Has anyone got their lender's agreement to sell a house with a shortfall?

In most cases I have heard of, the banks have refused to allow people to sell their house at a shortfall.

However, an [broken link removed]in today's Irish Times suggests that banks are becoming more flexible.

While there is little chance of lenders as a whole committing themselves to a debt forgiveness programme for borrowers out on a limb, the reality is that some institutions are quietly making concessions to customers in need of help. One building society, for example, recently agreed a settlement with a couple who were separating and whose home was in negative equity. The forced sale of their house threw up a shortfall of €140,000.
The society agreed to allow the couple to pay off this unsecured element of the loan at an attractive tracker rate over the remaining period of the original mortgage. Bank of Scotland, shortly to exit the Irish market, is also showing considerable flexibility in dealing with customers selling investment properties at a loss.

Click to expand...

I would like to get some first hand accounts of this process.

Which institution?
What was the size of the deficit?
What agreement did you come to?

They are not being any more flexible than a year or so ago when I last approached them. I made a proposal to BOI to carry a deficit of circa 60k as an unsecured personal loan after the sale of my home. They did not want to turn the mortgage deficit into a personal loan, even though I am on a good tracker rate which is costing them quite a bit of money. They also said that while I am able to service the loan they would not do anything for me.
I argued that while their loan was secured on paper against the property, in reality if I were to default on the loan and they were to sell it to try to make their money back, they would not get enough to cover the mortgage. This didn't make any difference to them...

Thats my experience for what its worth!

Hi Don

That is very interesting.

I wonder would they be more flexible with people in arrears?

Brendan

Mine agreed but only if I pay off the shortfall myself before the house is sold, which as I've outlined in my other post is giving me the heeby-jeebies! No question of them doing a deal or letting me carry the shortfall as a personal loan as they knew I had the cash to make up difference.

There are reports Ulster Bank are prepared to offer this on a case by case basis
[broken link removed]

Had a variable mortgage on an investment property with BOSI and was flatly turned down for a 35k shortfall. Thankfully somebody came along and purchased the house at the asking price.

There was an item on Newstalk Breakfast yesterday morning about emigration.

There was a lady on who had emigrated from Ireland to Australia.

She mentioned that they had sold their home and were paying the shorfall to the bank over 10 years by sending money home every month.

There are alot of rumours out there that Banks are definitely doing deals and in particular Certus (Formerly BOSI). However, I am heavily involved in commercial finance and know no one who has got such a deal and the same goes for any accountant that I have spoken to.
But I am continuously hearing third party stories of deals being done.
I spoke to employees of Certus and they say no deals are being done.

Has anyone any information?

A former conveyancing client contacted me recently.

She is selling her house 200k in negative equity in a well known unloved North Dublin development and buying close by in Raheny - loan is coming from one of the two main recapitalised banks - they are allowing her to carry the negative equity across to the new property.

Looks like the banks are anxious to transfer what little security they have left onto those houses with a prospect of recovering their value and in established areas.

Commercial said:

There are alot of rumours out there that Banks are definitely doing deals and in particular Certus (Formerly BOSI). However, I am heavily involved in commercial finance and know no one who has got such a deal and the same goes for any accountant that I have spoken to.
But I am continuously hearing third party stories of deals being done.
I spoke to employees of Certus and they say no deals are being done.

Has anyone any information?

Click to expand...

Hi Commercial

Deals are done on commercial loans all the time. I have no direct experience of home loans though.

Brendan

Shuttleworth said:

A former conveyancing client contacted me recently.

She is selling her house 200k in negative equity in a well known unloved North Dublin development and buying close by in Raheny - loan is coming from one of the two main recapitalised banks - they are allowing her to carry the negative equity across to the new property.

Looks like the banks are anxious to transfer what little security they have left onto those houses with a prospect of recovering their value and in established areas.

Click to expand...

Hi Shuttleworth

This is very interesting. Have you any further details?

For example, is she switching from a tracker mortgage to a SVR mortgage?
Will the resultant mortgage be smaller? For example, if she is selling her home for €200k and buying a new one for €150k.
Is she in arrears?
Does she have a good job? If you are well able to repay the loan, the value of the underlying security is less important.

brendan

Brendan Burgess said:

Hi Shuttleworth

This is very interesting. Have you any further details?

For example, is she switching from a tracker mortgage to a SVR mortgage?
Will the resultant mortgage be smaller? For example, if she is selling her home for €200k and buying a new one for €150k.
Is she in arrears?
Does she have a good job? If you are well able to repay the loan, the value of the underlying security is less important.

brendan

Click to expand...

I am no longer practising so wouldn't be handling the paperwork but I will ask her. She is working in life and pensions.

I was talking to my brother yesterday.
He couldnt go into fine detail - confidentiality.
But the gist of it was that he brokered an agreement between one the Irish bailed out banks and a person in negative equity.

They had lost their job. They were allowed to sell their house, but the shortfall was written off by the bank.
The bank got 100% of the money that selling the house made. It didnt make asking price, but even if it did the bank would still have got 100% too. The bank had final say on the offers on the house.

The total write-off for the person was 27%.

Hes also brokering more of these, but this is the first one he has had complete so far. ie the house has to sell first at the price agreed with the bank.

My advice is that if you are in negative equity, especially if you have a tracker, seek out help. Do not talk to the bank yourself. Get someone good at negotiation to do this for you.
You can still walk away with no debt to the bank.

He's a solicitor in the UK not Ireland.
He did not do it for profit.
He only negotiated for people he knew. Nothing to do with his practice. hes a very good negotiator. It runs in the family apart from me.
You would be better looking for someone in Ireland that you trust who is a good negotiator.
Perhaps there people on askaboutmoney who could handle it.

The total write-off for the person was 27%.

Click to expand...

While I can understand banks writing off some loans because the costs of recovering are too high and/or its clear they'll never get their money, I cannot see them allowing the customer to get away with a perfect credit rating. Is it that in this case, that even though the bank wrote off the debt, the fact that the debt is written off is still recorded on the customers credit rating thus making it unlikely they'll ever be given credit again?

I have around 10-15k negative equity,I think.

Leaving this aside for a moment, in 12 months we will have enough savings to put an 8% deposit down and pay other related fees so that we can buy a larger house that we can start a family in (our current house is v small and not appropriate for having a child in). I asked my lender about whether there was an option available to us, possibly to roll the negative equity into a personal loan so as to allow us move sooner rather then later. My fear is that I cannot save as quickly as the house will continue to drop in value and I was told absolutely not - they will only consider giving me 92% of the house value and any negative equity would need to be paid off by me before selling the house.

Shuttleworth said:

I am no longer practising so wouldn't be handling the paperwork but I will ask her. She is working in life and pensions.

Click to expand...

Hi,

Just wondering if you ever got any more info on this. On the face of it, it is very frustrating for me that someone would get this offer from a bank and yet they were so short with me when I tried to go down the same route, but the details may be quite different.

Oscaresque said:

Hi,

Just wondering if you ever got any more info on this. On the face of it, it is very frustrating for me that someone would get this offer from a bank and yet they were so short with me when I tried to go down the same route, but the details may be quite different.

Click to expand...

I think the problem might be that you have showed your hand to the bank.
They now know you are planning on up sizing and so must be relatively well off.
They now know you are not a risk to them at and so will not deal with you.
There is no advantage to them in offloading your loan. You are one of the good ones and they will keep you.

Thanks Minion. I must say I don't feel well off. When I consider the prospect of having to live in this tiny box for the rest of my life I feel rather poor and kind of depressed actually.

But you have a point, unless you are a default risk banks don't want to know about your personal circumstances.