Case study Jointly owned Property in the Midlands offered Split Mortgage

[Pablo21]

I'll cut a long story short as they say! Met a girl, bought a house for E280,000 and then a second Mortgage for E220,000 (PTSB) to renovate and extend in the midlands in 2007. Job and business collapsed for both of us over the following 2 years and she left with the baby. I lasted another 2 years before giving up and moving to the UK. Mortage hasn't been paid since apart from some short term rental money that went to the bank. Arrears are around 100K.
Been working with the bank all along to come to some solution but it has been incredibly slow. It got to the point where it went to court for reposession as they said we werent in contact but I made a complaint to PTSB and they realised I had been in touch all the time and they started to work with me. The property was valued at 200K (Was 1.2m prior to completion!) but I managed a buyer for 250K but the bank took so long to make their minds up i.e, over 2 years, that the buyer lost interest. I completed a recent SFA and offered two proposals, the first one being...they allow me 6 months to prep the property for rent, 6 months at reduced rent and then aim to get it up to over 1.2K per month, allow it to rent for two years and then I'd move my family back from the UK and live in the property and pay the mortgage in full as long as they would write down some of the mortgage. The second option I gave them was that I would declare bankrupt in the UK and they would get nothing. The other party is on welfare and can offer nothing to the mix so they would get nothing. I got a call from a member of their team and he basically said the bank liked my idea and were prepared to work with me! They suspended the court hearings indefinitely. So I waited and kept in touch with PTSB. Initially they came back and changed their mind and said because the other party (my ex) wasn't co-operating, they didnt think it would work, so I mediated with her and got her involved and they got all excited again and told me they would review it and come back to me. Months later (Today) I got an answer. They cannot write down any of the mortgage to make it favourable for me to move from the UK but they have offered me a Split mortage with the option of warehousing some of it till the end of the mortage term. I must admit I had never heard of this before today!
So my question is...what is the best to do?
Mortgage close to 500,000 with 100K in arrears. House might make 280,000 on a good day but because its idle its condition is worsening. Its in a small town in the midlands but not far from the M6 so reasonably well located. Its not finished i.e. grounds need to be complete, needs to be painted, some minor repairs, some elements of planning not complete (Septic treatment, walls etc).
I'm based in the UK with a good job and a new family. Am I mad to even consider looking at a split mortgage or should I just let them sell it? What can they do to me over here anyway? I can go down the banruptcy route if needed but I am a director so I dont want to. All sugesstions and advice greatley appreciated.

 

[dub_nerd]

Just my tuppence worth. I'd tell them you negotiated in good faith for years and they blew their chance. As long as you are prepared to go for the nuclear option of bankruptcy if it comes to that, I'd tell them to get stuffed. If you are staying in the UK and they don't pursue it, the debt will die in twelve years. Alternatively you could spend the next twelve years paying hundreds of thousands and still not own the place. Obviously the bank would love you to do that. Tell them to get real and that your last offer was the final one.

 

[TLO]

PTSB blew it. They should have taken the 250k and thanked their luck stars. A 50% recovery would have been an excellent result in the circumstances.

Do you have any real desire to keep this house? If so, then move your family into it and apply for a "no veto" PIA. A PIP will ask a judge to order a writedown of the mortgage to an affordable level, wiping out the 300k of negative equity. You will also need to come to a separation agreement with your ex to prevent a future claim on the house.

If you have no desire to keep the house then things become simpler. Offer PTSB a voluntary sale in exchange for a full write-off of the balance. Otherwise you will go bankrupt in the UK. Here's the thing. If you go bankrupt in the UK without having sold the house, it will cost PTSB about 6k in legal fees to repossess and sell the house themselves. It's a strong stick. And there is no comeback on you. Might even be worth getting the Official Receiver (of England and Wales) to declare the property onerous. No more LPT, insurance, water charge worries etc, the bank is left to clean up the mess all by themselves.

Warehousing is worse than useless. It wastes everybodies time and delays resolution of the underlying problem.

 

[Pablo21]

Thank you both for your feedback. I think you are both correct. I'm in a unique position in that they have very little hold over me. If they had come back with a reasonable offer e.g. write off some of the mortgage and I continue paying a reduced mortgage of E300,000 or even E350,000, the situation would be sustainable. But the warehousing option is just a massive gamble.

I dont have a massive desire to keep the house but I'd like to if I could. Finish the house and rent it long term and give them the money. As my situation improves I could spend a bit more on it and the value will increase all the time (its a pretty unique property design wise, no neighbours, river in the garden etc.).

I am just in the process of buying a house with my partner in the UK so I'd rather wield the bankruptcy stick than actually use it! And I am also a director so it wouldnt be ideal but not the end of the world.

Thank you both for your input. Much appreciated!