordinated?*



bacchus said:


> Why? Business is business, the OP simply made a bad investment and can only blame himself,



Well the Banks did, but nobody said to _them_ late one night last year       " business is business ".


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## Bronte (9 Nov 2009)

euclid said:


> My understanding at the time was that the apartment was (the only) collateral on the loan.
> 
> My solicitor tells me that the loan is “unsubordinated” which he says means that the bank can sue me for the 50,000. I always thought that, as the apartment was the collateral on the loan, I could simply hand the keys to the bank and walk away, but apparently not.


 
Euclid could you clarify exactly why you thought the bank would not be able to come after you for the loan?  Who told you this?

Did you ever rent the apartment out or did you just invest for a capital gain?  Can you rent it out and would this cover the mortgage now.

You can forget negotiating the amount to be repaid if you are a man of means.


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## Colndas (9 Nov 2009)

Euclid,

As the property was bought for investment purposes it is treated as a non consumer loan. When you borrowed from the bank you did so as a commercial customer. 

Being an investor and a business in the eyes of the law you must unfortunately bear any loss associated with the transaction. It should have been clarified with you that you may be liable for any loss (not that many foresaw the abrupt about face in property values). 

It is unlikely, though not impossible, that a judge would put a judgement on the family home of a retired couple that have , from what I can gather, lost a substantial amount of their retirement fund. 

That said I am sure you don't wish to think that let alone have to face the possibility. 

The best approach is to meet with the bank to discuss the situation, they may come up with an idea as to how to keep the loan going without it going down a legal route.


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## Palabra (10 Nov 2009)

*Re: Unsubordinated?*



Bluebells said:


> Well the Banks did, but nobody said to _them_ late one night last year " business is business ".


 
Right on brother. (or sister !!)


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## mickeyg (16 Nov 2009)

I was listening to Marian Finucane's show on RTE over the weekend and she had some "experts" on about this very issue. One of the people on the show said something which totally confused me as it is at odds with what was mentioned here about a bank mortgage/loan being unsubordinated and hence any shortfall in the repayment of same will be pursued relentlessly by the bank. The person on the radio said that as the mortgage was secured on the property purchased then by selling the property or handing back the keys that the mortgage holder has effectively discharged their responsibility and the bank can go whistle for any shortfall.
Maybe I picked it up wrong. Anyone enlighten me??


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## z101 (16 Nov 2009)

If you got an offer of 200,000, I would try to squeeze more out of this. Tell them minimum 220 for quick sale and take the hit on the smaller difference. I would definitely sell as market as a bit further south to go. Did the solicitor make commission from banks on initial deal?
Why is the system different here than the US ?? Is the law different there that it protects people? Should this be something NAMA could include?


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## Colndas (17 Nov 2009)

mickeyg, in answer to your question, if you hand the keys back on a family home there may be a situation whereby the bank will not chase you for the money. As it is a consumer loan there are some differences in the small print. 

That said why would anybody hand the keys back on their home just because the value has fallen, it is still a home and interest rates mortgage repayments are considerably lower than they were two years ago. 

In addition negative equity is just as realisable as positive equity only when you need or have to sell. If you dont need to sell, then negative equity is irrelevant.

The OPs situation is different in that they have a non consumer loan and the terms of the original agreement were based over a short term.


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## anuj21k (24 Nov 2009)

Hi,

First of all I feel sad for you.
I can put myself into your shoe and imagine that I might have done the same if I was you.
It is always us nowhere to go middle class people who suffer the most in any economic downturn as Rich have the means to move away and blame everything but them and poor well they got nothing to loose and have their social benefits regardless.
It is offcourse as you mentioned as well your decision to invest and you are liable for all monies owed. It is very unfortunate to see as in your case banks were throwing money to even those who cannot afford a loss to put on roulette table. And hence the credit crunch we are in. Well they have got govt. to bale them out and Nama to make sure they didnt end up as unfortunate as you.
I will say you do need to knock lot of doors looking for some sort of leverage. Personally I think it is unbelievable that bank lend you money when you have no continuous means of income in long term but thats history.
I will say it is worth having a chat with your local TD explaining your situation if bank is unhelpful. In any case do go to bank and try to work things around. Try to hang on for a year if you can but again its a gamble but thats what it was from the beginning.

Best of luck.


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## canicemcavoy (24 Nov 2009)

anuj21k said:


> I will say it is worth having a chat with your local TD explaining your situation if bank is unhelpful


 
Do people _really_ to live in a country where politicians can pull favors with banks and get people's loans/debts waived?


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## Guby (30 Nov 2009)

Hi,
I have heard that if there is negative equity that you must get the permission of the lender to sell the property and this may not be forthcoming.  The lender says that if the borrower sells and there is a shortfall that the deeds of the property will not be released unless the borrower can make up the shortfall.  
In the case I heard of, the lender (major bank) offered the borrower a substantial loan at 9.95% interest ! to pay towards any shortfall.  this happened in recent months and it seems extraordinary after all that has happened that a major lender thinks it is ok to lend someone obviously in difficulty an expensive loan in order to pay towards a shortfall.  In the particular case the shortfall is likely to be higher than the amount of the expensive loan.  
Has anyone come across this?  I do understand that the lender would try and recoup the shortfall but I thought they at least would allow the borrower sell the home and pay the proceeds of the sale towards the mortgage and then negotiate around any shortfall.


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## mercman (30 Nov 2009)

Guby said:


> this happened in recent months and it seems extraordinary after all that has happened that a major lender thinks it is ok to lend



What is so extraordinary about this ?? What do you think the Bank should do -- simply write off the debt ?? It is because of the careless lending that has left the Banks in such a dangerous level. Look, it really is quite simple, if you borrow the money it has to be paid back. And the higher the risk the more one will pay for the loan.


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## Guby (30 Nov 2009)

mercman said:


> What is so extraordinary about this ?? What do you think the Bank should do -- simply write off the debt ?? It is because of the careless lending that has left the Banks in such a dangerous level. Look, it really is quite simple, if you borrow the money it has to be paid back. And the higher the risk the more one will pay for the loan.


 
Mercman,  I don't understand your reply. You are being sarcastic? "it is because of the careless lending that has left the Banks in such a dangerous level".  My concern here is that a family in financial difficulty and negative equity has made the decision to sell their home, put the proceeds towards their mortgage debt, and negotiate around the shortfall. But they cannot sell their home as the bank has said they will not release the deeds until the shortfall, how ever much that may be, is paid.  the borrowers are concerned that prices will fall further and are trying to minimise the shortfall.  Acting responsibly I would say but the bank by granting them an expensive loan at 9.95% to cover the shortfall are acting irresponsibly, compounding the borrowers difficulties.  when the house is sold, their asset is gone, they will be renting so how are they to pay back the large expensive loan.  
I suspect that if the lender sought to re-possess the home that if a Judge heard the account above, they would be less than impressed.


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## mercman (30 Nov 2009)

Guby, No sarcasm meant. My answer was in line with the original Post. Everybody's circumstances are different. In the case of this the OP bought the property as an Investment not as a family home.


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## Buddyg (1 Dec 2009)

> compounding the borrowers difficulties. when the house is sold, their asset is gone, they will be renting so how are they to pay back the large expensive loan.


 
This is exactly what should happen. They have a debt to pay.

The poor family have to rent and pay a loan. Big deal. They shouldn't have bought a house they couldn't afford or anticipate not affording.


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## anuj21k (2 Dec 2009)

Buddyg said:


> This is exactly what should happen. They have a debt to pay.
> 
> The poor family have to rent and pay a loan. Big deal. They shouldn't have bought a house they couldn't afford or anticipate not affording.


 
And what about those who were well paid but have lost their jobs since recession. House prices are still at such levels that not a lot of ppl can afford to buy it outright.
What you are suggesting is a bit harsh on ppl already suffering bcoz of current economic climate.


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## euclid (11 Jan 2010)

In order to keep my blood pressure down , I've kept my distance from this thread for a while, but reading the latest posts, I have seen a lot of sensible and sympathetic replies. Thanks for those.

My original question has been answered, I suppose, although I'm not totally convinced:

When I took this gamble, and took out the mortgage to buy this property, my clear understanding was that THIS PROPERTY (AND ONLY THIS PROPERTY) WAS COLLATERAL FOR THE MORTGAGE. I had no idea that I was risking our family home as well!

My orginal question was: Shouldn't my solicitor have alerted me to the fact that the loan was "unsubordinated" and that my family home would be at risk if the property bubble burst?

Did I mention that I had an offer of 200,000 for the apartment? I managed (as someone suggested above) to get that increased to 220,000 and wrote to the bank asking them if they'd like me to sell for that price. I gave an undertaking that I would make up the difference. The bank agreed and the purchaser sent a surveyor round to check out the property.

The surveyor found a problem and the purchaser backed out. So the property is back on the market. The saga continues!


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## kopkidda (11 Jan 2010)

Can NAMA not deal with this as it was an investment property?


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## The Viking (12 Jan 2010)

Euclid

1. Get a good fees-only, financial adviser to outline some options. It will be worth the 1 hour fee. 

2. Can a relative not stand in the monthly payments gap - between what you can pay and what they could pay - until the market picks up and the house is worth closer to what you paid for it?   You would have to give them their share of the proceeds on preferential terms - but it would be better than losing all of your original investment.

3. If you have to sell, can a relative not stand in the gap between the amount you'll get and the amount you'll still owe the bank. i.e raise a small personal loan to help you pay off the bank. You want to be clear of the bank, because you don't want to have to pay the bank off at extortionate interest rates.  

4. Surely someone on here can comment to see if you might have a case of being missold a 250K mortgage at aged 60. Have you spoken to the Financial Ombudsman?

5. I'm no solicitor but my belief is that the decision when being advised by a solicitor, the decision is usually your own. I'm only suggesting it might be the least successful avenue to try. 

Good luck


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