# Banks wanted to recover shortfall over 26 years after voluntary sale



## epicaricacy (19 Mar 2015)

Well done Brendan on generating an interesting debate. I've been slow to reveal our own story on AAM for obvious reasons - but I believe it may help others.
My wife and I bought a property in 2006 for north of 300k on a 100 percent mortgage.
We both lost our jobs in 2010. We continued to pay our full mortgage for a further 18 months out of our redundancies until our funds were depleted. We then contacted our bank and entered the MARP process, whereby we paid about a third of our full mortgage for 12 months.
At the end of the MARP, the bank's underwriters suggested a voluntary sale as they believed that our mortgage was unsustainable.
We appealed - on the basis that we'd paid the full mortgage for 18 months (out of our redundancies) had never failed to pay restructured amount, our arrears were less than 8k, that the house was in massive neg equity and that we could see ourselves recovering in the near future as the economy improved. 
We lost our appeal and bowing to the inevitable, we agreed to sell our house on the bank's behalf. We met with our bank manager and he assured us that the bank would probably write off the shortfall.
After we sold the house, the bank wrote to us with a 26 year repayment schedule, whereby we would have to pay 800 per month for the 26 years - which equated to 90k interest in addition to full shortfall.
We decided that our only option was to move to the UK and petition for bankruptcy.
Our bank was (is) one of the Irish banks.
In conclusion:

(1) A wealthy cash investor bought our house and is now renting it out. So much for the argument that repossessions will free up property for first time buyers.

(2) The bank took a hit of 180,000 - which is probably being footed by the tax payer.

(3) Solicitor's and Estate's fees were paid by bank (tax payer).

(4) We 're now paying rent to another wealthy landlord.

(5) As the economy has improved - as I mentioned in our appeal - we're slowly managing to start again. Not helped by the banks' refusal to give us a basic account - as was mentioned by another poster a few weeks ago.


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## Delboy (19 Mar 2015)

Hi epicaricary

sorry to hear of your troubles. The 26 yr repayment schedule was ridiculous and unfair IMO, and I'm an advocate for repossessions! This type of story is driving the backlog at the minute as people won't walk away form unsustainable houses because the banks won't cut realistic deals when surrender of the asset is in play. 

1 question- how do you know the bank took a hit of 180k? How is that worked out?


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## epicaricacy (19 Mar 2015)

Hi Delboy

180k is the shortfall between what we sold it for and the amount we'd left on the mortgage.


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## Sarenco (19 Mar 2015)

epicaricacy said:


> Well done Brendan on generating an interesting debate. I've been slow to reveal our own story on AAM for obvious reasons - but I believe it may help others.
> My wife and I bought a property in 2006 for north of 300k on a 100 percent mortgage.
> We both lost our jobs in 2010. We continued to pay our full mortgage for a further 18 months out of our redundancies until our funds were depleted. We then contacted our bank and entered the MARP process, whereby we paid about a third of our full mortgage for 12 months.
> At the end of the MARP, the bank's underwriters suggested a voluntary sale as they believed that our mortgage was unsustainable.
> ...


 
Thanks for sharing your story epicaricacy and I hope things are now looking up for you.

I fully agree with Delboy regarding the ridiculousness of the arrangement in relation to the shortfall.

In a logical system, you should have been able to negotiate a reasonable arrangement in relation to the shortfall in advance of any voluntary sale.  If your lender failed to present you with a reasonable proposal regarding the shortfall - in your sole judgment - you could have declined to co-operate with the voluntary sale and put the lender to the (not inconsiderable) expense of having to repossess the property.  Following the repossession, if the lender still didn't present you with a reasonable proposal regarding the shortfall - again, in your sole judgment - you should then be in a position to seek the protection of bankruptcy, in which case the lender would get nothing.  The bankruptcy term should be no longer than is reasonably necessary to liquidate your assets and settle your affairs.

In other words, a logical system would have natural checks and balances built into it so that both borrower and lender are motivated to settle their affairs to the mutual satisfaction of both parties, in the most cost-effective manner possible.

Unfortunately, our government decided to go down a different route.  Firstly, they declared that it was official government policy to keep people in their "family homes", regardless of their ability to actually pay any outstanding mortgage on the property (to quote the Tanaiste at the time, "repossessions are not in anyone's interest") and then introduced an overly complicated and unworkable personal insolvency regime.  Job done!

The contribution of the Central Bank to resolving this issue has been equally underwhelming. The bureaucratic nonsense that is MARP simply operates to avoid dealing with issues.  Beyond the occasional bout of hand-wringing, there have been no concrete actions taken to force banks to realise losses and deal comprehensively with defaulting borrowers.

The latest soundings about removing the "bank's veto" would appear to involve some combination of the removal of private property rights (i.e. the security interests of lenders) and the appointment of a new arbitrar of "fairness".  More nonsense.

Really the solution to this problem isn't rocket science.  The system works perfectly well in other jurisdictions across the  English speaking world - why reinvent the wheel?

Sorry, rant over!


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## epicaricacy (19 Mar 2015)

Hi Sarenco

I agree with everything you've written. Our bank - not BOI, if people are wondering - deemed that we had to sell our house as we were incapable in the short / medium term of making 1100 mortgage payment and yet ended up demanding 800 per month for 26 years in the full knowledge that this 800 euro amount would be in addition to rent which we'd have to pay for a different property.
I was aware at the time that we could have probably continued to stay in situ for a few years without paying anything and that we could have used this time to build up a survival fund. If I'd had a young family I probably would've decided on that course of action.
However, neither my wife nor I have much tolerance for uncertainty and, as a result, we decided to move jurisdiction to an insolvency system that works. We did find the UK move to be particularly stressful as we initially struggled to find work to defray our expenses and we were surprised re. how expensive everything was (council tax, water, car insurance).
However, we eventually managed to get some dead end work and successfully petitioned for bankruptcy after 6 months. We didn't even have to meet the magistrate and we returned home a week after meeting the OR.

On our return to Ireland we found it impossible to get rent allowance as every property was above the threshold and no landlord would accept it.

There's a 10 year waiting list for social housing.

We found it impossible to open a bank account.

We 're now discharged  and attempting to start again - still being refused a basic bank account.

Short term recommendations:

Ireland needs to reduce the discharge period for bankruptcy to 1 year and the IPO period to 3 years.

Ireland needs to force state owned banks to offer basic bank accounts - no overdraft facility and cheque book - to (un)discharged bankrupts to enable them to work, pay bills by direct debit or to use a basic card to purchase goods and services. 

Up the rent allowance threshold for people who voluntarily surrender or engage in voluntary assisted sale on behalf of the banks - at least for a couple of years until the couple can  find work. Most people who purchased a house are not interested in remaining unemployed long term. 

The Gov should use its leverage in state owned banks to outlaw 26 year (my wife just reminded me it was actually 28 years) repayment schedules for people who fully co -operate with their lender re. voluntary sale / surrender.


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## no_moolah (19 Mar 2015)

I am so shocked at the bank's dealings with you epicaricacy ! I actually thought I had read your posts wrong. Absolutely disgraceful behaviour and totally unnecessary. I wonder how they kept a straight face with some of the unrealistic demands they made. 28 years lol. That made me laugh. Never ceases to amaze me...

Glad you're getting on with your life now. Well done for taking charge and doing something about it.


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## Bronte (19 Mar 2015)

Well done on telling us the truth of how banks deal with people.  It can not have been easy, but your post will help others on what is the reality when dealing with banks.  We can guess the bank.

It is a warning to those who are doing deals or coming to arrangements, you did everything right, you were honest, you ate into your hard worked for redundancy and the bank gave you no quarter.  No jobs, rent to pay, all savings gone and they expected you to be in hock for 28 years three quarters of ones working life.

If you were back dealing with the bank with hind-site, what would you have done differently?  You must have worked that out by now.

Unlike mo-moo lay, not a bit shocked at your experiences.  But pleased for you and your wife that you are now debt free and can start again.

Last question for now, could you have afforded a mortgage if it had been written down to the sale price?


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## Brendan Burgess (19 Mar 2015)

I am really shocked by this as well. 

I went to the AGMs of the three lenders last year and raised this very issue.  

Bank of Ireland seemed shocked when I said publicly that I would urge people not to agree to a voluntary sale if they lender was going to pursue the borrower for the shortfall anyway.  AIB said that it was their policy to do deals. ptsb said that they were surprised that people were not agreeing to voluntary sales  and that they were engaging in a pilot study of doing deals as part of a voluntary surrender. 

epi - do you think you gained anything by  your voluntary surrender?  Would you have been as well off forcing them to go through the legal process? 

After you had got rid of your home, did you try for a Debt Settlement Arrangement?  I have recommended this in the past, but if your lender was going to veto it, there was no point. 

Brendan


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## Bronte (19 Mar 2015)

BB I'm shocked that you are shocked.  This is what banks are like, nothing new here.


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## Sarenco (19 Mar 2015)

epicaricacy said:


> Hi Sarenco
> 
> I agree with everything you've written. Our bank - not BOI, if people are wondering - deemed that we had to sell our house as we were incapable in the short / medium term of making 1100 mortgage payment and yet ended up demanding 800 per month for 26 years in the full knowledge that this 800 euro amount would be in addition to rent which we'd have to pay for a different property.
> I was aware at the time that we could have probably continued to stay in situ for a few years without paying anything and that we could have used this time to build up a survival fund. If I'd had a young family I probably would've decided on that course of action.
> ...



Thanks for the follow up epicaricacy.

You and your wife have clearly been through some tough times and you should take pride in your resilient perspective.  Hopefully you are starting to see some light at the end of what has undoubtedly been a long, dark tunnel.

I have absolutely no doubt that sharing your experiences will be a source of considerable comfort to others.

Your story actually confirms my long-held opinion that the current "keep families in their homes" mantra actually works against the interests of most genuinely distressed borrowers. 

You obviously did what you thought was the right thing at the time in taking out a mortgage simply to buy a property to house your family.  You didn't set out to lose your jobs but bad things happen to good people. You did nothing wrong - at worst you were guilty of poor judgment.  So why has the system given you such a hard time?

Actually, I don't blame your lender.  They had every incentive to act as they did and zero incentive to act otherwise.  Expecting any organisation (commercial or otherwise) to act against their own self-interest is totally unrealistic.

The problem, in my opinion, rests with government policy and an overly compliant financial regulator. 

I am personally convinced that the vast majority of distressed borrowers simply want to bring their problems to a conclusion so they can start afresh, get on with their lives and contribute to their communities.  That is a perfectly reasonable aspiration and would be beneficial to our wider society.

Instead our system encourages distressed borrowers and their lenders to prevaricate and ignore economic reality.

What I find really objectionable, however, is the fact that we are content to export yet another economic problem to our nearest neighbouring jurisdictions.  Distressed borrowers are already in a stressed position - why are we requiring them to leave their social support networks simply to bring some finality to their issues?

Not everybody can be as resilient as epicaricacy and his wife.  It seems obvious to me that forcing this "solution" on distressed borrowers will cause lasting harm to the health and self-confidence of many.

There is no reason to punish distressed borrowers and yet that is exactly what we are doing.  Why?

Well, the most benign explanation is that high profile debt-forgiveness campaigners and their allies in the anti-reality alliance have adopted a well-intentioned but misguided approach.  I don't believe that for a second.  It seems pretty obvious to me that these self-appointed campaigners have a vested interest (financial and/or political and/or simple vanity) in maintaining the current status quo. 

Turning to epicaricacy's immediate problem, I am really struggling to understand why any bank would have a problem opening a bank account for a newly discharged bankrupt.  From a financial perspective epicaricary is the equivalent of a newborn baby - the bank is not at any risk.  However, I'm not sure that government intervention would help unless we want go down the road of compelling people tp contract with each other - have you tried any of the UK banks operating in Ireland?

[Two rants in one day- sorry Brendan, I promise to be good tomorrow]


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## epicaricacy (20 Mar 2015)

Bronte

Regarding your question re. hindsight - I've a few ideas:

Voluntary Sale plus our redundancy in full and final settlement to clear the shortfall. I'm not too sure if the bank would've accepted it back then.
However, at the time we were hoping that things would work out  and that we could remain in our home.

Brendan

Regarding 'gaining from Voluntary Sale' - it's difficult to quantify, even at this remove.

(1) It made the UK bankruptcy process 'smoother' as we had an unsecured creditor.

(2) We're now out the other side and have certainty.

(3) it ended the nightmare of having to deal with the bank e.g. we had to send the Agreement to Sell Acceptance Form' - along with Independent Valuation etc - by registered post,  on 3 separate occasions as the bank kept 'misplacing it'. Internal post also went missing. We kept receiving very threatening letters throughout from certain depts. informing us of impending repossession proceedings even after agreeing to the VS. None of the depts. seemed to communicate with the other depts. etc. In fact, our contact with the bank throughout MARP, the issuing of VS documentation, the threats throughout the sale process and the final offer of full shortfall plus interest - was characterised by chaos, confusion and irrationality. Of course, we certainly were not 'rewarded' in any way for fully complying throughout. I'm not sure how much more of this chaotic, irrational and threatening behaviour we could've tolerated.

Sarenco

I'm really struggling to understand the basic bank account problem myself.

Regarding the motivations re. IMHO etc. - friends of mine, with young families and therefore less mobile than us have got great deals e.g partial arrears write off in addition to split mortgages etc

Re. leaving support networks etc. to travel to the UK, was really difficult and we felt alone and afraid throughout. At the time I was more inclined to agree with The Joker in Batman 'that which does not kill you makes you stranger' than Nietzsche's 'stronger'. 

No-Moolah - the 28 year pay back threw us when we first read it.


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## deansmith27 (7 May 2015)

Epicaricacy

We agreed to a Voluntary Sale for Loss Scheme last year with a residual debt of 140,000 over 20 years. With interest this would accrue to 240,000 @ 1050 per month. Our mortgage was 1650 per month. EBS would not give consent to sale if we did not agree to the terms. They did acknowledge that the mortgage was unsustainable, but only when we agreed to sell. 

We were strongly advised to agree by our solicitor as the residual debt would become unsecured debt, in turn allowing us more options on a future debt deal. Renting the house out wasn't feasible as it didn't come close to covering the mortgage whilst both renting separately. I bought with a sibling and neither of us could move on with our own partners, with the house in our names, so we decided to sell. 

EBS have not chased/called us since, just the frequent unpaid direct debit statement(sent to the house we sold!) outlining how our credit rating would be affected by arrears etc(It's already goosed, but thanks for the tip EBS) We are both renting separately now and no matter what way its spun we can never afford to repay this debt. 
Did you enquire about a DSA prior to bankruptcy? This seems like the best option for us but we are afraid the banks veto would kill any proposal. Has anyone got any experience at this stage with similar residual debt?

Thanks


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## epicaricacy (7 May 2015)

No - we went for UK bankruptcy.
The IMHO work in tandem with Grant Thornton with PIAs re. shortfall amounts for EBS. It's a service (paid for by AIB /EBS) and works particularly well for lump sum PIAs, whereby a family member offers a full and final lump sum PIA in exchange for the shortfall being written off. Friends of mine are currently working on this option re. possible lump sum from family member. Why not contact the IMHO and ask for details? They put my friend onto Grant Thornton. The lump sum amount they are discussing involves an 80 percent write down of the shortfall.


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## robert 200 (8 May 2015)

I wrote on this site some time ago that " The banks are the enemy " and I received a negative reaction.

Now maybe the reality is dawning.

Epicaricacy , did you at any stage seek the assistance of a trained negotiator or did you consider getting
a politician involved?


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## robert 200 (8 May 2015)

Never ever try to negotiate with the bank on your own - you will lose


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## deansmith27 (8 May 2015)

Epicaricacy,

I will definitely look into the IMHO deal as I would be in a position to make a lump sum payment next year. Thanks

After approx 2 years of trying to deal with the bank myself, with many proposals to keep the house and restructure our mortgage, we finally gave up. On paper we could afford the mortgage but couldn't live. Changes to TRS/interest rates and pay cuts made the repayments totally unsustainable. 

I would also advise anyone in a similar position to seek legal advice as the banks would not even entertain us. They even suggested that I spend less on food and drive less to save on fuel rather than acknowledge the mortgage was a dud. Yet when my solicitor negotiated a Voluntary sale for loss, the mortgage suddenly became unsustainable in their eyes.


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## epicaricacy (8 May 2015)

Deansmith27

It's always preferable to get the lump sum - if possible - from a family member, as opposed to offering it yourself. There is a danger that the bank will agree to the lump sum from you and just subtract it from the shortfall. The logic underpinning the family member (third party) is that the lump sum PIA is only available on the condition that the remainder of the shortfall is written off. Implicit in the arrangement is that you and your sister will then have to pay back e.g. to your father, the lump sum in increments and as a result won't be able to pay the residual to the bank. In other words - try and arrange it prior to you receiving the lump sum  (you can pay e.g. your  father back when you get your own lump sum).


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## deansmith27 (8 May 2015)

Epicaricacy,

Yes that was understood, a loan from a family member. I have also read people have made a lump sum payment and the bank has put it off the arrears, so we will ensure everything is above board come d-day. Thanks for advice and other info.


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