guaranteeing a mortgage query? what does it actually mean

K

Keep it real

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hello,

first post, sorry if this has been covered elsewhere but I couldnt find the answer i need :)

I took a mortgage out with my ex-partner for a home together when things were going good. the ex worked for a bank and due to concerns over credit rating at the time, we opted for a preferential loan with the employer (mortgage in the staffs members name due to BIK, but deeds are joint). I am the guarantor - bank told us at the time it was a technicallity due to the BIK which I can understand where they are coming from to be fair.

Anyway, relationship has since broke up, and im led to believe that the ex cannot (perhaps will not) now pay the 50% share of the monthly mortgage outgoing. in short my question is that as im guarantor (but have no control/input over the mortgage), if defaults occurs, how soon typically before they approach me for the entire monhtly outgoing? If they do that, and i pay 100% does that mean that full responsibility (until end of the mortgage term) now passes to me? Bank have already told me that they are unwilling/unable to provide any information to me at its not my mortgage, so im a little confused as to what would actually happen in the event of the mortgagee defaulting - will they continue to maintain mortgage in the ex's name etc even though they have instigated the guarantee of repayments by me?

The only thing they will tell me is that "you signed a legal document blah blah" which i know understand and appreciate, but they being very unhelpful in that they will not provide me with what the process actually is in the event of default. Im effectively getting a "computer says no" response from them so i have no idea what happens once the guarantor is called upon.

I know that mortgages 99% of the time are joint & severally liable and im assuming this would apply for this too (would be surprised if it didnt tbh), but im getting the feeling that althought the joint & severally liable bit will apply im still going to be at a loss as to having any control or standing on the mortgage - either in relation to the recognition that im the one paying it or being able to access any data. Any ideas or experiences would be welcome.

Thx :)
 
Who is living in the house?
Which account do the repayments come out of?
Yours/theirs/joint?

I would have presumed that being a bank employee and defaulting on a preferential loan would have serious impact on their ability to stay employed by the bank?

It seems from your post that you are not speaking to each other - that doesn't help with resolving matters, getting legal may be the best way to approach this initially even if it's just a shot across the bows asking for information as to your ex's plans for the property and mortgage repayments.

Ask the bank for their protocol for when they inform guarantors of "issues" with loans they have guaranteed. Do they only inform you when it's too late or when issues such as the first missed payment arise?
 
Who is living in the house? Me at the moment - moving out soon though
Which account do the repayments come out of? Yours/theirs/joint? joint account with me being the only one depositing funds into the source account

I would have presumed that being a bank employee and defaulting on a preferential loan would have serious impact on their ability to stay employed by the bank? I would have thought so too but it seems its fairly low on the list of priorities. I would have thought that under the circumstances that the bank could enforce a payment so long as he has means (i.e. a salary from them!?) again this is an area i can find nothing out about

It seems from your post that you are not speaking to each other - that doesn't help with resolving matters, getting legal may be the best way to approach this initially even if it's just a shot across the bows asking for information as to your ex's plans for the property and mortgage repayments. I get the impression i am not been given the full story tbh, when interest only/moratorium was mooted by him, it seems that he "doesnt know" when he would be in a position to commence repayments (probably isnt aware of the consequences of this too), even though this is a certain reality at the end of any moratuorium or i/o period. Im not happy about prospect of applying for either of these but thats a rant for another post!

Ask the bank for their protocol for when they inform guarantors of "issues" with loans they have guaranteed. Do they only inform you when it's too late or when issues such as the first missed payment arise? The bank have been typically unhelpful, and very rude when im seeking information - even hypothetical information as would be the case in this scenario. There was a payment missed in the past (Nov 2008) which i was not made aware of, and i only found this out by someone elses mistake actually. They never followed it up with me in my capacity as guarantor.
 
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Sounds very strange to be honest why a bank would go down this road because of BIK issues. Are you Guarantor on the whole mortgage? If so, that is more than a technicality as the bank claimed when you signed. Do you have documentation that sets down the exact nature of the arrangement? Did your solicitor say anything about this arrangement when you signed? Can you talk to him again?

I would sit down with the bank and your boyfriend if possible and try to get to the bottom of this. Something really doesn't sound right. You end up completely screwed under this arrangement. I would love to meet the bank underwriter who signed off on this.
 
yes guaranteeing the entire mortgage. I guess the bank never figured that a negative equity environment would have existed. I kept every single piece of documentation i came across when the mortgage was taken out. I suspect they used the guarantor element to replicate the joint and severally liable aspect of normal joint mortgages. he definitely not my bf any more btw !! Anyway, the bank have told me that as i am not a client of theirs they dont have to talk to me (i suppose until such a time they are looking for the guarantor money!)

Sounds like the Underwriter / Risk Assessor got their qualification from Clown College, but so long as the Bank get their mortgage repayments they're not going to be concerned with the inefficiencies and logistical nightmare which it is - and to be fair i can see their pov even thought it sucks.
 
Keep it real said:
I would have presumed that being a bank employee and defaulting on a preferential loan would have serious impact on their ability to stay employed by the bank? I would have thought so too but it seems its fairly low on the list of priorities. I would have thought that under the circumstances that the bank could enforce a payment so long as he has means (i.e. a salary from them!?) again this is an area i can find nothing out about

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There was a payment missed in the past (Nov 2008) which i was not made aware of, and i only found this out by someone elses mistake actually. They never followed it up with me in my capacity as guarantor.
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I think it's important to remember that the mortgage is in your ex boyfriend's name and should he default, the bank will first chase him for the payment.

Do you know why your ex can't make the payments? Is it a case of can't or won't pay? is he still working at the bank? Banks don't like their staff to be in financial difficulty - generally they have a team who will look after staff loans and probably will offer debt management etc to their staff.

The bank's first call on the default would be the borrower, I think in this case this will work in your favour because they should want to help him resolve the problems
 
we opted for a preferential loan with the employer (mortgage in the staffs members name due to BIK, but deeds are joint). I am the guarantor - bank told us at the time it was a technicallity due to the BIK which I can understand where they are coming from to be fair.
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You jointly own a house.

You have a mortgage in his name, but you are jointly responsible for it.

Assume that you jointly own a house and have a joint mortgage.

This is something to be sorted out between your ex and you. Don't be distracted by guarantees for the moment. Forget about the bank.

What is the plan for the house?
What is your plan to discharge the mortgage?

What does the agreeement that you and your boyfriend signed when buying the house jointly say about what happens if you split up?
 
Brendan Burgess said:
You jointly own a house.

You have a mortgage in his name, but you are jointly responsible for it.

Assume that you jointly own a house and have a joint mortgage.

This is something to be sorted out between your ex and you. Don't be distracted by guarantees for the moment. Forget about the bank.

What is the plan for the house?
What is your plan to discharge the mortgage?

What does the agreeement that you and your boyfriend signed when buying the house jointly say about what happens if you split up?
Click to expand...

who needs co-ownership agreements when your in love eh?! unfortunately i wasnt cynical enough to arrange any agreement. at this stage anywaym we have both offered each other the chance to buy the other out. its not a possibility at the moment so we are in agreement that it should be sold.

I take responsibility for my own (and at the moment his portion) of the mortgage. I do realise the joint and severally liable nature of this and i would never take this forgranted - it is extremely difficult however to assume that i have a joint mortgage when the bank deny's me basic information on the o/s balances due and things like that. its all well and good being jointly paying for it, but i have no rights or control over it - that is totally his in the banks eyes - i.e. any instructions or requests for info have to be done through him and him alone. This does leave me in a very awkward position regarding obtaining information to allow me make best decisions for myself :(

The plan is to sell the house ASAP. Im in a very lucky position to have no other personal debts or liabilities, and in addition to paying all mortgage/bills etc on my own till now, i have been saving a rainy day fund. I never was a fan of debt so i have this side looked after for me. I would imagine that between savings and a small loan from the bank/CU i could clear neg equity if it came to it. I wouldnt be saying he is in the same position though. the banks got potential to halt the sale due to his inability to pay for his share of the neg equity shortfall. At present he claims to be unable to pay even half the mortgage so is proposing interest only or moratorium - i think if it came to it he probably could pay up. I'm dead against using either option for lots of reasons other than it increasing the amount which i will be liable for by the time we need to divvy up the negative equity (again if we were allowed to sell).

What i wanted to find out really was how do guarantees operate and has anyone experience with it. i mean the worst case scenario, he could completely "default" on his mortgage liability, leaving me paying the full whack on what will still be a house owned 50/50, but with a mortgage to which i am not entitled to a single scrap of information on ! thats scary as hell. i mean if he decided he was going to default, does that leave me completely liable or it is still joint & severally liable etc? do i need his permission to sell the house? Unfortunately the bank will not talk to me about this
 
This is very difficult.

You should ask him for a letter authorising the bank to give you full information on the mortgage.

How do you know that he is paying anything? I presume he is, but he might not be and you would have no way of knowing. I suppose if he was falling behind, the bank would have to tell you to call in the guarantee.

I think that the moratorium would probably be a good idea now. he can probably negotiate it with his employer. (he may already have done so!).

The bank will probably agree much easier to a sale if the payments are not coming in.

You will still be stuck with guaranteeing his shortfall, I think. You should try to negotiate your way out of this.

Brendan
 
Thanks Brendan, this helps to clear in my mind what I was already thinking.

Re the moratorium option my concern would be that at the end of the term he still will not be in a position to service his debt. A Letter of Authority sounds sensible and in the meantime I definitely seek some legal advice on how i can best protect myself for the future. I am terrified that he might let the mortgage default as a very easy way out (credit ratings left aside). thanks to all for the replies
 
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