# Repercussions of defaulting on mortgages.



## Bronte (11 Aug 2011)

Married couple with 4 young children.  

He has a 2 bed apartment in Dublin, my guess is about 250K mortgage, maybe more, rented but rent does not cover mortgage, I belive its been interest only for a few years now.  As for NPPR, PRTB, tax, my guess is probably never declared.  (May be an issue in relation to stamp duty too but not sure on that).

She has a house in the West of Irelandand stays at home with the children.  Originally this house was rented but bank agreed to reduce the mortgage to the rental amount, they moved into this house and are still paying this amount, so my guess is that the arrears are building up.  No prospect of a job,and impossible with the children.

They are slowly sinking.  They want to stop paying everything, save the 'rental' from the Dublin property for a year or two while the bank takes back the property, also 'save' the mortgage amount on the house they live on while the bank takes that property.  When the banks have taken back the properties, they will go and rent.  They will get a far better house to live in then they are in currently is the thinking and also that there is no end in sight plus the debt is only getting worse, and each year rent has been reducing.  How does that sound and is it a familiar story for others on here, maybe not for themselves but for others.  Will they be worse or better off in 6 years if they do this? (or however long the bad record lasts depending on what the bank does)  Eventual plan is to save and buy and family home at the rock bottom prices that they see all around them for much better properties for their large family.


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## mf1 (11 Aug 2011)

"while the bank takes back the property"

What makes them think the bank will do this? I would regard this as one of the many flaws in their "plan". 

Where are they going to put their "savings"? 

"Eventual plan is to save and buy and family home at the rock bottom prices that they see all around them for much better properties for their large family. "

This reeks of delusion - we'll walk away from all of our debt and then we'll buy something nice. 

I don't get it. 

mf


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## aristotle (11 Aug 2011)

Yeah, that would be a lovely ending but devoid of realism.

If you walk away from the debt, the bank will eventually repossess the property(s), sell for what they can get, and register a judgement mortgage against you for the remaining. Those "savings" you plan to make and use to buy a better house will have to be paid towards the judgement mortgage.

As it stands, the plan won't work. Delcaring yourself bankrupt (perhaps in the UK) might be an option if you want to go down a drastic route.

Not delcaring the rental property is a ticking bomb, if\when revenue find out you will be hit will demands for tax payments, penalities and interest payments, and refund of an interest relief. Even right now, assuming you have not told your insurance company it is rented out, you insurance may be void if anything happens to the property.

And all the "they" and "them", is this a theoritcal situation or is it about your own situation?


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## Bronte (11 Aug 2011)

No it's not me Aristotle, (I don't live in Ireland) the story is actually more far fetched.  But it did make me wonder was it possible somehow and in the last while on AAM a lot of people have hinted that this is exactly the kind of thing they are going to do.  

Re some of the queries on what they will do with the savings, I guess under the bed.  Or in an account that can't be found out about, credit union maybe.  

Aristotle you mention a judgment.  Well one is not earning, so what will a judgment do to them, remember both properties are individually owned.  Also the one earning, their thinking seems to be so what if the bank goes after them for an instalment order,  after having repossesed,  they will probably be ordered to pay little or nothing as if they start paying rent, there will be no money left after utilities and food for all of them.  The salary is not high.  Right now they are sinking, and as the Dublin rent has gradually been reducing the cost of servicing it is becomming impossible, they have not paid it a couple of times already.  When people are faced with the choice of the ESB or the mortgage some will chose the ESB.  

I presume both their ICB records are shot already, one of them already had debt written off by some credit cards etc.  

MF1, I know it sounds far fetched, but the bank will have to take back the property if they don't pay the mortgages?


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## Alwyn (12 Aug 2011)

As far fetched as it might sound - this is the actual thinking out there.  The amount of people that have said to me that they are planning on the doing all of the above is unreal.  People are actually expecting to purchase with cash in the next three years.

Where they think there savings will be safe is beyond me?


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## frostie (15 Aug 2011)

Boomtobust said:


> As far fetched as it might sound - this is the actual thinking out there.  The amount of people that have said to me that they are planning on the doing all of the above is unreal.  People are actually expecting to purchase with cash in the next three years.
> 
> Where they think there savings will be safe is beyond me?



I'm hearing the same thing myself boomtobust - it's false hope more than anything.

Do they have savings at all, and whats the depth of negative equity in the rented property. One option, depending on the circumstances, would be to hand back the keys of the rented-out property, and use any savings as an offer to off-set the negative equity as a settlement to the bank. Most banks are dealing in some form of debt-forgiveness on a case by case basis, if they have enough savings, it also wouldn't have to be the full total they offer - again depending on the circumstances as to where the savings are held.
Buying in a few years seems to be out of the question, as their credit rating will be in bits if the bank takes back the property.


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## orka (15 Aug 2011)

Bronte said:


> They want to stop paying everything, save the 'rental' from the Dublin property for a year or two while the bank takes back the property, also 'save' the mortgage amount on the house they live on while the bank takes that property. When the banks have taken back the properties, they will go and rent. ... Eventual plan is to save and buy and family home at the rock bottom prices that they see all around them for much better properties for their large family.


I can see the 'plan' working for the 'let the bank take back the properties' point of view but I don't see how the savings will work. Apart from the fact that it's pretty much pure theft collecting rent but not passing it on the mortgage provider, how are they going to explain the sudden appearance of many thousands of euros in x years time? Money laundering legislation makes it quite difficult to just spend a huge amount of cash so they could find themselves screwed that way (although I'm just wondering whether there would actually have been any law broken concealing money from the bank while going through reposession). 

As pointed out above, they would find it very difficult to get a mortgage for the next house so they would want to be doing a massive amount of saving if they expect to pay cash - whatever about no law being broken, I'd love to see them give the explanation to the next bank of where their savings were accumulated from...

Anyway, I think its stinks, particularly when there is more than just a family home involved - whatever sympathy I would have for a family, sinking further into arrears, choosing to stop paying the mortgage to push the bank into reposession, taking in rent and not paying at least that (or the net after expenses) towards the mortgage seems criminal to me. 

And I would hope that revenue would come after them with a high tax bill on their rental property too as the outgoings (which would usually include large mortgage outgoings meaning that no tax would be payable) would be so low. Plus (see discussions on some other threads), there is a good possibility that debt forgiveness/write-off on the rental property would be considered income and so taxable - will they hide their savings from revenue too?


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## Bronte (26 Aug 2011)

Why would they need to hide their savings from revenue?  Who would they have to explain the appearance of money to ?

As far as I can figure out is what they planning anything different to what the big developers/property purchasers have done.  And none of them have had a change in lifestyle.  

I suppose the logic is that all they are doing is sinking further and further into debt, have no cash for any emergencies (and they have had genuine emergencies) and what is the point, they might as will give up trying as there is no end in sight, the bank will just keep them on the hook for the rest of their lives.  

I am not condoning the idea, it was discussed with me so I put it on AAM to see what others thought.


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## Bronte (18 Jan 2012)

Update on this.  No payments on family home in a few months.  Bank visited them.  Wants him to start making the payments and want all his salary details under the Marps process but he pointed out it's not his debt, bank thinks that as it's the family home they should make it a priority.  A  lot of emphasis was put on this.  

They didn't actually save any money by stopping paying the mortgage as they were already sinking it has just gone to pay bills, heating and xmas etc.  They asked the bank what about the 3 other debts with the bank (business overdraft converted into personal loan at banks gunpoint, overdraft and personal loan) the official would not deal with these at all, only the mortgage.  

Suggested the wife sell the investment mortgage (with subprime lender) with massive negative equity and official told them that if the subprime lender brought them to court the judge would throw it out.  

Bank also said if they didn't start paying the family home the bank would repossess it and board it up and that would add to the costs, but as the person liable for the debt has no job, no assets etc they told the bank it didn't matter how much the debt was.  

I thought it was interesting that the bank said they would board it up rather than sell it, why would that be?  Bank doesn't want it, and knows they cannot sell it, cannot sell anything if they start repossessing all those who have arrears.  

Also thought it was interesting that bank would not deal with the other debts they have with them.  Why not, what kind of a way is that to deal with things properly. 

Can't believe they said to get rid of the investment and the subprime would not get a judgment in court as there  is no money/assets.

But if he paid family home and they got back on track presumably the subprime and the bank would both go after the equity and wipe it out completely with interest, penalties and costs.  

This couple are beyond caring any more and the debt is unsustainable.  They are going to sort out the investment property tax wise by starting each month with paying something off it.  So first off is registration with PRTB, deduct that cost from rent and pay balance to subprime.  Next month, NPPR, following month NPPR arrears etc.


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## Bronte (26 Jan 2012)

Latest on this, bank has sent letter that they now have a judgment in relation to the lowest debt (less than 10K) in addition to that debt they now owe minor interest charges and court costs and the letter says if the don't pay within 7 days they will get either the sheriff (nothing to take), bankruptcy !, gazette (already on ICB so do they care), judgment mortgage on house (massive negative equity) or instalment order (no income).  Why does the bank waste time and money on this riducleness.  It seems that one arm of the bank does not deal or speak with the other.


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## ClubMan (26 Jan 2012)

Bronte said:


> the sheriff (nothing to take)


Nothing? What about furniture, household effects etc.? Aren't they fair game in this situation?


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## ClaireM (26 Jan 2012)

Ok, so if the bank get judgements on all the debts, repossess on the mortgages and get installment orders on the others the family will be left with the bare minimum to live on after they pay the installments.

I don't see how or when they think they will save to buy another house. They will just get by.


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## 44brendan (26 Jan 2012)

Nothing surprising here Bronte. One might naturally expect that the Banks have a fairly seamless and progressive debt collection progress. As an "insider" in the sector I am constantly amazed at the lack of common sense and joined up thinking in dealing with arrears processes within the main banks. There is now a Civil service mentality in their approach (no offense to good Civil servants) where the objective is to push the can down the road and continue to hope that by issuing threatening letters and progress with ultimately fruitless legislation they are actually achieving something. I have some degree of sympathy for the officials involved as this is ultimately a lack of focus by senior management. 
You are right and to a certain extent I can empathise with the approach taken by the couple in your example. As their credit rating is shot anyway, they may as well milk this situation for as long as they can. Ultimately the Bank will go for instalment proceedings against him on his borrowings which may not be such a big issue unless he has reasonable surplus income


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## ClaireM (26 Jan 2012)

But surely this couple are trying to hold on to some money. They are considering not giving the rent to the bank, the stopped paying mortgage but the money is just being spent. How many cuts have they actually made to their expenditure.

Maybe if they are in court defending an installment order they might start paying something. Some creditor will get the money rather than it going under the mattress or on lifestyle expenditure.

there genuinely may be no money but the creditor doesn't know that yet.


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## Time (26 Jan 2012)

ClubMan said:


> Nothing? What about furniture, household effects etc.? Aren't they fair game in this situation?


Nope. The sheriff is not interested in small potatoes like that. A Rembrandt on the wall or a Porsche parked outside yes, a crappy 3 piece suite from Ikea no.


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