Mortgage Mess

R

Red Biro

Registered User
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3
Hi All,

I would be very grateful if someone could offer me some advice or an alternative prospective on our situation. We have a loan on our pdh of approx e520k with a current value of e200k which we are paying interest only. We also have a loan with another bank of e150k (current value e40k) for a site (looking for interest only/ have filled out SFS forms for both banks). Our 2006 plan was to move close to family and build on this site,but house sale fell through leaving us with both properties which have tumbled hugely in value.

Our joint income is approx e4,100k per mth plus child benefit of e390 for 3 kids, which with all the usual household costs ect (and after paying mortgages) leaves us in a situation that our savings are almost exhausted and with little chance of pay rises, our immediate financial prospects seem bleak.

I have spoken with people in the banks and other professionals (whose advice we have paid for) and we are no clearer in our minds as to what a realistic solution would be. Therefore, we would appreciate if anyone could give us a steer in the direction of a potential solution.

Many thanks.
 
Hi OP, Sorry to hear about your "mortgage mess".

Your negative equity in total is c.430K and to be fair you have to be congratulated for managing it so well, so far. Your overall debt burden of 670K is high in relation to your income and somewhat unsustainable. Frankly speaking you will need to have some of that debt written off, one way or another.

When filling out the standard format, as requested by Brendan above, be sure to let us know if both loans are with the same bank or different banks. Also please let us know if your preferred plan is to stay in your existing home or is the new build still something you would want to pursue.

The solution to your problem must start by opening a serious dialogue with your bank(s) You need to find out what solution the bank is proposing and take that as your starting point. Are you already in the MARP process ? If so, has there been some outcome from this. If you want to stay in your existing home and the bank is proposing a solution that will allow you to do this and also let you have a reasonable living standard, then in my view that is the optimum outcome for you.

If the bank is not proposing something acceptable to you, then you have two other main options

1) A solution under the new Insolvency Act
2) Bankruptcy, either in Ireland or abroad.

1) Under the new Personal Insolvency Act, you would be making a proposal to your banks (through an Insolvency Practitioner) to come to an arrangement regarding your debt. The new legislation favors solutions where debtors are able to stay in their homes. The downside is that (in your case) your bank will need to agree to what is being proposed and will have power to veto any proposal that it doesn't like.
In my oppinion the success of this process will depend on the skill and judgment of the Practitioner representing you. If you propose writing off all the negative equity, then the bank is unlikely to consent. If you propose partial write offs,then we can only hope that the banks will be willing to compromise. The new act is not active yet and the approach of the banks remains to be seen.

2) Bankruptcy
If steps one and two fail to yield a solution, then its probably time to consider your bankruptcy options. In bankruptcy your debts are written off and you get a chance to start over. This would be the worst solution for you in that you would lose your home and all your possessions however it would also be the worst solution for the bank as they stand to lose several hundred thousand euros.

So in your shoes that is how I would play it :-

1) Seek a solution through direct negotiation with your bank(s)
2) If you cant get any solution from No.1, apply for a PIA under the new Insolvency act
3) If the bank vetos your proposal in step 2, go for Bankruptcy

We could spend a lot of time analysing your numbers in greater detail but I dont see the point. Your outcome depends largely on what your lenders will agree to. You need to engage with your bank and only then will you find where they really stand.So far the banks have been extremely slow in agreeing to write off any debt. Some commentators are saying that this must change soon and even Enda Kenny has hinted at that today in the Dail. On the other hand Board members of the main banks are on record recently as saying that there will be no write offs. All the interested parties are still jockeying for position. Unfortunately we still have no real idea how it will play out.
 
Red Biro said:
I have spoken with people in the banks and other professionals (whose advice we have paid for) and we are no clearer in our minds as to what a realistic solution would be.
Click to expand...

I find this just dreadful, the bit in bold.

Welcome to AAM, if you fill out all the details as asked you hopefully will get some good advice.
 
I don't find that so dreadful, there are no solutions either now or coming for a lot of the people in difficulties these days and I don't think anyone, paid or not, knows the answer.
 
Totally agree but people are desperate for solutions, I think MABS are more useful for smaller debt and unsecured creditors, I doubt they would be able to offer anything that would be a solution either, only a temporary kicking the can scenario.
 
Thanks to you all for your responses. I will complete details as suggested by Brendan later tonight, and look forward to comments/suggestions ect,
Thanks again.
 
Mortgage Mess (figs)

Permanent Employee/Sales Role - income e52,000pa /company car value e30k (BIK 24% value so taxed on approx e7.2kpa notional salary for this)

Partner -(almost )full time work on contract basis approx e26k pa.

3 kids (all in primary school/eldest 11years old)

Home Loan e515k interest only/ rate 4.3%pa (Irish Bank 1)
In MARP Process Realistic house value approx e200k
(No supplements/tax relief ect)

Site Loan e155k had been servicing loan fully until last Nov ( just into arrears of about e900)/ done SFS awaiting decision (rate 4%) (Irish Bank 2)
Realistic value e30-40k

Other borrowings e5k overdraft with Irish Bank 2
No other term/personal/car/credit card loans

Savings e1,500k in cash accounts and With Profits policy due for maturity in 2015 current value e7k

Kids settled and doing well at school ect, so would like to stay for their sakes.

Our borrowings are totally beyond our income levels, which realistically wont rise in the near term.

Medium term concern is as we live in country area that if kids want to go to 3rd level education they will need to go move to city, we have no savings(or prospects of savings in the next few years to help them).
We can live with the consequences of our bad financial decisions, but are upset at the prospect of our children losing out as a result of them.

PS when I mentioned in my original post that we had spoken to banks and other professionals whose advice we paid for, ( and are still no clearer in what path we should take) I didnt mean it as a swipe at them, just as a reflection of the uncertainty of the present situation.
 
To Red-Biro, The {professionals in the fluffy-times} don,t have the skill-set to sort this mess.On a WORST case scenario and you stopped paying,, it would take 4 plus years to repossess, so if you saved the (non-payment ) for 4 years you would have a nest-egg...{I am NOT advising that }
The SFS will show you can,t resolve this without (write-down)(debt-relief) or call it what you will.I suggest DO WHAT suits your family , this is not to hurt the Bank but unless you can look after the family EVERTHING else WILL fail. You have a good nominal house income , please ENSURE you and your family hold enough to have a normal life style. The new Personal Insolvency Regime will I hope giv both you and the lenders a realistic time-frame to conclude matters and you can all then move on... PLEASE remember the Banks are reliant on YOU !!
 
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