# Bank Writedown?



## Commercial (12 Jul 2011)

Hi there,
I am looking for advice. I have a loan facility with a foreign Bank. The interest only period has expired since early this year and I am not in a position to meet P&I repayments.
I have continued to pay them interest only, but now they have sent me a letter with asking that I sell the property.
I have no issues with selling the property.However, I am getting no reassurance from them as regards the residual debt from the sale, as there will be circa. 40% residual debt.
What should I do, sell the property and hope that they write off the balance or dig my heels in and say no until they agree it will be full and final settlement?
I have no equity in other properties and no means to repay any other debt.
The Bank are aware of this.
I would appreciate any views etc


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## Bronte (22 Jul 2011)

If you have no assets and no income then they are likely to write off the debt.  The sooner you do this the sooner you start to deal with the problem.  If you are able to service the 40% then you should try and do so.


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## Commercial (22 Aug 2011)

Thanks Bronte. Purchaser now wants an answer and the bank won't let me know what they will do with the shortfall.
I have no means to pay anymore repayments at all.  Should I sell and hope that they give me a full and final setllement or sit and wait for potentially better deals if they don't give me full and final settlement?


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## JoeB (22 Aug 2011)

If it were me I'd be telling the bank that I have no choice but to say no to potential purchasers because I don't know what's going to happen with the shortfall. To take on 40% as a personal loan seems like too much, .. so from your point of view you're better off remaining on the hook for 100%, and still holding the apartment.

But if you can't handle the repayments, and penalty interest is accruing, then perhaps you should sell, even before confirmation from the bank.


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## mf1 (23 Aug 2011)

Its important that people know that a Vendor cannot sell a property with a mortgage attaching , without the Mortgagee's ( Bank's) agreement. 

The Vendor's solicitor will be holding the property deeds on trust from the Bank with a  personal undertaking not to part with them unless and until the solicitor is in full funds to completely satisfy the Banks debt. 

It is not as simple as just sell, get what you can  and then go and talk to them. You have to try and reach agreement beforehand. 

mf


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## Brendan Burgess (23 Aug 2011)

Am I missing something here? 

The bank wants you to sell. 

If you don't agree to sell, then the bank can repossess the property and sell it anyway. The only thing is that it will be at a much lower price. Both you and the bank lose out.  They will get less and you will have a bigger shortfall. 

The Sunday Independent had a headline "confirmed mortgage write-off gives hope" in July . This was for Stepstone, a sub-prime lender, who is exiting Ireland and only has a few mortgages to sort out. 

What was unusual about this was not that it happened, but that this is the only recorded case of a mortgage write-off.

Commercial, I don't believe that the bank will tell you in writing that they will write off the debt. But there is a good chance that they won't pursue it. 

In practical terms, you will have an unscecured debt of €x after the sale which is much easier to deal with than a secured debt. Next year we will have new debt settement legislation and it will be much easier to deal with unsecured debt than secured debt under this legislation.

I suggest that you sell the property. 

Brendan


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## JoeB (23 Aug 2011)

Well, I would still tread carefully.

The bank should, at a minimum, tell you what interest rate would apply to the outstanding balance,.. whether a normal mortgage interest rate, or a personal loan rate. If they won't answer that question then you could legimately say that you couldn't sell and take the risk that 40% of your mortgage balance would be converted into a personal loan at (rate x 2 or 3) compared to the mortgage rate. 

I know it might sound unlikely, but without any confirmation from the bank it's a possibility. Paying 2.5 times the interest rate, on 40% of the loan would leave you having to pay the exact same interest as currently, which you can't afford.

But Brendans point is good, that it might be easier not to pay unsecured debt.


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## mf1 (23 Aug 2011)

"Am I missing something here? " - Brendan 

If there is a mortgage attached to the  property, he cannot sell for less than the amount of the mortgage without a written confirmation from the bank. It's the solicitor who is carrying the risk plus the mortgage remains on the property so the purchaser won't be too happy either!

mf


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## Commercial (23 Aug 2011)

I will not receive anything in writing from the bank, even though I have requested it numerous times.
I have now taken a leap of faith and have agreed the sale of the property. I have to present a proposal to the bank, which thankfully I am well versed in and give them a figure which I can repay.
I know what the figure will be.
Brendan, what is the debt settlement legislation coming in next year?

Thanks to everyone for their replies.


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## Brendan Burgess (23 Aug 2011)

mf1 said:


> "Am I missing something here? " - Brendan
> 
> If there is a mortgage attached to the  property, he cannot sell for less than the amount of the mortgage without a written confirmation from the bank. It's the solicitor who is carrying the risk plus the mortgage remains on the property so the purchaser won't be too happy either!
> 
> mf



Hi MF

He said in his first post "[the bank] have sent me a letter with asking that I sell the property."


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## Brendan Burgess (23 Aug 2011)

Commercial said:


> Brendan, what is the debt settlement legislation coming in next year?
> .



The Law Reform Commission has produced proposals which are set out here

As part of the EU/IMF bailout, the government has committed to publishing the draft legislation by March 2012. Of course, it might take a lot longer to become law. 

Brendan


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## mf1 (23 Aug 2011)

OP

Can you  tell us please? 

Is there a mortgage - a legal charge - attaching to the property or is this an unsecured loan? 


mf


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## Commercial (23 Aug 2011)

There is a first legal charge on this property. It is an investment property


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## mf1 (23 Aug 2011)

Thanks for clarifying that


mf


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