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  #1  
Old 07-11-2009, 10:59 AM
euclid euclid is offline
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Default Negative equity. Can the bank sue me for the balance?

I am 64 years old and retired.

In 2004 my wife and I bought an apartment with the intention of selling it again in a few years for a profit. (Don’t laugh)

We bought for 350,000 euro with a mortgage of 250,000 and cash of 100,000.

My understanding at the time was that the apartment was (the only) collateral on the loan.

Now, due to pressure from the bank to pay back the mortgage, I have placed the property on the market. We have been offered 200,000 euro for it.

If I accept the offer, I will lose my own investment and we will still owe the bank 50,000.

My solicitor tells me that the loan is “unsubordinated” which he says means that the bank can sue me for the 50,000. I always thought that, as the apartment was the collateral on the loan, I could simply hand the keys to the bank and walk away, but apparently not.

Is this true?

Do we have a case in law against our solicitor?

Should we wait another year or two in the hope that the market recovers?
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  #2  
Old 07-11-2009, 11:44 AM
Brendan Burgess Brendan Burgess is offline
 
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Default Re: Unsubordinated?

You have no case against your solicitor.

Loans in Ireland and the UK are to the person. You have to pay off the loan.

The bank can pursue you for the balance.

No one knows when and whether the market will recover. Further falls would just make your problem worse. You can't handle further falls, so you should probably try to sell now.

Brendan
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  #3  
Old 07-11-2009, 11:50 AM
mercman mercman is offline
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Default Re: Unsubordinated?

My heart goes out to you and thousands like you that are in the same position, The problem as I see it is that the loan is in your own personal names and for which the Bank will chase you for every last cent (unless you are able to come to a deal).
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  #4  
Old 07-11-2009, 11:58 AM
euclid euclid is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Thanks, Brendan and Mercman.

That's what I thought.

(and thanks, Brendan for improving the title of the thread)
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  #5  
Old 07-11-2009, 04:41 PM
Buddyg
 
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Default Re: Negative equity. Can the bank sue me for the balance?

Pressure from the bank to pay?

Are you paying into your mortgage? Why not continue to do so?
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  #6  
Old 07-11-2009, 04:49 PM
John Rambo John Rambo is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Sorry to hear about your situation. I would tread carefully if I were you. Unlike (say) the US where loans are generally non recourse (i.e. you can simply hand the keys back), as other posters have stated you are liable for the loan. However, given the present climate there may be merit in engaging with the bank. Play the "poor pensioner card". Tell them you'll be taking a €100,000 hit and that you expect them to take a €50,000 hit. An 80% recovery on the loan (i.e. €200,000 of the €250,000) may be acceptable to the bank. Tell them you simply cannot repay the €50,000 (I'm assuming doing so would put you in a difficult situation). Put it this way, if I were you my starting point would be that I am not repaying that €50,000.
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  #7  
Old 07-11-2009, 05:09 PM
pjmn
 
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by John Rambo View Post
Sorry to hear about your situation. I would tread carefully if I were you. Unlike (say) the US where loans are generally non recourse (i.e. you can simply hand the keys back), as other posters have stated you are liable for the loan. However, given the present climate there may be merit in engaging with the bank. Play the "poor pensioner card". Tell them you'll be taking a €100,000 hit and that you expect them to take a €50,000 hit. An 80% recovery on the loan (i.e. €200,000 of the €250,000) may be acceptable to the bank. Tell them you simply cannot repay the €50,000 (I'm assuming doing so would put you in a difficult situation). Put it this way, if I were you my starting point would be that I am not repaying that €50,000.

Interesting advice....

If the OP stood to sell at say E500k (i.e. E150k profit, and bank laid claim to E50k on the basis that OP was making a profit and that they (the bank) felt they should share in this profit, would you say that was fair and reasonable...?

If we follow your logic, then everybody should take your advice and tell bank 'I'll only pay you x%' - upshot bank's go belly-up and Joe Citizen has to carry the cost in some form or another...

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  #8  
Old 07-11-2009, 05:36 PM
euclid euclid is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by Buddyg View Post
Pressure from the bank to pay?

Are you paying into your mortgage? Why not continue to do so?
It was an interest only mortgage over a very short term (4 years) because of my age.

The bank is happy for me to carry on paying interest only for another 12 months, and they would review the situation again after that. The problem is, as Brendan said, futher falls in the market would make my situation worse.
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  #9  
Old 07-11-2009, 05:39 PM
euclid euclid is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by John Rambo View Post
Sorry to hear about your situation. I would tread carefully if I were you. Unlike (say) the US where loans are generally non recourse (i.e. you can simply hand the keys back), as other posters have stated you are liable for the loan. However, given the present climate there may be merit in engaging with the bank. Play the "poor pensioner card". Tell them you'll be taking a €100,000 hit and that you expect them to take a €50,000 hit. An 80% recovery on the loan (i.e. €200,000 of the €250,000) may be acceptable to the bank. Tell them you simply cannot repay the €50,000 (I'm assuming doing so would put you in a difficult situation). Put it this way, if I were you my starting point would be that I am not repaying that €50,000.
That wouldn't work in our case as we are house owners with obvious means. I've been advised that the bank will pursue us for every penny. Apparently, the only way to get away with paying less than the full amount is to skip the country!
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  #10  
Old 07-11-2009, 06:34 PM
Buddyg
 
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by euclid View Post
It was an interest only mortgage over a very short term (4 years) because of my age.

The bank is happy for me to carry on paying interest only for another 12 months, and they would review the situation again after that. The problem is, as Brendan said, futher falls in the market would make my situation worse.
Right.

You took a gamble to make money and you lost so pay up.

I could also say to the bank that they took a gamble on you paying up given your circumstances so they can't feel too hard done by. Legally they have you though.
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  #11  
Old 07-11-2009, 06:45 PM
John Rambo John Rambo is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by pjmn View Post
Interesting advice....

If the OP stood to sell at say E500k (i.e. E150k profit, and bank laid claim to E50k on the basis that OP was making a profit and that they (the bank) felt they should share in this profit, would you say that was fair and reasonable...?

If we follow your logic, then everybody should take your advice and tell bank 'I'll only pay you x%' - upshot bank's go belly-up and Joe Citizen has to carry the cost in some form or another...

Post as many ridiculous little blue faces as you like...if the OP cannot repay the €50,000 (which for a retired 64 year old isn't a massive assumption), then he's perfectly entitled to put a proposal to the bank. MBNA can pursue people who owe them €10,000 so why are they settling for 50% of that amount when pushed? My suggestion to the OP is to negotiate with the bank on the basis that repaying this €50,000 would cripplie the OP financially. As I said earlier, an 80% recovery for the bank in the present climate isn't to be sniffed at.
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  #12  
Old 07-11-2009, 07:04 PM
mercman mercman is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

The OP has not declared if he has other assets. Whilst I am not a great believer in doing the Banks they will do everything in ensure that they do not lose money. No point in playing hard ball to open a can of worms. Sure Banks are doing deals in circumstances when the borrowers do not have an asset base. In this case we do not know, but it's a bit risky to try it on with a Bank just in case they dig their heels in and cause more and bigger problems down the line.
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  #13  
Old 07-11-2009, 08:00 PM
euclid euclid is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by Buddyg View Post

You took a gamble to make money and you lost so pay up.
That's a bit harsh.

I took a gamble on the stock market, too, and lost. I also bought a "fully tradable" share in Se(ll)afield Golf Club and when I tried to sell that (for 40% of what I paid) the golf club stepped in and vetoed the sale. I have found lots of interesting ways to lose money!
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  #14  
Old 07-11-2009, 08:53 PM
Marietta Marietta is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by euclid View Post
That's a bit harsh.

I took a gamble on the stock market, too, and lost. I also bought a "fully tradable" share in Se(ll)afield Golf Club and when I tried to sell that (for 40% of what I paid) the golf club stepped in and vetoed the sale. I have found lots of interesting ways to lose money!

I am reading down through these posts and I am at a loss for words. Did you get proper financial advice in all of this. You paid 350,000 for an apartment and then some bank was smart enough to gave you 200,000 of a mortgage when you were approaching 60 years of age, utter and complete madness and I think both you and the bank are equally responsible for the situation you now find yourself in.
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  #15  
Old 07-11-2009, 09:33 PM
D8Lady D8Lady is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by Marietta View Post
Did you get proper financial advice in all of this. You paid 350,000 for an apartment and then some bank was smart enough to gave you 200,000 of a mortgage when you were approaching 60 years of age, utter and complete madness and I think both you and the bank are equally responsible for the situation you now find yourself in.
+1
Assuming the mortgage was for min 25 years, so bank thought you were ok to pay until you were 80? Something definitely off here.

Is the apartment rented out - how much extra would you have to put in every month to meet mortgage payments?
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  #16  
Old 07-11-2009, 10:14 PM
Brendan Burgess Brendan Burgess is offline
 
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
we are house owners with obvious means. I've been advised that the bank will pursue us for every penny. Apparently, the only way to get away with paying less than the full amount is to skip the country!
Negative equity is a meaningless concept in this case. Euclid has another home and obvious means.

There is absolutely no reason for the bank to take a hit here. Euclid took a risk with a view to making a profit. It didn't work. He has to take the loss.

By all means, ask the bank to do a deal, but they would not be under any commercial, moral or legal requirement to do so.
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  #17  
Old 07-11-2009, 10:17 PM
euclid euclid is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by Marietta View Post
I am reading down through these posts and I am at a loss for words. Did you get proper financial advice in all of this. You paid 350,000 for an apartment and then some bank was smart enough to gave you 200,000 of a mortgage when you were approaching 60 years of age, utter and complete madness and I think both you and the bank are equally responsible for the situation you now find yourself in.
Yes, I got the very best financial advice available at the time. Remember that the housing market was booming then. I was advised to put as much as possible into "bricks and mortar". I was also advised to "leverage" as much as I could, and went looking for (and found) a mortgage. To their credit, the bank refused to give me a mortgage on a second property, so I had to invest the remainder in stocks and shares. The best advice told me to put it into safe "blue chip" banking shares, like Anglo Irish, which were breaking new ground at the time... The alternative to investing it was to leave it in an interest-bearing bank account, but the interest rate on offer was less than the rate of inflation at the time.

I accept responsibility for my actions, of course, but I was misinformed by my solicitor about the meaning of the term "collateral". No mention was made then of "unsubodinated" loans. I thought the risk was limited to the cash I invested and that the apartment would revert to the bank if the worst happened.
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  #18  
Old 07-11-2009, 10:19 PM
euclid euclid is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Quote:
Originally Posted by Brendan View Post
Negative equity is a meaningless concept in this case.
Believe me, negative equity is by no means a meaningless concept here.
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  #19  
Old 07-11-2009, 10:45 PM
Palabra Palabra is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

Crazy situation man!! You have my sympathy.

What really galls me is that the banks who are primarily responsible for the appalling mess the property market is in now, they want to take no hit whatsoever on these deals.

Like you I chose to buy a property, but I had no idea the lunatics were running the asylum
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  #20  
Old 07-11-2009, 11:01 PM
euclid euclid is offline
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Default Re: Negative equity. Can the bank sue me for the balance?

I agree the banks carry a lot of the blame (for the appalling mess that is the present property market), but don't forget the planning people who were ultimately controlled (or not) by the government. Bertie and his finance minister have a lot to answer for.
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