Case study Family Home sold - How to deal with mortgage shortfall?

A frequent reader of AAM but this is my first post - seeking advice on what to do next. Following 2 years of engagement with our lender in the MARP, unfortunately our home was sold - leaving us homeless, three young children, and liable for an outstanding negative equity of €175k. We have no other debts

A brief history, sold small 3 bed and bought 4 bed family home. Both of us in long term permanent positions, comfortably afforded the repayments until recession hit - no other loans, have modest cars, invested time and effort into what we thought would be our forever home to raise our children - both made redundant within 6 months of each other - I found contract work soon after but this also then ended - was on MIS for some time which we also topped up using SW payments - made every effort with lender but with a series of their interest rake hikes, we eventually fell below interest only payment level - lender then said next step was to have to sell the house - which we painfully agreed to do. House deep in negative equity and on a SVR.

Asking AAM readers, what should we do next with regard to the €175k negative equity debt oustanding? Is there anyone here in a similar boat? The issue is causing us much stress and worry. Advice/opinions on next steps for us greatly appreciated.

whatnext said:

Asking AAM readers, what should we do next with regard to the €175k negative equity debt oustanding? Is there anyone here in a similar boat? The issue is causing us much stress and worry. Advice/opinions on next steps for us greatly appreciated.

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Welcome to AAM Whatnext. In relation to the new insolvency regime, the truth is none of us know really how this will work in reality. In addition it looks like banks are going to do their best to avoid it.

In relation to your sad tale, what has the bank done about the NE. What did they say to you would happen when you sold the property? Can you tell us which lender it is.

It cannot have been easy losing 2 jobs and then to lose your home, especially when there were 3 children as well. I think that if both of you are on the dole then really the bank cannot do anything to you. They cannot go after you for an instalment order. Can you give us more details on your current situation. Have you thought about the UK route of bankruptcy. To me this is the best solution for unemployed people who have nothing else left to lose but want to start afresh.

Being realistic the bank cannot currently get anything out of two people with an unsecured loan, with no assets, with no income other than social welfare. I realise that we cannot make the worry go away, and banks work on this and feed on it to try and turn the screws but you might be actually a lot better off than you think. If you've young kids it means (in general) that you must be relatively young yourself and so can pick up the pieces and move on. It's easy for me to write this but it's where you need to start going, firstly in your mind and secondly by your actions.

Hi whatnext

I will use your case as a Case Study and we will see if the combined wisdom and experience of Askaboutmoney can come up with the options and a solution for you.

When we have all the information, I will draft a letter to your lender which could be adapted by others in a similar situation.

First of all, can you provide the following information.

The house and loan

1) When did you lose your jobs
2) On what date did you first contact your lender about your difficulties?
3) On what date did you agree the sale of your house?
4) Did you sell the house or did the bank repossess it?
5) Which lender is it?
6) How much do you owe the bank at present?
7) When you sold the house, did you agree any particular repayment arrangement?

Your current contact with the bank
8) When was the last contact with the lender? Are they still in touch with you?
9) Have you put any proposals to them?

Your current circumstances
10) Where are you living now and how are you paying for it?
11)What is your current income? Presumably Jobseekers and Child Benefit?
12) What are your job prospects in Ireland?
13) If your job prospects in Ireland are poor, have you job prospects abroad?

Have you taken advice from anywhere else
14) What did your solicitor advise you on surrender of the house?
15) Have you been to MABS or any other Debt Advisor?

I'm surprised your bank agreed to the sale without having ironed out the all important what happens next to the shortfall? Seems very strange.

[FONT=&quot]Hi Brendan - thanks for making this a case study and below I have answered your questions -[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]@ dereko1969 - yes it may seem strange to you, but this is exactly what has happened and why I am seeking advice on this forum as what to do next?[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Thanks for all posts/replies to date - very much appreciated[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]The house and loan [/FONT][FONT=&quot]
1) When did you lose your jobs [/FONT]
[FONT=&quot]I lost job December 2009 – wife lost job mid 2010 shortly after returning from maternity leave – both statutory redundancy – I obtained low paid contract work in 2011 for 10 months, during which time we maintained IO payments. Otherwise were in receipt of MIS which we topped up using SW payments to maintain IO arrangement.[/FONT]
[FONT=&quot]
2) On what date did you first contact your lender about your difficulties? [/FONT]
[FONT=&quot]Contacted local branch in Jan. 2010 and met with a branch manager and completed a SFS. This was the first of many meetings with PTSB, all instigated by us - [/FONT]
[FONT=&quot]
3) On what date did you agree the sale of your house? [/FONT]
[FONT=&quot]Agreed sale end February 2012 – house on market, start of March 2012 – sale completed in July 2012 – [/FONT]
[FONT=&quot]4) Did you sell the house or did the bank repossess it? [/FONT][FONT=&quot][/FONT]
[FONT=&quot]We sold it - Lender verbally gave us three options, 1) The lender take house and sell it and we owe shortfall 2) We agree to sell house with a local auctioneer - get to live there while its being sold – owe shortfall but should get better price than if they sold it 3) continue in unsustainable situation with rising arrears and property prices likely to decrease further. [/FONT]
[FONT=&quot]
5) Which lender is it? [/FONT]
[FONT=&quot]PTSB[/FONT]
[FONT=&quot]
6) How much do you owe the bank at present? [/FONT]
[FONT=&quot]€175k – interest is being charged on shortfall at their SVR [/FONT]
[FONT=&quot]
7) When you sold the house, did you agree any particular repayment arrangement? [/FONT]
[FONT=&quot]No repayment arrangement was set – but we were told that we were fully liable for the shortfall, with interest being charged at the SVR[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Your current contact with the bank
[/FONT][FONT=&quot]8) When was the last contact with the lender? Are they still in touch with you? [/FONT][FONT=&quot][/FONT]
[FONT=&quot]Last contact was in July 2012 via solicitor prior to the close of the home sale. PTSB have our mobile contacts, email address and solicitor name/address but we have not received any contact from them since the sale closed. [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]
As our Housing Needs Assessment and rent supplement were not in place when sale closed, we were homeless and had to move between family and friends for several weeks until our HNA was completed as we couldn’t get rent supplement without the completed HNA.This arose due to a delay in issue of formal response to our final SFS by PTSB which we needed to apply for our HNA - we only received the paperwork on the day of the final house sale signing due to persistence of our solicitor. [/FONT]
[FONT=&quot]
9) Have you put any proposals to them?[/FONT]
[FONT=&quot]No – unfortunately we are both still unemployed – both statutory redundancies and any savings we had were expended in the 2 year process of trying to maintain IO payments (and during this time, there were several SVR rate increases which made this task impossible in the end).[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]
Your current circumstances
10) Where are you living now and how are you paying for it? [/FONT]
[FONT=&quot]Following sale of our home – we moved county to Dublin and are now living in rented accomodation and in receipt of rent supplement - [/FONT]
[FONT=&quot]
11) What is your current income? Presumably Jobseekers and Child Benefit? [/FONT][FONT=&quot][/FONT]
[FONT=&quot]Yes - Income is Jobseeker Allowance and Child Benefit – and continuing to actively seeking work[/FONT]
[FONT=&quot]
12) What are your job prospects in Ireland? [/FONT]
[FONT=&quot]Mine are low – wife moderate prospects – she has come close to job since the move, obtained interviews but pipped at post – both continuing to actively seek work. Both have professional qualifications. [/FONT]
[FONT=&quot]
13) If your job prospects in Ireland are poor, have you job prospects abroad?[/FONT]
[FONT=&quot]Haven’t yet explored options abroad but I guess like alot of people, they are likely to be better for both of us. [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Have you taken advice from anywhere else
[/FONT][FONT=&quot]14) What did your solicitor advise you on surrender of the house?[/FONT][FONT=&quot] [/FONT]
[FONT=&quot]Given the options laid out to us by PTSB, solicitor advised we had little choice but to agree sale of the home – as mortgage was unfortunately a clearly unsustainable one.[/FONT]
[FONT=&quot]
15) Have you been to MABS or any other Debt Advisor?[/FONT]
[FONT=&quot]Consulted with MABS during MARP process and before putting house up for sale. Found the MABS person frustrating – her advice was to increase the top up onto the MIS further using SW payments. [/FONT]
[FONT=&quot]Have not been to any debt advisor following sale of home. [/FONT]

Thanks for those detailed replies. Consider this response a draft. As others come up with ideas, I will edit it.

Option 1 - Do nothing
Option 1a - Go to Australia
Option 2 - Apply for a Debt Settlement Arrangment
Option 3- Apply for bankruptcy in Ireland
Option 4 - Apply for bankruptcy in the UK.
Option 5 - Apply for a vountary agreement with ptsb

Option 1 - Do nothing and keep your head down
In a sense, this is the default option. ptsb aren't chasing you. If you do nothing and ptsb does nothing, they will lose their right to take legal action after 6 years.

The downside of this is that if they have up to 6 years to get a judgment against you. If they get a judgment, it will last for a further 12 years.

Check out this Key Post Does my debt disappear after 6 years, if the bank does nothing or can't find me?

Option 1a - Go to Australia
By emigrating to Australia or America, it is very unlikely that ptsb would take legal action against you.

If you are an American or Australian citizen and have no wish to return to Ireland, this would seem like a very practical option

Option 2 - Apply for a Debt Settlement Arrangement
A PIP will put together a proposal to ptsb.
The maximum time period is 5 years.
He will propose something like paying all your disposable income in excess of the net social welfare amount and his fees over 5 years.
ptsb will probably approve it. There is no reason for them to veto it.
After 5 years, if you have maintained the agreed payments, your residual debt will be written off.

It's important to note that the maximum time period is 5 years. Given that you have been in this situation for 3 years already, your PIP should propose a 2 year time period.

Option 3 - Apply for bankruptcy in Ireland
This lasts only three years. You will still be able to work. In three years, you will be debt-free. This seems to me to be superior to a DSA of 5 years.

Option 4 - Apply for bankruptcy in the UK
This has the huge advantage of being quicker. You will be back home in Ireland debt free by the summer of 2014 and able to resume your lives.
If you are considering going to the UK for work, then you should definitely go for this option.

Option 5 - Apply for a voluntary agreement with ptsb

In a bankruptcy, ptsb will get nothing.
In a DSA, they will get very little either. If you do earn any money, it will go to the PIP. A DSA will involve them in a big admin burden.
I would offer them a voluntary agreement along the following lines

Our life has been on hold for the past three years.
A DSA is of no benefit to you or to us.
As an alternative to bankruptcy, we would propose the following.
We will pay €17,500 as soon as we can. However, in exchange for this, you will agree in advance to write off the balance in full when the €17,500 is paid off.
We cannot commit a date to paying off the €17,500, as we simply do not know what our job prospects are. However, if we saw light at the end of the tunnel, we would do our very best, including, possible relocation abroad to earn the money, so as to become debt-free as soon as possible.

If ptsb don't go for this, then go for a Debt Settlement Arrangement proposing a one year period.

If they veto this, go bankrupt in the UK or Ireland as appropriate.

There is little that either you or the PTSB can do at this point. You have no income and no capacity to pay anything to the PTSB. They have the option of taking judgement proceedings against you, but beyond that they can only sit on the judgement. They probably realise this and have put your case on the back burner. Realistically my employers are taking a similar pragmatic approach. i.e. we are not wasting time pursuing a debt where there is little option of any benefit. We will not acknowledge any write-off just in case the debtors financial circumstances change. Even if your wife does get employment, it would unlikely to be at a level where you can make any realistic payment on this loan. I doubt if the PTSB will proceed further against you. However, they will not acknowledge this and your best bet is to ignore them, unless you receive a legal notification.

Draft letter to ptsb

To follow

44brendan said:

There is little that either you or the PTSB can do at this point. You have no income and no capacity to pay anything to the PTSB. They have the option of taking judgement proceedings against you, but beyond that they can only sit on the judgement. They probably realise this and have put your case on the back burner. Realistically my employers are taking a similar pragmatic approach. i.e. we are not wasting time pursuing a debt where there is little option of any benefit. We will not acknowledge any write-off just in case the debtors financial circumstances change. Even if your wife does get employment, it would unlikely to be at a level where you can make any realistic payment on this loan. I doubt if the PTSB will proceed further against you. However, they will not acknowledge this and your best bet is to ignore them, unless you receive a legal notification.

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Brendan,

I can see the logic of what you are saying from the Bank's perspective...as in "Oh, we have no hope of getting much back here, lets kick the can down the road and see happens over the next year or two and we may be able to recover more".

However, is there a way for the Borrower to agitate the Banks into making a decision? The OP would benefit from getting something done and dusted, so just wondering is there a way people could get your institution to actually do something / recognise the loss?

K

Not really. In reality the loss would be fully provided for in the books of the Bank. However, there are always prospects that a debtor will "come into money" further down the line. Whether that be an income change or receipt of capital. A bank would look pretty foolish if it had agreed a WO and a year later the debtor won the Lotto!!
It's not an ideal scenaro for someone looking for closure, but its considerably better than being pursued through the Courts for money tat you don't have.

Thanks Brendan - reading the replies - so with option 5, this would be a 10% payment for settlement of the negative equity shortfall -

@44 Brendan - in your opinion, do you think the lender could be agreeable to such a proposal?

whatnext said:

Thanks Brendan - reading the replies - so with option 5, this would be a 10% payment for settlement of the negative equity shortfall -

@44 Brendan - in your opinion, do you think the lender could be agreeable to such a proposal?

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Sorry to hear about your problems whatnext. Banks have a lot answer for when they take homes over the heads of young families.

As you have sold your home and both unemployed and still young and qualified, why not look into going to Australia and start over again. I would not entertain going to the UK as it is just as bad of not worse than Ireland for employment. Benefits are being cut left right and center in the UK with the Lib/Con government that is in at present.

http://www.express.co.uk/news/uk/37...-apply-for-just-eight-jobs-at-new-coffee-shop

@ Kev - thanks for your reply - but that means running away from the debt - and never being able to return to Ireland? - its a sad state of affairs for people like us, who genuinely lost good jobs, made genuine efforts with the lender.... didn't have speculative investments, salubrious lifestyles or habits.... but then be forced to run away from our lives in Ireland...

but you've rightly pointed it out as another option... so it will be Option 6 in this assessment of what we should do next.

whatnext said:

but you've rightly pointed it out as another option... so it will be Option 6 in this assessment of what we should do next.

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Hi whatnext

I have made that Option 1a

Option 1a - Go to Australia
This is really a sub-set of "Do nothing". It is not dealing with your debts. They remain there and will resurrect themselves when you return to Ireland. This might be an option worth considering if you are an American or Australian citizen and have no wish to be returning to Ireland.

You will be able to return to Ireland after 6 or 7 years as that is when the debt will become statue barred, you can always in the meantime return for holidays. I would not worry about your debts as you have made the ultimate sacrifice by selling your home for them.

If I was young that's where I would be heading for and who knows you may not want to return to Ireland after you have made your home somewhere else and I am sure your children will love it there.

Thanks Kev - yes from your post and the other post in relation to what happens your debt if you leave the country, I now understand that we could avail of this option and then return to Ireland in 6 years debt free.... employment prospects are very good for us in Australia.

44brendan said:

There is little that either you or the PTSB can do at this point.

We will not acknowledge any write-off just in case the debtors financial circumstances change.

However, they will not acknowledge this and your best bet is to ignore them, unless you receive a legal notification.

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Very insightful into how the banks are operating - thank you.

I think that it is morally wrong in this situation that PTSB who forced this family out of their house and got their pounds worth, this family who used up all their savings in an effort to do their best and literally ended up with nothing, and homeless to boot should be treated as the decent human beings they are by the PTSB and not as a never ending open case to keep this debt forever hanging over their heads.

I do not have an issue with the PTSB being repaid out of the sale proceeds but I see no reason to continue the misery. PTSB could quite easily deal with this by writing to this family and stating that we will not be pursuing the shortfall on this debt ever.

And that's the letter the result that Brendan Burgess should aim for, in my opinion.

People surely have a right to move on at some point. How are we every going to progress, how are people going to be able to pick themselves up and start again if you has a constant threat over you. If there nobody in bank management that sees this.

Bronte

I agree fully that ptsb should write off the shortfall in this case. However, I don't think that this is warranted.

I think that it is morally wrong in this situation that PTSB who forced this family out of their house

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The reality is that the borrower and ptsb accepted that the mortgage was unsustainable. The orderly sale of the home was in everyone's best interests. No one was forced out of their home.

Brendan Burgess said:

. However, I don't think that this is warranted.


The reality is that the borrower and ptsb accepted that the mortgage was unsustainable. The orderly sale of the home was in everyone's best interests. No one was forced out of their home.

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On reflection you are correct. The story made me too emotive. It is in evereyone's best interest and it was agreed. As the borrower's have done everything possible and have nothing left then in the interest of fairness PTSB should write off the shortfall.

How are you going to word it to get that shortfall written off. How can one appeal to PTSB's better nature?

Remember the lady who once managed to get the bank to agree to the sale of her house by ignoring the branch and mortgage department and going straight to the top guy, maybe that's what you need to do.

Kev said:

As you have sold your home and both unemployed and still young and qualified, why not look into going to Australia and start over again.http://www.express.co.uk/news/uk/37...-apply-for-just-eight-jobs-at-new-coffee-shop

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Hi Kev

I had initially not given much weight to this suggestion, but I checked out my own Key Post on the topic and it does seem like an option worth considering.

I have edited Option 1 and Option 1a accordingly.

Thanks for the suggestion.

Brendan