Threatening a bank with possible move to UK

Hi all,

I moved house in 2008 for job reasons and sale fell through on old house, which is now "an investment property". It's about 130k in negative equity now. Rental income is €700pm and we're on interest only of about €900pm. However, I've lost my job and we can't afford €200 shortfall now, never mind whatever capital payments will be when they decide to end interest only.

We don't want to move abroad but life is miserable because of this albatross around our necks. We also love our new home and don't want to lose it or move.

When we were only 50k in negative equity on investment property I asked lender could we sell it and pay them difference with a term loan. They refused. Now, it's much deeper in NE as I'd anticipated.

We see no light at the end of the tunnel as prices will never rise (in my opinion) to the level we'd need to break even on a sale.

My question is, could we threaten a move to UK (which is possible due to no employment opportunities here)? Or will this set alarm bells with lender and could they instigate bankruptcy proceedings here? Basically, what advantages do we have in negotiations, including the upcoming Personal Insolvency Laws?

PS. We've never missed a payment on our Home but are a few hundred quid in arrears on NE property.

There's not a whole lot any Bank can do if you have no source of income. Send a registered letter to them fully detailing your current financial position and stating that you are prepared to had over the property to them in full and final settlement of your debt. They will huff and puff at this offer initially, but realistically they have little option other than to come to some settlement agreement with you.
UK bankruptcy is not appropriate, for you, given your financial position and would not benefit you.
The main risk you face now is that the Bank may decise to take a judgement against you and register his against your PDH.

Thanks Brendan.

I didn't mention in original post that I am unemployed but my wife works, earning around the average industrial wage. We also have two young kids. Her income pays mortgage on home, insurances, car taxes, utility bills etc.

Have they much hope of taking a judgement against PDH? How does that work?

Oh, and I currently receive €188 Jobseeker's Benefit, which will end in October this year.

Banks tend to differ in their collection practises Mortimer. Even within the same Bank you can be dealing with a pragamatic or "by the book" individual and the results can differ. Send them the letter as per my last post and state that all you can offer to them pending sale is the rental income.
Ideally they will agree to accept your offer. The alternative is that they can take legal proceedings against you. This will cost them time and money. the ultimate downside for you is that they could in time obtain a judgement against you and register this against your PDH. In effect it will just sit there, and if you sell the house in the next 12 years, the Bank can recover its money (if there is sufficient equity from the sale). Hopefully they will accept your offer. This will take time, but don't be put off by an initial refusal. No harm in stating that you are intending to emigrate!

Thanks again Brendan.

So basically, if investment property sells for 130k less than what we owe bank, they MAY look to get that IF we sell our main home? And only if we sell it in next 12 years?(it's probably in NE aswell but we have no plans to move from it ever, barring forced emigration).

They can't force sale of our Home too, can they?

The 12 years is an example and irrelevent if you don't sell. What they can do is try and place a charge of the outstanding amount of your loss on the investment property on your home. If you ever sell the house then they will hope to get the amount owed to them. If we return to the mad old days in say 20 years time and you sell for 1 million they will collect their amount. Not sure what would happen if you sell for just the same amount as owed on the mortgage. Maybe they have the power to block the sale but that's the least of your worries now.

Elcato, I'd have NO problem giving them the 130k plus interest if I ever made a profit on Home house. But I can't see us moving in the short to medium term, barring as I said forced emigration.

It is possible for a creditor with a judgement mortgage on a property to apply to the court for a "well-charging order" to force the sale of the asset with the judgement mortgage. I cannot see a court ordering the sale of a modest family home (as opposed to a mcmansion) and if the family home has no equity anyway then I can't see why they'd even try.

elcato - I'm pretty sure that only the actual mortgage holder could block the sale, since they hold the deeds; a judgement mortgage would just prevent the balance after the actual mortgage was paid from being released to the vendors.

I presume that you have bought home you are in at the moment and no renting it?
I wonder that even if you declare bankrupt in UK, if they can still attach a judgement on the latest home, especially if its not in neg equity.
Im in the same boat and cant afford the steep shortfall every month so I have cancelled my direct debits and will reinstate a new standing order which is lower and much more sustainable for me. It was only a few weeks ago and they have replied to my detailed letter, yet. Im sure they cant see themselves financing my loan indefinitely and will write back rather strongly - even maybe repossess, but for now it is better than not paying or full defaulting.
But if you own second property, they may be more inclined to come after the property. Are the two mortgages with the same bank?

I have roughly drafted a letter to them. Any suggestions?

Dear Sir/Madam,
We are writing to you in relation to the aforementioned mortgage.
We wish to discuss an exit strategy on this mortgage due to its increasing unsustainability. Since the mortgage was drawn down in 2008 a combination of decreased rental income, property charges, increased taxes & charges and, most pertinently, a redundancy have made continuing with this mortgage untenable.



In December 2011, we sent you complete Income & Expenditure details which outlined the huge negative gulf between the two. In the interim, items such as electricity bills, waste charges, fuel costs etc. have increased. Meanwhile, _________’s Jobseeker’s Benefit is due to end later this year, resulting in almost €1000 per month less income. Since __________’s redundancy in October 2011 he has applied for over 100 positions without success. In order to survive and provide for our family the only tenable option that remains is emigration to secure full employment.



We have on numerous occasions over the past couple of years suggested exit strategies on this property, conscious that house prices would continue to drop. However, this was refused by your organisation, making the current negative equity on the property considerably worse. In light of the above, we propose handing the property back to you in full and final settlement of this debt. Alternatively, we can continue to furnish the loan monthly with any rental income, which is currently €700 per month – a considerable shortfall on even the interest only repayments.


We are confident that you will concur on the increasing unsustainability of this loan and discuss a mutually beneficial strategy. We look forward to hearing from you in the near future.

Regards,

Well written letter but very broad. You only have one exit strategy to offer so why not state that in your letter. There is really nothing else to discuss as you have no other available assets or additional income. Also, enclose the details of your financial position in the letter, rather than referring to 12/11 submission. Just update the figures from those previously submitted.
Ensure that you let them know that you are prepared to co-operate in a sale of the property, on the basis that they agree to a settlement of this in respect of your loan & advise them that you are proposing to emigrate in the short term, so put a time limit on response from them.

munchy said:

I presume that you have bought home you are in at the moment and no renting it?
I wonder that even if you declare bankrupt in UK, if they can still attach a judgement on the latest home, especially if its not in neg equity.
Im in the same boat and cant afford the steep shortfall every month so I have cancelled my direct debits and will reinstate a new standing order which is lower and much more sustainable for me. It was only a few weeks ago and they have replied to my detailed letter, yet. Im sure they cant see themselves financing my loan indefinitely and will write back rather strongly - even maybe repossess, but for now it is better than not paying or full defaulting.
But if you own second property, they may be more inclined to come after the property. Are the two mortgages with the same bank?

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Hi Munchy, if you go bankrupt, the liability to pay the debt is extinguished. Therefore once you go bankrupt, your interest in any property you own vests in the Official Receiver. They generally hand it back to the bank if it is in NE. The bank will realise the property and advise the OR of the amount to be written off in the bankruptcy.

Steve

One further point is, that it's probably more beneficial to do this now, judgement or not, than a year down the road when the property's value has decreased even more?

Mortimer said:

One further point is, that it's probably more beneficial to do this now, judgement or not, than a year down the road when the property's value has decreased even more?

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The more important point is that you are going to be economically active quicker. It doesn't really matter about the property dropping in vlaue as that is the banks problem not yours, it is simply more debt that will be written off.

Steve

Right, I'm going to send this letter today with suggested tweaks.

Any opinions on what they'll come back with? It's a non-Irish lender but not a sub-prime lender.

Send the letter and remove it from the post above. Don't assume bankers don't google about.

It would seem a pity to remove the letter, which is fairly generic, as it may be of use to others.

Send the letter and remove it from the post above. Don't assume bankers don't google about.

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I would'nt worry about it, us bankers are a fairly dim lot & tend to believe what clients tell us!