Query re CPO & Mortgage

[Gordon Gekko]

Hi,

If a portion of someone’s garden is CPO’d and he/she has a mortgage, what happens to the proceeds of the CPO?

e.g. the person’s home is worth €500k, he/she owes BOI €350k, and the State buys a section of the garden for €25k.

i.e. Does the person get the €25k, is it pro-rata, or does BOI get the €25k?

Thanks.

 

[Korbous]

Hi Gordon,

Having dealt with a few of CPO's with different Banks - the rules seem to be different depending on the Bank and the persons history.

If the mortgage has had no issues and the customer circumstances haven't deteriorated since the mortgage was drawn down then for a relatively small CPO then the person should be able to retain the funds. They will likely have to get a valuation to show that this doesn't have a material impact on the value of the Bank's security. If the customer has had or is in some level of difficulty then the Bank are likely to try use these funds to reduce what's owed.

If this was a material CPO which would impact the security value then a Bank may seek an amount to be paid off the mortgage to ensure that the LTV doesn't increase.

 

[Gordon Gekko]

Thanks Korbous.

For a fully performing mortgage at 40% LTV, do you think the person would get the money himself/herself?

 

[Korbous]

At 40% LTV and fully performing then they should not have an issue especially if this doesn't really impact the value of the security.

Years ago Banks would try to use an opportunity like this to reduce un-profitable trackers however that day is also gone. If they do look for a reduction and don't provide a valid reason then the FSPO route can be used and they will try to have it rectified via mediation so that would provide another opportunity.

This could be an interesting topic in the future if plans like Bus Connect take off which will require lots of relatively small CPO's.