# In case of negative equity what right have banks to seek shortfall



## Ryandd (16 Oct 2011)

I have a house in negative equity and was hoping to get advice on the issue of banks and mortgage contracts and if anyone knows if there is an requirement on the banks to advise customers of negative equity and what it would mean for the mortgage taken out, as the banks placed their own valuation on the property and gave 100% mortgages, surley the responsibility falls on both banks and customers, is there a notice stating that if the property falls into negative equity that the borrower must make up the shortfall and was it not taken into account when underwriting the loan.  Was there negligence on the bank to leave out an important piece of advice to customers.  It may have some stop and think!


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## Don_08 (16 Oct 2011)

You took out a loan for an amount of money, that's what you signed up for  - the house is just the asset backing that loan. 

Did you read your mortgage document before you signed?

I am in negative equity too - but it seems pretty straightforward to me. I took out s certain amount of money and thats what has to be paid back. Did all the people who made profits when selling their house before 2007 give a share to the banks?


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## wbbs (16 Oct 2011)

The valuer appointed by the bank was to confirm the value you had already agreed to pay, they didn't set the value, the value in general was considered to be the purchase price.

The term negative equity was not in widespread usage in this country in the past so I doubt if any lender was pointing out it could happen to their customers.   It was not an issue and previously there was no such thing as an 100% mortgage and there were indemnity bonds in place to protect anything above 80% of the value so it simply did not arise on a large scale.    

Anyone who had been through the UK negative equity situation in the past was aware of it but I don't think it even occurred to the average purchaser here or for that matter to the bank staff.


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## Purple (16 Oct 2011)

Ryandd said:


> I have a house in negative equity and was hoping to get advice on the issue of banks and mortgage contracts and if anyone knows if there is an requirement on the banks to advise customers of negative equity and what it would mean for the mortgage taken out, as the banks placed their own valuation on the property and gave 100% mortgages, surley the responsibility falls on both banks and customers, is there a notice stating that if the property falls into negative equity that the borrower must make up the shortfall and was it not taken into account when underwriting the loan.  Was there negligence on the bank to leave out an important piece of advice to customers.  It may have some stop and think!



You are 100% liable for any shortfall.


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## wbbs (16 Oct 2011)

Ryandd, you do have my sympathy, it is very difficult for people in that position but when it happened in the UK I don't think there was any bail out or whatever you want to call it for mortgage holders, don't think the banks were blamed for it either, I am open to correction on that as the only experience I have of that was a friend who was in the UK at the time.   Bought house for 50k, put 15k into renovating it, for various reasons had to move home, house prices had dropped, house was voluntarily surrendered to bank who sold it for 35k (going rate at the time).  Indemnity bond kicked in and bank got their shortfall but insurance company then chased friend for the shortfall.   So in the end they were still on the hook for the shortfall.   There were no easy solutions.


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## PiedPiper (17 Oct 2011)

An agreement or a contract with two parties you and the bank and therefore the liability should be shared 50/50.

If the bank gave you wrong advise or information then of course they should be liable.

If the bank or your solicitor did not explain and you didnt go into the contract with full information then it is null and void anyway as the basics of contract law were not in place.


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## Purple (17 Oct 2011)

PiedPiper said:


> An agreement or a contract with two parties you and the bank and therefore the liability should be shared 50/50.


 Give’s a loan of €10’000 will ye? I’ll repay the 50% I owe you over the next 3 years.



PiedPiper said:


> If the bank gave you wrong advise or information then of course they should be liable.


 If.



PiedPiper said:


> If the bank or your solicitor did not explain and you didnt go into the contract with full information then it is null and void anyway as the basics of contract law were not in place.


 If... but if the OP signed the bit saying that they understood what they were getting themselves into then they are liable.


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## Steve Thatcher (17 Oct 2011)

PiedPiper said:


> An agreement or a contract with two parties you and the bank and therefore the liability should be shared 50/50.
> 
> If the bank gave you wrong advise or information then of course they should be liable.
> 
> If the bank or your solicitor did not explain and you didnt go into the contract with full information then it is null and void anyway as the basics of contract law were not in place.


 
I don't know which school of economics you studied Pied but this advice isn't right and isn't helpful.
The contract stipulates the terms and that is that you borrow X for Y years at Z rate and pay it accordingly. It doesn't say borrow X , pay back what you can and if you get into trouble we'll go halves with you. In the same way it doesn't say borrow X, watch the property prices rocket and when you sell at a huge profit we'll take half.


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## Ryandd (17 Oct 2011)

I don't think it  clearly states that with the banks having an interest in the property aren't  liable for shortfall in case of negative equity, either way unless things improve for me I will be facing the fall, but can't help feeling banks are lording over the people who have bailed them out.  If the banks knew of possible bubble bursts before the customers it was wrong to continue giving out 100% mortgages past that point.


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## Bronte (18 Oct 2011)

Ryandd, by now we have got the message.  You are in negative equity and you want the bank to share your pain.  Well they are not going to.  Why don't you focus on doing everything you can to sort out your negative equity and if you really feel that you can't why don't you skip to the UK and go forum shopping.  

If your property had increased in value, would you have shared the profits with the bank?  Did you at all make a wrong decision in overpaying for a property?  

If you continue to focus your anger on blaming the banks you will never move on.  Why don't you do the money makeover thread and hopefully get concrete advice on what you need to do.  Being angry with the banks is not going to do you any good.  Love them or loath them, we need banks.  Banks are about making money, not empathy.


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## Gekko (18 Oct 2011)

Ignore the naysayers and talk to your bank.

Bespoke solutions are being found for people...they're just not being publicised.

Don't let the moral police get you down.


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## peelaaa (18 Oct 2011)

Bronte said:


> Ryandd, by now we have got the message. You are in negative equity and you want the bank to share your pain. Well they are not going to. Why don't you focus on doing everything you can to sort out your negative equity and if you really feel that you can't why don't you skip to the UK and go forum shopping.
> 
> If your property had increased in value, would you have shared the profits with the bank? Did you at all make a wrong decision in overpaying for a property?
> 
> If you continue to focus your anger on blaming the banks you will never move on. Why don't you do the money makeover thread and hopefully get concrete advice on what you need to do. Being angry with the banks is not going to do you any good. Love them or loath them, we need banks. Banks are about making money, not empathy.


 
Actually, we don't need banks, especially irish ones .


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## mccabes2 (19 Oct 2011)

Rylandd the courts have refused to accept the concept of reckless lending, that the banks should be liable for some of the shortfall in a negative equity situation. Legally they can't be forced to reduced your negative equity, so why would they - it's in their interest to keep your negative equity on their books, in the off chance you can ever afford to pay it at some point in the future. 

Anecdotally I have heard of banks reaching settlements with people in mortgage arrears that allow for a reduced sum of negative equity, that's before the case reaches the courts, and that was when they were very well represented. (New Beginnings I believe).


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## Gekko (19 Oct 2011)

mccabes2 said:


> Rylandd the courts have refused to accept the concept of reckless lending, that the banks should be liable for some of the shortfall in a negative equity situation


 
Are you sure of this?

I would have thought that the "duty of care" question remains unanswered by the Courts.


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## Ryandd (19 Oct 2011)

Bronte said:


> Ryandd, by now we have got the message. You are in negative equity and you want the bank to share your pain. Well they are not going to. Why don't you focus on doing everything you can to sort out your negative equity and if you really feel that you can't why don't you skip to the UK and go forum shopping.
> 
> If your property had increased in value, would you have shared the profits with the bank? Did you at all make a wrong decision in overpaying for a property?
> 
> If you continue to focus your anger on blaming the banks you will never move on. Why don't you do the money makeover thread and hopefully get concrete advice on what you need to do. Being angry with the banks is not going to do you any good. Love them or loath them, we need banks. Banks are about making money, not empathy.


 

Bronte
It may appear that Im having a problem with the banks but its more a collective problem of how the current situation is having such an effect on the country as a whole.  My negative equity can't be solved so I need to plod on like everyone else.  And just for the record the banks did take the profit I made from a house sale 10years ago, they were quiet keen to take it for 2 years savings scheme  Bank customers were loyal joining family members and friends over the years.  I feel now they have forgotten the values and resorted self preservation.  I like many others wish they had done things differently or saved a bit more for a rainy day but no point in feeling sorry for myself, or as you mentioned asking the banks for help, it is quiet clear there is little empathy which would suggest that they don't feel partly responsible for negative equity and the massive poverty levels facing the country.  I await the plan of action


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## Purple (20 Oct 2011)

Ryandd said:


> And just for the record the banks did take the profit I made from a house sale 10years ago, they were quiet keen to take it for 2 years savings scheme  Bank customers were loyal joining family members and friends over the years.


I don't understand this point. Did the bank take your savings and keep them?


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## Bronte (21 Oct 2011)

Ryandd said:


> . And just for the record the banks did take the profit I made from a house sale 10years ago, they were quiet keen to take it for 2 years savings scheme
> 
> 
> . I await the plan of action


 
If you sold a property for profit then it is you that got the profit not the bank. If you then lodged that money in a savings account, the bank didn't get the money, it is still yours.

In relation to your point about banks and empathy.  Banks don't do empathy, they do money lending for profit.  There job is to make as much money in profits as they can and they will use and have always used every trick in the book to increase their profit.  

Instead of waiting for the plan of action, which doesn't look like it's coming any time soon, how about doing the money makeover thread and having a serious discussion on the financial problems you are experience.  You cannot solve the problem for all of Irish society, but maybe some of the rest of us could try and help you if you post up full details.  If everyone did that maybe we could get somewhere.


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## Ryandd (21 Oct 2011)

I was just saying in relation to the banks customers if people didn't keep their money in Irish banks they would collapse and I was making the point that banks have made money over the years through customer loyalty and should remember this when customers are in trouble with mortgages.  Im not talking about debt forgiveness but some banks need to take a more understanding approach when dealing with mortgage arrears.


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## dereko1969 (21 Oct 2011)

Ryandd said:


> I was just saying in relation to the banks customers if people didn't keep their money in Irish banks they would collapse and I was making the point that banks have made money over the years through customer loyalty and should remember this when customers are in trouble with mortgages. *Im not talking about debt forgiveness but some banks need to take a more understanding approach when dealing with mortgage arrears*.


 
It seems to me (from reading on here and through the media) that most of those who are having difficulties with their banks are those that have buried their heads in the sand and not contacted their banks *before* missing payments. They then tend to miss a few months payments, still saying nothing to the banks and then when the banks through frustration start getting legal they only then wake up and try to engage.

Have you a specific example of banks not being understanding where customers have engaged early with them?


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## Ryandd (21 Oct 2011)

I applied for interest only and had been unable to meet the full mortgage repayment the previous month.  I was told that I need to clear what I owed before they would consider.  But I don't think they understood I had filled out the forms of our incoming and outgoings and it was clear there was a shortfall as we both lost are jobs so this was made known.  They weren't interested in discussing interest only until I had cleared the arrears from the previous month.  The month of september was particularly difficult as I have 3 children going to school and there were bills due which were a priority to clear.  example. Oil, car tax and general for children to attend school.  I felt a bit upset that I couldn't manage that month and didn't feel any better or reassured after the phone call with the banks.


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## mccabes2 (21 Oct 2011)

Hi Gekko - that's my understanding of the law. Last year in  _ICS Building Society v Grant_, Justice Peter Charleton held that a tort of reckless lending does not exist in law as a civil wrong. I don't think another judge has contradicted this since. 

The Irish Property Council are currently looking for funding to take a reckless lending case and I've come across several Irish Times and Examiner articles mentioning that New Beginnings are looking to take a similar case. But as of today I think that _ICS Building Society_ stands.


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## Bronte (24 Oct 2011)

You should not speak to a bank on the telephone, this will not get you anywhere.  Everything should be done in writing.  You previously stated that you used your savings to pay the mortgage, but if you are both employed, you would be entitled to mortgage supplement.  Have you applied for mortgage supplement?  Are you entitled to mortgage supplement?


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## PiedPiper (24 Oct 2011)

Hi

There are no end of specific examples of the banks not engaging with customers no matter when they tried to contact them.


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## Bronte (25 Oct 2011)

PiedPiper said:


> Hi
> 
> There are no end of specific examples of the banks not engaging with customers no matter when they tried to contact them.


 
Can you give a specific example or two?


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## Ryandd (27 Oct 2011)

Bronte said:


> You should not speak to a bank on the telephone, this will not get you anywhere. Everything should be done in writing. You previously stated that you used your savings to pay the mortgage, but if you are both employed, you would be entitled to mortgage supplement. Have you applied for mortgage supplement? Are you entitled to mortgage supplement?


 
Ive applied for this supplement, paper work sent in and will take some weeks yet, Im hoping on this lifeline unless one of us find work soon it will our situaton will be disasterous.  Like many thousands without work and trying so hard to find work its very difficult to manage day to day living, bills, the mortgage was a chunk of our outgoings and social welfare payments are only covering our living costs modest as they are.  Our weekly income is just over 400 pw It just is not sustainable to have a mortgage of 1200pm.   I can say if the banking crisis did not occur we would both still have our jobs as it was the downturn which was the reason given for me losing mine.  Being angry at the banks is just a normal reaction, it doesn't solve the problems and there is little hope given the grim details of the Keane report which offered little insight or hope for the future.  I would love nothing more to go back to paying my bills and mortgage and get on with raising the family, no fancy expenditures we were proud home owners like all the rest, I just can't see a way out of this for us, it may be the case of starting again, but ordinary people don't want the labels or the stigma that will be with us for many years to come


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