Case study ACC - Negative Equity and can just about pay interest only.

K

Kerrigan

Registered User
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Income details
Net monthly €3,800 self employed

Personal circumstances so we can calculate your reasonable living expenses
Monthly mortgage repayment approximately 2400
Electricity 60.00
Heat: 50.00
Food: 240
CU loan: 600.00 per month
House Ins 30.00
Mortgage Protection 23.00

Home loan
Lender: acc
Amount outstanding: 380000
Value of home: 260,000
Interest rate: SVR 4.4%
Monthly repayment 2,300.00
Amount in arrears 1,870.00
Refuse collection: €40.00

Summary of discussions and agreements with the bank. Turned down for a mortgage term extension because the bank believe my mortgage is affordable. I don't have health insurance or do not live a fancy lifestyle and have pointed out to the bank that if interest rates were to rise I would not be able to repay my debt in full each month. I am left with approximately €380.00 each month but if there was an emergency ??


Credit Union
Amount of shares
Amount of loan outstanding 15,000
Monthly repayment 600.00


Do you expect any lump sums in the medium term future?
No.


How important is retaining the family home to you?
I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it.


What is your preferred realistic outcome?
Extend the mortgage term from 15 years remaining to 25 years.
 
Please note I have a surplus left over each month and its due to this surplus that I have been turned down for a term extension. I am finding it increasingly difficult to live i.e. the cost of food, heat etc. Realistically I have zero left over each month but the bank don't see it that way.
 
Are you suggesting that on an income of €3,800 with repayments of €3,000 you are trying to live on €800 per month?
 
A few observations.
1) You could apply for a Personal Insolvency Arrangement. ACC would probably veto it, but you could then either use the new appeals system or else apply for bankruptcy. Your liabilities exceed your assets by €135k so it will take a lot of time to sort this out.

2) From ACC's point of view, you should be prioritising your home over your unsecured creditors i.e. ACC over the credit union.
This is understandable. Have you asked the Credit Union to reschedule your loan? What interest rate are you paying them?

If it's 12%, you will have the Credit Union loan paid off in 2 years and 5 months. If you rescheduled that to 5 years, you would have an extra €270 cash each month.

It really annoys mortgage providers when they are asked to extend loans when the borrower insists on paying the CU in full.

3) Obviously, it's better that you pay off the Credit Union first, as the rate is so much higher. I presume you have done an SFS?

4) From ACC's point of view, this is an extremely profitable loan at 4.4% interest. They should be happy to switch you to interest only, but banks are too stupid to see that.

5) You could ask ACC again, to switch you to interest only for one year to allow you to clear your more expensive credit union loan. That would give an extra €900 a month. You would clear your CU loan within around 11 months.

6) If ACC refuse, you could simply tell them that you are doing it. It would wreck your Credit Record. Would this affect your business?
You will build up arrears, but will be able to clear them over the following year or two. There is no danger that you will lose your home.

Brendan
 
Hi,

I had a chat with an insolvency company and they said that it was more than likely that an application for a PIA would be vetoed by our home lender so I'm thinking this route is a waste of time; eh?

They seconded what was mentioned here and agreed that the CU should be paid a token payment. Here's how our SFS looks now with some tweaking:

Income details
Net monthly €3,800 self employed

Personal circumstances so we can calculate your reasonable living expenses
Monthly mortgage repayment approximately 2400
Electricity 60.00
Heat: 50.00
Food: 240
CU loan: 100.00
House Ins 30.00
Mortgage Protection 23.00
Refuse collection: 40.00

Home loan
Lender: acc
Amount outstanding: 380000
Value of home: 260,000
Interest rate: SVR 4.4%
Monthly repayment 2,300.00
Amount in arrears 1,870.00

Also just to mention that €600.00 of our net salary is from a lodger.
 
We have a high SVR which has financially tipped us over the edge. Our PIP said our mortgage is unsustainable as does contributors on this forum; however our bank think otherwise.

We applied for a form of bankruptcy and were vetoed. The PIP merely requested that the interest rate be lowered to that of the ECB rate for two years to no avail.

My wife and I have discussed our case inside out and are regular readers of this forum and having wayed up the pros and the cons we decided to simply pay interest only and sit tight until we are removed by the courts.

In the event of our untimely deaths we are fully insured with our protection policy assigned to our lender. The policy slightly exceeds the value of the property.

How long is interest only granted for?

Thank you once again.
 
Kerrigan said:
The PIP merely requested that the interest rate be lowered to that of the ECB rate for two years to no avail.
Click to expand...
Sounds like the PIP is somewhat inexperienced. I have never seen any bank agree to this option as its not considered to be an appropriate solution.
Kerrigan said:
How long is interest only granted for?
Click to expand...
You have indicated that you are taking this action without bank agreement. I.e. sitting tight and waiting for eviction. I'm assuming that you have read through B Burgess's posts on the Courts process and length of time in granting repossession orders. This would indicate that it is likely to take at least 2 years before repossession. Given that the interest only option is not being agreed to by your bank you are at the mercy of the Courts in terms of this timescale.
 
Thanks Brendan Burgess for flagging up this thread.

Hi 44Brendan, I know very little about banking but I can say that I thought it an odd request but the PIP ensured us it was no big deal ~obviously wrong~.

We will write to our bank again today requesting a review and interest only payment for a term. Is a term of two years acceptable?
 
OK

I think that you are being very responsible by cutting the Credit Union down to €100 a month and taking in a lodger. Very few people are making the sacrifice of taking in a lodger.

If you unilaterally reduce the payment to interest only, then the repayments will fall to €1,400 per month, saving you €1,000 per month.

Your options

1) Struggle to pay what ACC is demanding. This is not sustainable and you would be in difficulty for years.
2) Go bankrupt - you would probably lose your house eventually but you would be debt-free.
3) Unilaterally switch to interest only on €380,000 and await developments. If ACC pursues you in the courts, drag it out for some years. There is a somewhat remote chance that house prices could recover and wipe out your negative equity.
4) Offer a voluntary sale/surrender to ACC in exchange for writing off the shortfall - they are unlikely to agree, but they might.
5) Stop paying ACC altogether and clear your credit union loans as quickly as possible.
6) Keep chasing ACC for a deal e.g. a split mortgage. I don't know if they do them or not.

It's hard to know which option to go for. There really is no advantage to you in making huge sacrifices to pay down negative equity if you are going to lose the house anyway. I think you should reduce the repayment to interest only for the moment but keep talking to them.

So how about
1) Reduce the repayment to interest only on the current value of the house, not the value of the mortgage
2) Put the money saved into an account which you will need if you lose your house.
3) Reduce the repayment to the credit union to interest only.
4) Write to ACC telling them what you are doing. You will release the full payment from the savings account if they do some sort of reasonable deal with you.
5) If they won't do a deal of any sort, then use the amount saved to pay off the credit union loan as quickly as possible.

You just might be able to string it out long enough to pay off the CU loan in full and house price increases clear the NE by the time of repossession.

If you are left with a big shortfall at that stage, go bankrupt.
 
Last edited:
44brendan said:
Sounds like the PIP is somewhat inexperienced. I have never seen any bank agree to this option as its not considered to be an appropriate solution.
Click to expand...

Ulster Bank and AIB reduce the interest for some customers. 6,820 temporary interest rate reductions were given in the period up to 30 September 2015. I understand that the rate was usually 0.5% rather than the ECB rate. This does allow people clear down negative equity quickly.
 
Excellent post Brendan - thank you very much.

Yes, they do split mortgages but a duration of two years only.
 
Keep trying to do a deal with them.
Keep writing letters e.g. Have you considered offering me a split mortgage?
Follow up every phone call with a letter for the record.
Keep stressing the sacrifices you are making - taking in a tenant, cutting back on the CU loan.

If and when it gets to court, you will have a file showing what you have done and you will get plenty of sympathy from the Registrar.

Brendan
 
I have a mortgage with ACC too. Impossible to deal with but I have never heard of anyone getting a deal from them. If they have please post here I'd love to hear it! I asked them recently to quote me for a fixed rate and they offered me an excessively high 6% plus rate; laughable.

Brendan ACC assign case managers to mortgage accounts that are experiencing difficulties; are these case managers high enough up the food chain for want of better wording or would there be another section of the bank that you would be best addressing your proposal too?
 
Kerrigan said:
Yes, they do split mortgages but a duration of two years only.
Click to expand...

Other than AIB, all the other lenders offer split mortgages which have review clauses in them after 3 years or when circumstances change.

Have they actually offered you a split mortgage? If so, you should probably take it if you are not going to press the bankruptcy button.

One of the errors in the general approach to mortgage arrears is that the solutions must be long-term sustainable. That is nonsense. Sustainability varies with time. If you get an additional two year or even one year, that is a solution. Banks are often obliged to declare mortgages unsustainable because there is no long-term solution. But a short-term solution is much better than seeking repossession.
 
Kerrigan said:
We applied for a form of bankruptcy and were vetoed.
Click to expand...

There is either bankruptcy or a personal insolvency arrangement or an informal arrangement.

What did you actually apply for? Did you go through the formal process or did your advisor just "sound out" ACC?
 
Hi Brendan,

It was an informal sound out for a PIA.

We were also turned down for a split mortgage because we were deemed solvent.

For example if we pressed for the split mortgage option again would it read something like this:

190k mortgage and 190k warehoused.
 
If they think you have affordability, they won't offer you a split mortgage.

50/50 would be a lot. It would be more like €260k/€120k

Brendan
 
Brendan Burgess said:
Ulster Bank and AIB reduce the interest for some customers. 6,820 temporary interest rate reductions were given in the period up to 30 September 2015. I understand that the rate was usually 0.5% rather than the ECB rate. This does allow people clear down negative equity quickly.
Click to expand...
Are you aware if PTSB have reduced an interest rate for any customers??
 
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