Case study Permanently Resident in North America - PIA Rejected by Lender

[J Hayes]

My wife and I purchased a property in Ireland, but had to emigrate to North America a few years back in search of work - we rented the property in Ireland, continuing to supplement the mortgage out of pocket until 2013, when my wife stopped working on personal health grounds. Currently €40k in mortgage arrears (€120k N/E) with no assets and surviving on a single income (w/ newborn), we recently put a proposal to (single) Lender after multiple SFS submissions with little or no response - through a PIP we voluntarily surrendered the property (bad advice?) and proposed a lump sum settlement offer (~15% of N/E) from family & friends which the Lender rejected outright.

Lender's intention is now to sell the property and seek full repayment of shortfall through the courts. PIP has subsequently closed my case now (in reality, he offered very little). I'm sure this is a very common strategy by the Banks, but a few questions I need to find answers to;

1. Understanding no judgement will be sought until the house is sold (and shortfall realized), do Banks generally tend to make plays on the property market, i.e hold a non-performing property long-term, anticipating a strong market correction?
2. How long does it take a Lender to seek judgments & enforcement action through the courts? Am I looking at months or years?
3. Would a Lender typically have any added incentive to wait the full 6 years (statute of limitations) to initiate Bankruptcy proceedings?
4. Are they likely to enforce this overseas and if not, what happens if we were ever to move back to Ireland?

Thanks in advance for your help!

 

[Jim Stafford]

. Understanding no judgement will be sought until the house is sold (and shortfall realized), do Banks generally tend to make plays on the property market, i.e hold a non-performing property long-term, anticipating a strong market correction

4.

Generally they do not, due to costs of receivers etc. In certain cases they might, particularly if the on going rent was very high relative to the loan interest.

How long does it take a Lender to seek judgments & enforcement action through the courts? Am I looking at months or years?

Depends on the bank (In a public forum such as this I will not comment on the strategies of specific banks.) In general you would be looking at months. However, living in North America does pose problems for any creditor, as you would have to be personally served etc.

Would a Lender typically have any added incentive to wait the full 6 years (statute of limitations) to initiate Bankruptcy proceedings?

No. they will try and enforce sooner.

Are they likely to enforce this overseas and if not, what happens if we were ever to move back to Ireland?

Yes, but with difficulty. You should Google "Homestead States" to see what protections you can avail of, as each State has a different level of protection. For example, Florida gives great protection to a family home. Indeed, if you are unable to do a deal, you might decide to "forum shop" and move to a State with strong protection. Certain states have minimum "crystallisation" periods. for example, in some States you must have owned your own house for at least 3 years before it is protected from bankruptcy.



Jim Stafford

 

[44brendan]

1. Understanding no judgement will be sought until the house is sold (and shortfall realized), do Banks generally tend to make plays on the property market, i.e hold a non-performing property long-term, anticipating a strong market correction?

True. Persist with your offer. Likely that they will always reject 1st offer in the hope that they can negotiate a better one. Make sure you are clear that this is the only offer on the table and that you have no intention of ever returning to Ireland.

2. How long does it take a Lender to seek judgments & enforcement action through the courts? Am I looking at months or years?

Years. No enforcement action can be taken in Ireland and I don't see any realistic fear of them pursuing you in the US. Cost would likely well outweigh any perceived recovery unless you are really rolling in funds!!

3. Would a Lender typically have any added incentive to wait the full 6 years (statute of limitations) to initiate Bankruptcy proceedings?

Forget bankruptcy proceedings. No lender will ever initiate them at this level of debt!!

4. Are they likely to enforce this overseas and if not, what happens if we were ever to move back to Ireland?

Highly unlikely! If you don't intend returning home for a number of years bank will have moved on. Historical debt is very rarely pursued unless you hit the headlines by say winning the Lotto!!

 

[J Hayes]

Appreciate the responses, very helpful. I have had no contact from the Bank since the decision and I have revoked the Letter of Authority from my PIP so will be dealing with this myself from here on. What would be next steps by the Bank (and expected timeline) from the point of rejecting a PIA?

 

[44brendan]

What would be next steps by the Bank (and expected timeline) from the point of rejecting a PIA?

If you were a client of mine you would not be regarded as a priority. I'm assuming that the property is now either sold or in the process of sale still. Bank will do nothing until the sale is completed. At that stage they may transfer the case to what we call the "hopeless cases unit". I.e. In the case of the bank I work with a few threatening letters are generally sent and if no response is received a decision is then made on whether or not to proceed for judgment. Where a client is abroad and there are no assets or earned income in this country the case is usually held in that unit and eventually written off.
Obviously different banks have different strategies but if I was making a decision on a case such as the one identified above I wouldn't be recommending taking very expensive and potentially fruitless legal action pursuing you in the USA! I'd be focusing on cases where I have some reasonable level of recovering funds.
I'd recommend ignoring all correspondence!

 

[TLO]

The quality of the decision making by the Bank has been poor. This makes it hard to predict what steps, if any, that the Bank will take next. If the Bank is able to sell the property without further reference to yourselves then one possible angle is to forget about them and get on with your lives. Another possible angle is to wait, and when they make contact next, say that the previous offer of a 15% shortfall settlement is no longer on the table, (remember, it is they who rejected the PIA) but that you will co-operate with a voluntary sale in exchange for a full write-off of the short-fall. Another possibility again, if you want complete certainty, and if you have no other assets, would be to apply for your own bankruptcy in Ireland, if you are still within the time limit. You would be absolved of any further responsibility to the bank, would be discharged within a year, and are unlikely to to be subject to a payment agreement because you are "struggling" on a single income, 3 mouths to feed, high rent, two cars needed etc.

 

[J Hayes]

I honestly can't understand the Banks position here. They look to be basing their decision on my earnings potential (nothing to write home about) - is this a common strategy when dealing with younger borrowers in their mid-30's?
Also, in the very unlikely event that we were to ever consider a move back to Ireland, what avenues do Lenders typically have to locate borrowers within the 6 year period? I have no fear of this (given our financial situation and our full transparency over the last few years from abroad), but would like to know if a P.I/tracing agent is of any concern. In theory, this would determine whether we would ever look at moving back, declaring bankruptcy etc. Appreciate the advice as always, JH.