# Informal arrangement with Vulture Fund???



## Dog Days (8 Jul 2017)

Hi, I'm looking for some general advice as to whether an informal arrangement with a Vulture Fund is possible in the following situation, which we find ourselves in:-

We currently own 3 Buy to Let properties, all of which are in arrears and have recently been sold by the same Mortgagor to a Vulture Fund.
These properties are all in negative equity to the tune of €170,000 approx. combined.  
Modest Family Home not in arrears and mortgaged with a different bank. 
No other loans.  
2 children in primary school.
We don't have any other assets.

All service charges, NPPR, LPT, income tax etc. paid up to date out of the rent received.  
The original mortgages we received were interest only for 5 years then extended for another two after the crash.  Eventually the Bank pulled the interest only and we came to arrangement with them whereby we paid them all rent except for expenses, repairs, income tax, etc.  
We have continued to pay the Vulture Fund when we received the letter informing us to do so.  
Both of us are working (one part-time) with a combined salary of under €90K gross.  
Usual expenses of mortgage, food, childcare, etc.  
Additional expenses of Occupational Therapy and Speech Therapy for both children with additional needs. 

We would rather avoid Bankruptcy if possible, as one of our employers would have to be informed and a regulatory body having to be informed.

I assume a PIA would not be the best option for us either as our family home is not in arrears.

We recently received a letter from the Agents of the Vulture Fund requesting all arrears to be paid within 21 days.  I take it the next step they will take is to appoint a Rent Receiver/Receiver over the properties.  

We would be happy to sell the investment properties and give the Vulture Fund the proceeds of sale but I imagine this would not be enough for them.  I suppose realistically I am asking how much extra would a Vulture Fund be expecting us to pay to settle with them?  Not sure where we would get the extra money from as it will be impossible for us to take out a loan at the moment to pay them off as our credit rating will not allow it.  If this restriction were lifted then I believe it would be possible for us to get a loan to allow us to settle.  

I would like to be proactive about this and would be grateful for any advice from those who are familiar with this type of situation.  

Thank you.


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## Brendan Burgess (8 Jul 2017)

Who was the original lender?

Check your mortgage agreement.  Does it give them the right to appoint a Receiver?   If not, then they can't do it, and they might be open to doing a deal.  If you are paying over all the rent, they won't get much benefit in appointing a Receiver, apart of course, from being able to sell the property. But if you agree to sell it, they will get a better price and save on a lot of costs.

Brendan


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## Open air (8 Jul 2017)

I can only speak for myself,,,and i would say unless you have a lump of cash to give them forget about a deal.I would imagine that they would love a voluntary surrender and would write off remaining debt.I can only speak of my own experience


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## Brendan Burgess (8 Jul 2017)

Hi Open air

Yours is a family home which you would have to sell to make a settlement. You don't want to sell. 

Dog Days is speaking about investment properties. He presumably doesn't mind selling them if the sale clears the debt. 

Brendan


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## Dog Days (8 Jul 2017)

Thanks for your replies. The original Mortgagor was First Active, then taken over by Ulster Bank who sold it on to the Vulture Fund.

I can check the original Mortgage but I would be shocked if it didn't include the right to appoint a Receiver over the properties. I still thinks it makes financial sense for the Vulture Fund to appoint one given we have to deduct tax at the higher rate from the rental proceeds and they pay minimal tax. They also try to fix the Mortgagee with the costs of the Receiver, if you forget to include this in your settlement arrangement. 

I know they are going to put us in a really tight squeeze to try and get as much out of us as they can but as we don't have any other assets to sell or any lump sums anywhere our only other option is to get a loan for a lump sum to settle and to agree to sell the properties voluntarily. The problem is because we are in arrears with the 3 investment properties we will not be able to get a loan for a lump sum. Catch 22. 

The other question is what amount would they be looking for as regards a lump sum? I know the answer is "however much they can get" but given our financial situation a ballpark figure would be very helpful. 

Thanks.


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## Open air (8 Jul 2017)

Yes,,good point.surely this would be possible for him.


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## cremeegg (8 Jul 2017)

Dog Days said:


> Thanks for your replies. The original Mortgagor was First Active, then taken over by Ulster Bank who sold it on to the Vulture Fund.
> 
> I can check the original Mortgage but I would be shocked if it didn't include the right to appoint a Receiver over the properties.



In some, and perhaps all, cases Ulster Bank no longer have the original loan documentation for First Active mortgages.

In my case there is no reference to a rent receiver in the default section.


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## Dog Days (8 Jul 2017)

Sorry, I should have also mentioned as the properties are in negative equity selling them won't clear the debt. If we got full market value for them we would still owe approx €170,000 so I would imagine they will be looking for a lump sum also.


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## Dog Days (8 Jul 2017)

Thank you cremeegg, the title deeds must be held somewhere, if a Receiver is appointed I will ask them to send us a certified copy of the original Mortgage. That should clarify whether or not they are entitled to appoint a Receiver. I strongly suspect they are though!


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## cremeegg (8 Jul 2017)

You shouldn't underestimate how disorganised UB are. That is probably why they sold the loans. The vulture fund may have been willing to take on loans without poor documentation, in the hope people would not realise how weak their security is.

They paid me €2k rather than produce my original documents. They said that the documents refuted a complaint I had made, when I asked to see the documents they made an offer to settle my complaint rather than produce the documents. 

I had my copy of the original documentation, what they were claiming was in the documents wasn't even wrong. This woman was telling me all about home loan conditions, when I said the property was rented, she said that I was in breach of my loan conditions. I am having this conversation while I am looking at "Residential Investment Mortgage" printed on the loan agreement. 

They are clueless and they lie.

Don't let them bluff you into agreeing something.

I suggest that you could well get agreement to cooperate with a voluntary sale, and they accept the sale proceeds less costs in full and final settlement.


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## Dog Days (8 Jul 2017)

Thank you cremeegg, I would be over the moon if they would accept the sale proceeds less costs. A good thorough investigation of the mortgage documentation is definitely called for. I will start there.


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## newtothis (8 Jul 2017)

Dog Days said:


> Sorry, I should have also mentioned as the properties are in negative equity selling them won't clear the debt. If we got full market value for them we would still owe approx €170,000 so I would imagine they will be looking for a lump sum also.



That's a very big assumption on your part! Don't forget that they will have paid very significantly below the nominal amount owed. Their only interest is turning what they have into cash as soon as possible. Once that amount is higher than what they paid, they will take a view very quickly on whether to say "yes" or "no". You've no way of knowing what they paid, so just make the offer: all three for full and final settlement. 

Personally I would be surprised if they said no. If they did, you're handing them a whole pile of grief and more importantly delay and expense. Both of your interests are actually aligned. There's no way I 'd consider offering cash (which you don't have) unless and until they've rejected such an offer.


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## Dog Days (8 Jul 2017)

Thanks for replying Newtothis, I am basing my assumption on the experience of someone else I know. They ended up borrowing a substantial amount of money from friends and relatives and agreeing to sell the investment properties before the Vulture Fund would cut a deal with them. Even then the agents for the Vulture Fund kept changing the goal posts. 

I know every case is different and in that instance those people were desperate to put an end to the misery and probably ended up folding under the pressure. 

I guess I am just going to have to "tough it out" and see what happens.


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## Open air (8 Jul 2017)

If the fund think that they can get a extra few bob out of you, then they will. Dont roll over too easy at all


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## bren1986 (9 Jul 2017)

Will they not look into mortgage on his family home? If he is not in negative equity would they not get a judgement against the difference on his family home if/when he decides to sell?


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## newtothis (9 Jul 2017)

bren1986 said:


> Will they not look into mortgage on his family home? If he is not in negative equity would they not get a judgement against the difference on his family home if/when he decides to sell?



And how likely do you think they would get a sucessful outcome going down that route? More importantly, how long would it take and what legal costs would be involved?

I'm not saying it's an idle threat, but their interest is in getting a swift profitable outcome at the lowest risk and lowest cost.


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## Jim Stafford (10 Jul 2017)

Dog Days said:


> I'm looking for some general advice as to whether an informal arrangement with a Vulture Fund is possible in the following situation, which we find ourselves in:-



An informal arrangement is the most likely solution to your case.

PIA's are very useful when you are dealing with 2 or more creditors.  If you are dealing with only one creditor, then you should focus on an informal arrangement.

Residual debt of €170,000 on 3 properties would suggest to me that the rental income would cover all of the interest and make a contribution to capital.  If this was the case you might be able to use the Code of Conduct on Lending to SMEs and argue that the vulture fund should extend the loan over 15 years so that you could pay off the mortgage.  The vulture fund would not like that argument, as they generally want the money now etc.  However, such an argument could strenghten your negotiating position.

Whilst I will not comment (in a public forum such as this) on specific strategies of the various funds, you will generally find that they are pragmatic, and they want a solution.  They do not wish to waste unnecessary funds on legal cost.

They will generally settle for a contribution to the residual debt after selling the properties. The amount of the contribution will depend on your financial circumstances.



Jim Stafford


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## Dog Days (30 Jul 2017)

Thank you Jim, I was hoping an informal arrangement would be the best option in our case.  

Sale prices have been rising recently in two of the properties as they are in a high demand rental area (€10,000 sale price increase in the last couple of months).  If the market continues like this then the longer we can hold off selling them then the higher the price we will get and the lower the residual debt.  A fifteen year extension on the Mortgage would see us well out of the woods, but as you say, it is highly unlikely the vulture fund will want to accommodate us!!!

Unfortunately for us (but fortunately for the tenants) because they are in Rent Pressure Zones we cannot increase the rent which would significantly increase the repayments we could make.  However, as we have tracker mortgages the rent is covering the interest and we are making small payments off of the capital and covering the vast majority of the rental costs.  However if the ECB increase interest rates, which apparently is on the cards, then it could leave us in a bit of bother so it is probably best to cut a deal if possible and sell them.  

Thank you for your advice, much appreciated.


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