Exiting a neg eq. buy to let. How to get the best deal from BoI

[iano086]

At the outset let me say that I believe 3 parties got folk into the mess they are in now with negative equity: The Government of the Celtic Tiger day and their policies / the banks lending recklessly / Joe Punter himself

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I've a mate with a BTL, bought in 2008 when the tide on everyone-have-a-BTL had long gone out. He's been long underwater and wants out. He's, somewhat unusually, maintained payments throughout - supplementing the undershoot in rent with money from his full time job. He owes €310K

He's with BoI (whom he says won't write down - but he's a bit of a softy and might not have pushed). Other than shift him from interest only they've done nothing by way of restructuring. He can sell the house now and pay off about 5/6th's of the loan, taking the remainder as an unsecured loan at BTL interest rates.

I think this a bit insufficient in the sense of the other parties to his dilemma paying their due share.

What should he do by way of getting a better deal:

- reduction in rate of interest on the remaining loan
- debt write down
- play hardball (as others appear to successfully have done). He could feign separation from his missus, move into the house and pay sufficient / "engage with the bank" to make repossession more difficult

Any other ideas/suggestions?



Cheers

 

[Sarenco]

Is this is a genuine post?

Your mate owes €310k and apparently can service the loan. Why would any bank give him a deal?

 

[cremeegg]

Is this is a genuine post?

Your mate owes €310k and apparently can service the loan. Why would any bank give him a deal?

Because lots of other people have gotten debt write downs or other deals. In fact lots of people have gotten advice on how to go about it from AAM.

 

[Sarenco]

Because lots of other people have gotten debt write downs or other deals. In fact lots of people have gotten advice on how to go about it from AAM.

Really? Can everybody get their debts written down now? It's amazing that anybody is daft enough to meet their legal obligations in that case.

 

[cremeegg]

Really? Can everybody get their debts written down now?

Not everybody, lots of people. You just have to read AAM to see the examples.

It's amazing that anybody is daft enough to meet their legal obligations in that case.

I agree. Because security is so difficult to enforce is given as a reason interest rates are so high.

 

[Brendan Burgess]

This seems really simple to me.

This guy borrowed the money. He can afford to pay it back. So he pays it back.

Not only is that my personal view, but it will also be the view of Bank of Ireland and the legal position.

There is no point in using the "we all partied" excuse. Come to think of it, he seems to have made this investment after most people had left the party "I've a mate with a BTL, bought in 2008 when the tide on everyone-have-a-BTL had long gone out."

He made a risky investment. It might have done well and he might be up considerably now. But it hasn't done well. That's the nature of investment. Some you win, some you lose.

Brendan

 

[Brendan Burgess]

He's, somewhat unusually, maintained payments throughout - supplementing the undershoot in rent with money from his full time job.

There is nothing unusual about that. Most people who borrow to invest in property do supplement the repayments in the early years.

He's with BoI (whom he says won't write down - but he's a bit of a softy and might not have pushed

Bank of Ireland don't do write-downs. This is not being a "softy". This is being responsible.

 

[iano086]

This seems really simple to me.

Very rarely in life is anything simple. Pick heads or tails, perhaps. Or what is left and what is right. That kind of thing.

To take the simple view is a sure path to taking an incomplete view.

The notion of him being totally alone in his 'investing' as if it were just any old investment strikes me as problematic. There is such a thing as mis-selling during that time.

- the banks, by their actions, artificially inflated an investment vehicle and sold it on.

- there was Government culpability involved in this artificial inflation.

It isn't unusual to see those selling investments to be pulled for mis-selling and being forced to rectify/compensate for their mis-selling.


The issue, to my mind, is whether the morality of what banks and Governments did during that time ought to be taken account of. Morality trumping legality (which is, after all, but a best-attempt to codify the commonly held morality) renders this ultimately a moral question. And if one content that one is acting morally (in the case the legality hasn't managed to raise it's game to deal with the matter in hand) then proceed one does.

Fair enough if you don't agree. The question remains: how best to force the bank to deal playing the legal/political situation to achieve the right moral result.

 

[iano086]

Is this is a genuine post?

Your mate owes €310k and apparently can service the loan. Why would any bank give him a deal?

Servicing the loan is a relative thing. You could rent your PPR out and go live in a hovel and use the saving to service the BTL. You could eat bread and water and surf wheelie bins outside supermarkets for your protein requirement ... and service the loan even more.

 

[Sarenco]

Again, there is no reason to believe that BOI will do any kind of deal while your friend is in a position to service this loan. Sure, he could strategically default but ultimately the bank has a range of legal remedies available to it to seek recovery of the unpaid debt. It may take some time for the bank to pursue these remedies but there is no reason to believe he will get a free pass.

If at some point in the future he genuinely cannot meet his contractual obligations then a personal insolvency arrangement or declaring bankruptcy could be considered in the absence of a settlement with his creditors.

 

[Brendan Burgess]

It isn't unusual to see those selling investments to be pulled for mis-selling and being forced to rectify/compensate for their mis-selling.

Ian

Your friend was not sold an investment. Your friend bought a property on the open market. He then applied to BoI for a loan and was given that loan.

The High Court has ruled clearly that "reckless lending" is not a defence.

I would be worried that you will completely mislead your friend.

I am not aware of any case where the FSO, the courts or anyone else has awarded a borrower compensation, much less a write-down, of their loan.

Insolvent borrowers can get write-downs as part of an insolvency process. You have not suggested that your friend is in any way insolvent.

Brendan

 

[Brendan Burgess]

Very rarely in life is anything simple. Pick heads or tails, perhaps. Or what is left and what is right. That kind of thing.

To take the simple view is a sure path to taking an incomplete view.

I am sorry, this is simple. You are complicating it unnecessarily.

He borrowed money. You have not offered any evidence whatsoever of mis-selling. So he owes the money.

It is, actually, simple.

 

[iano086]

Ian

Your friend was not sold an investment. Your friend bought a property on the open market. He then applied to BoI for a loan and was given that loan.

I take a somewhat less letter-of-the-law view and look at what was actually happening at the time. Investment was how the thing was pushed. I say pushed because that was the term used by a bank manager acquaintance of mine when he described the pressure to achieve loan targets - the by to letters being a fresh outlet to keep the engine running. Are you saying the word 'investment' wasn't being used in the terminology employed at the time?

The High Court has ruled clearly that "reckless lending" is not a defence.

I couldn't actually give a monkey's what the High Court rule. The law, whilst our best attempt at codifying morality, doesn't necessarily do a very good job. It's the best we've got, but not necessarily following a moral due North.

My consideration is the actual situation as it was, who the culpable parties were at the time and ways to arrive at a satisfactory solution once concluding oneself acting morally correctly.

I would be worried that you will completely mislead your friend.

I would present the moral case and if he decided it sound, would advise that he thread carefully. The same sharks that contributed to his current position are the same sharks he would be facing now. When the company I was working for was being taken over by a multi-national I rang around folk I knew who worked for multi-nationals, seeking insight into what life would be like.

- prepare for bureaucracy
- don't makes waves
- they don't get to being big by being nice guys.

Government and banks aren't nice guys. Of that I would most certainly warn him before he considers a course of action.

 

[iano086]

You have not offered any evidence whatsoever of mis-selling. So he owes the money.

An orgied, frenzied environment was created by government, banks and other players like newspapers and the chattering classes themselves. It was an environment in which folk who would neither normally consider investment or have the means to invest found themselves in the middle of. Without that environment, such people would not be in the position they are today. Those who created the environment are culpable in it's consequences.

Although not innocent children, such 'investors' were like children being offered poisoned sweets by adults (such is the responsibility/influence/power differential between Government (with the emphasis on what the function of that word is) & banks .. and the average Joe.

An appeal was made to that part in people which seeks financial security, to that part of people which is greedy, to that part of people which likes to be seen as a success ("you are sooo debt deficient").

You appear to suppose that those responsible for bringing about the circumstance in which those appeals are made possible have no culpability. Calling it "not an investment" or "a loan is a loan" strikes as the flimsiest of shields.

 

[Sarenco]

I asked at the start of this thread whether your original post was genuine.

It clearly wasn't.

You are not really interested in soliciting advice on behalf of your friend - you simply want to rant.

I sincerely hope your friend pays no heed to your Freeman ravings. They really are tedious.

 

[iano086]

You are not really interested in soliciting advice on behalf of your friend - you simply want to rant.

I've not ranted in the least. I've stated the case as I see it to counter the case (or rant if you prefer) presented by a point of view which takes a very narrow, very-letter-of-the law view in re-writing what actually transpired. I mean, money proffered by the banks not proffered as a chance for the dog in the street to invest in this wonderful new world? Do me a favour!

I'm happy for any advice give by those who would largely share my take on things, not those who don't and who are therefore unlikely to be in a position to give sound, practical advice on how to navigate shark-infested waters.

 

[Peanuts]

- play hardball (as others appear to successfully have done). He could feign separation from his missus, move into the house and pay sufficient / "engage with the bank" to make repossession more difficult

Is this your idea of morality?

 

[Brendan Burgess]

Hi ian

It really doesn't matter what you, what Sarenco or what I think is fair or moral.

The reality is that BoI does not do deals with solvent people.

If he is solvent. If he has a family home or other assets, he has no practical choice but to pay his debts.

Advising him to do otherwise will achieve nothing for him except a ruined credit record.

Brendan

 

[PaddyW]

Was your friend aware of what he was getting into at the time? Did he do due diligence before he signed the loan papers? Did he have his I's dotted and T's crossed? If so, he has no recourse.

Or did he blindly sign the papers, overcome with thoughts of making big profit from the 'investment' (as you say) and didn't bother to do any proper research on what he was buying into? If so, well, that's just bad judgement on his part.