# Negotiation Tactics - Are you better off with / without your house?



## Kine (14 May 2013)

Hi,

I was having a debate with a few friends over what the best tactic is for someone with an unsustainable mortgage - should they try complete their negotiations (assuming for a write-off) while they have their property or, if they get the Bank's agreement, sell the property and then try do a deal on the shortfall. 

I suppose what we haven't been able to figure out is whether or not you are in a better or worse off position with a large unsecured debt. Many people have received lots of varying advice on their own individual circumstances, with much of the recent discussions on the site revolving around people emigrating, but I suppose in light of the recent PIA etc, I haven't seen much discussion on whatc it is actually better to have? 

Getting a deal from your bank is easier said than done, so if they agree for the sale, I would have thought get the property sold and , assuming you can't afford the outstanding balance, that's when it is your best time to push as hard as possible as it is now an unsecured debt?

Penny for your thoughts!

Kine


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## khards (15 May 2013)

I believe thast they can ony chase you for 6 years on unsecured debt, but they can chase you for 12 years on secured.
If the bank will not let you sell the property then they can extract money from you for as long as they want.
I think you would be better off getting agreement to sell it, then either negotiating or defaulting on the unsecured debt.


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## Commercial (16 May 2013)

Most banks take this route. They will not negotiate until the house is sold.
They will sell the house and then negotiate on the shortfall. The reason being twofold. 

Firstly, they are not sure what you will get for the house, therefore they are unsure of the shortfall, so once this is known they can negotiate a writeoff.

Secondly as khards mentioned, there is amoral issue involved. They will not being doing writeoffs on family homes, but once the house is sold, what is left is unsecured debt, therefore they can do write downs on unsecured debt.

It is a leap of faith by the Borrower, and can be nerve wracking for them.


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## Bronte (16 May 2013)

Commercial said:


> They will not being doing writeoffs on family homes, but once the house is sold, what is left is unsecured debt, therefore they can do write downs on unsecured debt.


 
That's clever and makes perfect sense.  And it's currently bank mantra to state will not do writedowns on home loans.  

Anyway to answer OP it is best to sell, make an agreement that you agree to pay back the shortfall, then when property is sold renegotiate to not pay shortfall/have it written off, or decide not to pay anything - depending on circumstances.


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## Brendan Burgess (16 May 2013)

khards said:


> I believe thast they can ony chase you for 6 years on unsecured debt, but they can chase you for 12 years on secured.
> If the bank will not let you sell the property then they can extract money from you for as long as they want.
> I think you would be better off getting agreement to sell it, then either negotiating or defaulting on the unsecured debt.



This is not correct, so don't base your decision on it.

Does my debt just disappear after 6 years?


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## Brendan Burgess (16 May 2013)

It is a pity that banks won't come to an agreement on the shortfall before the house is sold. If they did, it would work better for everyone. More people would be prepared to address their unsustainable mortgage. 

Banks don't write down mortgage debt while the borrower retains ownership - this may change under a PIA, but I am not sure. 

Banks do write off and do deals on unsecured debt.

So, it is my opinion, that you are better off converting your mortgage debt into an unsecured debt. If they ask you to sign some document accepting responsiblity for the shortfall, go right ahead. This does not increase your liabilities.

When you have an unsecured debt, you can try to come to a voluntary arrangement. For example, that they will write off the balance after you have paid 10% - especially if a family member is prepared to give you 10%. 

If they don't agree to a voluntary arrangement, apply for a Debt Settlement Arrangement with all debts written off after one year. My guess is that the banks won't formally approve of it,  they will just ignore it. Therefore if it's at least 65% of your debts, it will go through by default. 

If the lenders use their veto, go bankrupt. Or go to the UK and go bankrupt.

If you have no assets, the bankruptcy process will be a lot simpler and the Assignee will have very little interest in you. If he has to negotiate with secured creditors or if he has to sell your house, your file will be active for a lot longer.


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## Bronte (17 May 2013)

Brendan Burgess said:


> So, it is my opinion, that you are better off converting your mortgage debt into an unsecured debt. If they ask you to sign some document accepting responsiblity for the shortfall, go right ahead. This does not increase your liabilities.
> 
> .


 
Yes one should sign the document, but it would be advisable that a solicitor looks at it.  Signing it doesn't really change anything so I'm not sure why banks insist on it, you owe the money one way or another.  

After you've signed it, and agreed basically that you owe the money and that you'll pay it back.  You can then go down the route of not paying it via the new insolvency regime etc.  Signing this document does not stop you being able to go bankrupt etc.


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## Importer (17 May 2013)

Bronte

I think you're giving terrible advice there, presumably unintentionally.

Accepting responsibility for the negative equity portion of the house in any written legal document is a very bad idea. Why on earth would you do that ??????
Recovering the negative equity portion of a distressed home loan puts the bank in a very weak position legally. Getting you to accept the negative equity portion of the loan
in a separate legal document helps to strengthen their hand and weakens yours. Don't do it or don't do it lightly.

If the OP signs such a document and in three months time the OP files a DSA application, the bank has valid reason for vetoing the proposal based on a very fresh, signed acceptance, of the now unsecured debt.

My advice to the OP and anyone else is to never sign such a document in cases where the NE is high just to get agreement for the house to be sold.
Much better off to go the PIA route without signing anything OR just hand the keys back on your own terms.

Remember one thing, the banks will be coming under increased pressure from the Central bank directly and the Troika indirectly to solve the mortgage problem. Any DSAs or PIAs that are vetoed will definitely come under scrutiny. The bank can quite justifiably say that they vetoed a DSA because the OP had already agreed to repay the loan shortfall in a recent signed document.

Don't be naive here. You say yourself that you cant understand the reasoning of why the banks are asking Debtors to sign such forms. Believe me there is ALWAYS a reason for everything where the banks are involved.

Never sign a document like this unless you are getting very sound legal advice and / or something equally valuable in exchange. That's what a deal is , one for one. If the banks are asking Debtor's to sign this type of form its because they see an advantage to themselves of having such a signed form.

I agree that such a signed form will not be of any disadvantage to a Debtor who decides to go bankrupt but not everybody will want to take the nuclear option.

Also, On a purely ethical note, I think it would be very bad form to sign a document taking responsibility for the negative equity portion of your loan when you have no intention of doing anything of the sort.
Has our society become so screwed up that people are willing to lie at will and tell mistruths on legal documents as long as its in their own interests. If this is true and nobody can trust anyone else, then we're all doomed.

The best thing to do is keep all communications with the bank in writing. If they telephone you , get the name of the official and write to him immediately afterwards summarising all the main points made in the conversation.
If they agree that you can sell the house provided you sign a document taking responsibility for the negative equity portion, you should write to them saying that there is no guarantee that you will be able to pay it all off
and refuse to sign the document.


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## ellenb (17 May 2013)

If the only way the bank will allow you to sell your house is by signing such a document and you decide not to sign, where does that leave you? Chances are if you have started down that road, mortgage must be unsustainable etc and there is not much other choice. 
 If you have managed to find a buyer, still most likely leaving you in NE, presumably the offer will be higher than any sale achieved by the bank at auction if you hand the bank back the keys with a voluntary surrender, thus leaving you with even more debt than if sold by you personally?
Damned if you do and damned if you don't. I know where I live, once word is out the house is being sold by the bank, silly money is offered and often accepted. 
I still also cannot understand why buy to let investors are getting write downs left, right and centre yet those with just the one family home are unable to seem to secure any writedown. 
Hopefully things will change once the insolvency process starts. We are holding tight for moment to get an offer, will ask bank to agree to sale, sign whatever they require in order for sale to go through and will try our level best to pay back what was agreed. However if that arrangement proves difficult or unworkable then we would have no choice but to go down insolvency path if needs be. 
If banks were being more realistic about shortfall then that would not happen, so the ordinary people can't be blamed if a so called "agreement" is completely one sided and you agreed to it or the sale wouldnt be allowed through.
Obviously we would have legal advice and maybe try negotiate on the shortfall but you don't want to hold things up so long that you lose your sale. And most of us know how long it can take certain banks just to agree to an interest only solution-3 months last time I filled a SFS.
 Seems to me it's the banks that are allowing this situation by not offering a fair solution on shortfall. 
Perhaps that will change within the next 12 months or so with PIA etc coming down the track. 
Anyone any experience of attempting to negotiate potential shortfall prior to a sale? Is it worth talking to them? My bank refused saying they would only go this once an offer is made.


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## Commercial (18 May 2013)

ellenb said:


> Anyone any experience of attempting to negotiate potential shortfall prior to a sale? Is it worth talking to them? My bank refused saying they would only go this once an offer is made.



I have tried in many cases to negotiate a settlement prior to the sale of the asset with most of the banks.
Only one bank has agreed prior to the sale and this was EBS.


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## Brendan Burgess (20 May 2013)

Let's just look at the options here for an unsustainable mortgage and evaluate them 

1) Sell the property in an orderly manner with the agreement of the bank but signing a letter acknowledging your responsibility for the shortfall. 
2) Refuse to sign the letter and hand back the keys to the bank.  Apply for a PIA. 

As this involves predicting bank behaviour, there is no correct answer.  Each alternative has pros and cons. 

The lenders are not agreeing in advance to write off the shortfall. 
The lenders are not agreeing to the sale without the borrower signing this letter. 

But after the house is sold, banks are doing deals, despite the letter. 

When the new Personal Insolvency legislation is in place, I believe it will be relatively easy to get a Debt Settlement Arrangement, despite having signed this letter.  I can't imagine that the lenders are going to spend time and resources reviewing and negotiating DSAs over unsecured debts.   

And if they do veto a DSA, you can go bankrupt, either here or in the UK. If you go bankrupt, you will be far better off not having any secured loans as it will make the Assignees job much easier and he won't have much lasting interest in you.

Will the banks veto a DSA because you signed a letter acknowledging your responsibility for the shortfall?  They might, but I don't think that they will. 


*Now, let's look at refusing to sign the letter and handing back the keys. *

As I understand it, you continue to have a secured debt until the bank sells the house which could take a year or more.  So you can't apply for a DSA as you have a secured debt. 

You can apply for a PIA, but the bank could well deem you to be non-cooperating as you  handed back the keys.

Or you can wait a year or more for the house to be sold and then apply for a DSA. Your deficit will be a lot higher so the bank is likely to be more interested in pursiuing you.


Of course, I might be wrong, but I think that the balance is strongly in  favour of signing the letter, selling the house and looking for a DSA or bankruptcy.


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## Brendan Burgess (20 May 2013)

> Also, On a purely ethical note, I think it would be very bad form to  sign a document taking responsibility for the negative equity portion of  your loan when you have no intention of doing anything of the sort.
> 
> Has our society become so screwed up that people are willing to lie at  will and tell mistruths on legal documents as long as its in their own  interests. If this is true and nobody can trust anyone else, then we're  all doomed.



With respect, I think it's far more ethical to sell a house in an orderly manner thus minimising the bank's loss than to just hand back the keys. 

I am not sure what "lies" one is telling on this surrender form?  As I understand it , one is acknowledging responsibility for the shortfall. You are responsible for it anyway, whether you sign the form or not. 

If the borrower is forced by the bank to sign an agreement, say to repay €2,000 a month for 20 years, to be allowed to sell the house, so be it. If the bank forces someone to agree to something completely unreasonable, I wouldn't condemn that person for being "unethical".


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## Importer (20 May 2013)

Hi Brendan

You keep on saying that banks are doing deals on the negative equity portion after the relevant house has been sold. This is not my experience at all.

Yes, I have heard cases where the banks themselves have introduced scenarios (some people might call them enticements)to do deals after the house has been sold but in practice, they will normally decline to discuss the "deal" (in advance) in any great detail . i am not aware of anyone who has actually received one of these deals. It seems that in many cases the banks want the security sold but Im not convinced at all that they will follow up with the kind of deals of the type that are widely reported here.

I am very skeptical that banks have any intention to write off ANY debt that they dont have to. I know of a few cases where houses have been sold and the banks have soon afterwards obtained a judgment on the unsecured portion. It's really only the extreme and desperate cases that have any hope of write offs.Make no mistake, secured or unsecured, banks will be fighting to get their money back regardless of what they say.


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## Brendan Burgess (20 May 2013)

Importer said:


> I know of a few cases where houses have been sold and the banks have soon afterwards obtained a judgment on the unsecured portion. It's really only the extreme and desperate cases that have any hope of write offs.
> 
> Make no mistake, secured or unsecured, banks will be fighting to get their money back regardless of what they say.



Hi Importer

Let's be clear. If a person has assets or income, the bank will get a judgement and seek to enforce it. It shouldn't be any other way.

So of course it is ony the extreme and desperate cases which should get write-offs.

I agree that the banks don't like writing off money even when they have no hope of recovering it.  

But I don't agree with your equating secured and unsecured debt.  I think that any sort of half decent DSA will be accepted or, at least, not vetoed by the mortgage lender. 

But just to be absolutely clear, it would be better for everyone, banks and borrowers, if the banks developed a protocol which told borrowers what they would get in exchange for the orderly sale of the house.


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## Kine (20 May 2013)

I think the above advice on tactics is most suited to an Irish resident, but I suppose quite a lot of people posting here have been talking about emigrating etc with an outstanding debt, and my understanding is the PIA / DSA only applies to irish residents? If this is the case, I suppose they are left with fewer options:

1) Allow the bank to get a judgement against them and assuming they don't need to move back, wait for 12 years and allow the judgement to expire;
2) Hit the UK for bankruptcy before their final destination.

Both options leave the bank with minimal recovery - you'd think they would be commercial in these cases, but from the posters on this site, this is still not the case.


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## Bronte (21 May 2013)

Importer said:


> Bronte
> 
> I think you're giving terrible advice there, presumably unintentionally.
> 
> ...


 
What difference does signing the document make? None. You owe the money whether you sign or not. If you don't sign the bank won't let you sell, and if you want to sell than you should sign. 

You say banks are not doing deals. I know for a fact that there are properties being sold with the permission of banks, and that they are being sold with a shortfall. I now this from 3 sources, my solicitor, auctioneer*s* and a banker. What is happening afterwards is that the shortfall is being 'ignored' in cases where the borrower has no money or assets. Obviously they will chase you if they think they can get money out of you. But even the idiotic bankers know they cannot get blood from a stone.


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## Bronte (21 May 2013)

ellenb said:


> I still also cannot understand why buy to let investors are getting write downs left, right and centre yet those with just the one family home are unable to seem to secure any writedown.
> .


 
This will only be happening because, buy to letters are fair game to banks, they are loath to go after homeowners as the word 'eviction' in Ireland stirs up all kinds of hatred. If a homeowners is making some kind of payment it is better for the banks to leave them in the house. 

You can be sure that the buy to letters may be getting writedowns, but the banks are going after their other assets if there are any.

You asked about negotiating a shortfall prior to sale, don't think it's possible.  You are correct that you selling is better than the bank repossessing.  Don't tell the auctioneer you need the banks permission, but auctioneers are very clued into this currently.


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## wiliteverend (21 May 2013)

First time user, hope this is the correct posting site. 

Previous thread indicated Banks are writing off Buy to let mortgages, I have seen no evidence of this at all unless one is considering the Nama customers? Currently negotiating with Bank regarding possible write down of a buy to let mortgage, not in arrears and will try to continue to pay this mortgage as well as two other investment mortgages, also in negative equity. 

In the long term I don't believe the position is sustainable and it is causing significant stress on the home front. Two/three reasons why I believe Bank should at least discuss the situation,

1. Its good for the bank and if, we the taxpayer, own the banks, it must also be good tax payer.

2.  It will be good for me but it should mean I will start to spend money in the economy. 

However, at present Bank has absolutely no interest in entertaining any write down. Fortunately I have a tracker mortgage on a loan of approx 210k, due to be paid off 2031, property worth about 140k; according to an article in today newspaper anyone presently trying to borrow 210k would have to pay nearly 60k more at current variable interest rates than me over the next 18 yrs. 

I intend to try and pay my debts if at all possible but can anyone explain why it would not be best for all concerned to write down this loan?  Where does the concept of moral hazard fit into such issues? Surely the Bank have some responsibility,


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## ellenb (21 May 2013)

Honestly not being mean but I really did laugh out loud when I saw the words "moral hazard" and "banks" in the same sentence! Don't think we would be where we are now if any moral or social aspect was high up in the agenda on any of the boards, and I don't think the shareholders would care too much either. 
From my anecdotal knowledge of buy to let writedowns, they only happens once investment propert is sold. If you can afford to pay your mortgage why on earth would they consider a writedown? Deals are being done with BTL where the case is alot of property and no hope of repaying.
What is making things hard now is there are a huge amount of investment properties for sale and those that are selling are going for very little rendering me, a homeowner desperate to sell, in a no win situation. 
If you have time, things might work out. I have been told today I have 3 months to get my "house" in order, excuse the pun. Time has run out I fear


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## elbo (19 Mar 2014)

Hi there, I am just wondering is there any more update on banks writing off debt after vol surrender? We wrote to PTSB recently and asked if they would accept vol sur on buy to let, we have 1 buy to let and our home mortgage with them.  We are on a interest and part capital agreement on our home and they have offered split mortgage on buy to let, but we are trying to get them to agree to vol sur and write down on balance on buy to let in order to leave our home mortgage sustainable for the future (both mortgages are variable int. rate) So we think it would be in their favour?  Although my husband has other commercial property with other banks, but we are in arrears also and huge neg equity....


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