Case study Lender wants me to go for mortgage to rent

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KitKat

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Personal and income details
Net (i.e. after tax) Income self: €345 per week take home (temporary contract)
Income history: Was made redundant in June 2008 and have just secured temporary employment until November 2013
Net income partner/spouse: employed €430 per week take home
Income history: Was in full time employment but hours reduced to 4 day week in July 2010.
Number of children: 2 (ages 10 & 8)
Amount of child benefit received: €260 per month
Amount of Mortgage Interest Supplement received: None

Home loan
Lender: AIB
Amount outstanding: €171,000 (approx.)
Value of home: €120,000 (approx. if we're lucky)
Interest rate: SVR 4.4%
Monthly repayment: €1069 per month (currently on I/O at €450 per month)
Amount in arrears: approx. €3,000

Summary of discussions and agreements with the bank:
Have been on interest only since 2010 – Letter received back in late June advising us we were “officially” in the MARP process (I would have thought we were in MARP since 2010?).

Although I have secured a temporary position until November I (rightly or wrongly) have not told the bank about it, as I feel that we will be back to square 1 come November. There is definitely no possibility of the contract I am on being either extended or made permanent. I have my wage paid into a separate bank account and have been transferring money over weekly to try to cover the interest only payment and other DD’s etc.....


Other loans and creditors:
Personal Loan: €9,000 remaining at 12% (I think)


Other savings and investments:
None

How important is retaining the family home to you?
Partner would prefer to keep the property but I would be happy to walk away as I’m sick of the worrying.

Any other relevant information:
Partner was recently contacted by phone (15th August) by the lender and was informed the mortgage was unsustainable. They said they wanted to look at us selling the property to a Housing Association and we rent it off them. My partner said he preferred not to discuss it over the phone and that he would prefer a face to face chat. They said they would be in touch. We have heard nothing since that call, written or otherwise.

What is your preferred realistic outcome?

We would be happy to work with the lender to try and obtain some sort of a realistic outcome.
 
Hi KitKat

You could sell your home to the Housing Association and stay in your home on a level of rent which would be lower than you are paying on interest only.

I think that AIB would write off the shortfall as well. If they don't, you could get it written off through a Debt Settlement Arrangement or bankruptcy.

You should pursue them to make an appointment to meet with them and find out what they are proposing.

Brendan
 
Hi Brendan - thanks for your reply.

A quick question (well maybe 2 or 3) regarding this scenario.......

Would you (or anybody) have any ideas as to what if any conditions are attached to such a solution. For example, is one expected to remain renting the property for a fixed term and how would they assess the rent? I mean would they (the housing association) have to keep rent payable in line with the local area rental values?

We will try and contact them tomorrow to see if an appointment can be made (sooner rather than later).
 
Hi KitKat

I don't have any direct experience of it, but quite a few posters on Askaboutmoney have tried to get into it, but have been refused by their banks or the Housing Association.


Here is some information from Cluid, the main housing association.

It provides a link to the Government's FAQ here.
 
The tenancy would be on similar terms to a local authority tenancy with rent being based on means.
 
Brendan and ClaireM - thanks for the replies.

We contacted the bank today and they are going to call us back next week to arrange a meeting. They were still talking of the Housing Association route, so we'll see what happens there.

They did mention was that unfortunately 2 payments were returned unpaid and we need to pay those amounts as soon as possible, I'm not sure how we'll manage that but we'll see what they have to say next week (hopefully).

Thanks again.
 
Unsustainable Mortgage Communication

OK - further to my last post we have now received communication from the lender as follows (Brendan/Mods please feel free to delete anything you may feel is inappropriate):::

Dear xxxxxxxxxxx

Further to your request for an alternative repayment arrangement on your account we are writing to advise you that we are not in a position to offer you an alternative repayment arrangement as your mortgage is unsustainable.

In assessing your case we used the information you provided in your Standard Financial Statement together with any accompanying documentation. Based on your financial circumstances we do not believe you will be able to return to full contractual repayments in the foreseeable future. However, we are committed to working with you and there a number of options available to you in your circumstances and we would ask you to consider them.

These options include:

Trading/Downsizing
By downsizing you will reduce your mortgage, resulting in more affordable monthly repayments. This will involve selling your property to purchase another at a lower cost.

Voluntary Sale
This option allows you the opportunity to voluntarily sell your property. The proceeds of the sale (less reasonable sale costs) are credited to your mortgage account. You will be liable for any outstanding balance after the sale has completed. However, we will work with you to agree an appropriate arrangement in respect of your outstanding balance to enable you to plan for the future. This may include a full and final settlement in respect of this balance.

Voluntary Surrender
By voluntarily surrendering your property to us we will take it into possession with a view to selling it. You will be liable for any outstanding balance including the selling costs after the sale has completed. However, we will work with you to agree an appropriate arrangement in respect of your outstanding balance to enable you to plan for the future. This may include a full and final settlement in respect of this balance.

Mortgage to Rent
This means that the property is sold to an Approved Housing Authority (AHA) and you will become a tenant paying an agreed rent to the AHA, however you will continue to reside in the property.

For any of the options outlined above:

The associated approximate costs which may apply to the options above include:

A valuation fee: €150.00
Estate Agent selling costs: 2% of the purchase/sale price
Legal purchasing / selling costs: 2% of the purchase/sale price

In relation to Mortgage to Rent, Trade Down and Voluntary Sale options, we will contribute to these costs, once the particular option has been agreed with you.

Please be advised that you are now outside the protection of the Mortgage Arrears Resolution Process (MARP) and therefore you need to be aware of the following:
1. We reserve the right to commence legal proceedings three months from the date of this letter or eight months from the date the arrears arose, whichever date is the later. In the event that we commence legal proceedings to repossess your property, you will be responsible for the legal costs of such proceedings, estimated at €4,500 and costs associated with the disposal of the property. However, this amount could be higher or lower depending on the legal action taken. You will also remain liable for any outstanding debt, including any accrued interest, charges, legal, selling and other related costs.
2. Under the Personal Insolvency act 2012, you have the right to consult with a Personal Insolvency Practitioner. For more information please refer to their website at www.isi.gov.ie
3. Your account may be reported to the Irish Credit Bureau or any other credit reference agency or register and may appear on your credit report. The impact of this will affect your ability to borrow future funds.

We recommend you seek independent legal and/or financial advice in relation to the contents of this letter and confirm that a copy of your most recent Standard Financial Statement is available on request.

Should your circumstances improve, or if you have any questions or require clarification in the interim please contact us immediately.

While we appreciate this may not have been the decision you were hoping for, we are committed to helping you reach a solution and would ask you to contact us within 14 days from the date of this letter on 1890 252 008 to agree the most suitable option for you.

Yours sincerely
The Bank

Anybody have any views at all?? Personally I don't like the options of Voluntary Surrender or Voluntary Sale.

KitKat
 
Let's assess the sustainability of this

Income self|€1,495
Income partner|€1,863
Total|€3,358
Reasonable living expenses|€1,820
Available for creditors|€1,538
How much is your mortgage?

Repayments|€1,069
Interest only|€752
Interest on personal loan| €100
Unless I misunderstand the figures, you can afford to pay the full payments on your mortgage? You can probably pay the full repayments on your personal loan as well.

If you have had an income of €3,358 per month in recent months, and you are paying only €450 per month to the bank, I would classify you as a strategic defaulter.

But maybe I have the figures wrong?

And I think it's the threat of repossession which will make people take their debt obligations seriously.

The answer to your question is here:

Should your circumstances improve, or if you have any questions or require clarification in the interim please contact us immediately.
Click to expand...
 
Brendan - thanks for responding. We are most definately not "strategic defaulters".

As mentioned in my 1st post:::
"Although I have secured a temporary position until November I (rightly or wrongly) have not told the bank about it, as I feel that we will be back to square 1 come November. There is definitely no possibility of the contract I am on being either extended or made permanent. I have my wage paid into a separate bank account and have been transferring money over weekly to try to cover the interest only payment and other DD’s etc....."

Previously I was on jobseekers bringing in 115 per week and I would imagine when my contract finishes (the contract only started at the beginning of August so it is a 3 month contract) the jobseekers will probably revert back to that same amount (unless of course something else - permanent hopefully - comes up.... in which case then yes we will inform the bank of a change in circumstances).

Apologies, maybe I should have mentioned the above in the case study.


KitKat
 
Last edited:
Hi KitKat

OK, I take your point.

However, from August to November, you will have surplus income, so you should clear your mortgage arrears of €3,000.

If you choose to be a deliberate defaulter, then you should pay only the €450.
The bank will enter into discussions with the Housing Association.
The local authority or Housing Association will assess your housing needs.
If they approve you for social housing , the bank will sell your home to the Housing Association who will rent it to you.

So you will be able to skip ahead of the other 100,000 on the housing list to get social housing in a house which you chose.

Alternatively, you can appeal the bank's assessment of your mortgage as unsustainable. Default on the unsecured loan and focus on the mortgage.I suggest that you pay off the arrears as quickly as possible. It will be difficult for the bank to sustain an argument that you are unsustainable if you have been paying the interest in full and if you have been paying more when you get temporary employment contracts.

Brendan
 
Hi Brendan

Your response is appreciated. We are trying to work on the arrears, but unfortunately we very recently went into an overdrawn position with the bank, so we're playing catch up at the moment, but believe me we are definitely trying to sort this out.

Brendan Burgess said:
If you choose to be a deliberate defaulter, then you should pay only the €450.
Click to expand...


We are not purposely choosing to "default" (I actually didn't think of it like that until you made your comment) - in fact, up until now, through all of this, we have been the ones instigating communications with the bank and keeping them informed of our position.

I appreciate it's probably not good not telling them of this 3 month contract but it is giving us a feeling of a bit of breathing space to try to catch up a bit.

Thanks for your input.
 
Hi all, a few months down the line and I thought I'd update, if that's OK.

Personal and income details
Net (i.e. after tax) Income self: Unemployed €115 per week
Income history: Recent temporary contract finished earlier than expected.
Net income partner/spouse: employed €430 per week take home
Income history: Was in full time employment but hours reduced to 4 day week in July 2010.
Number of children: 2 (ages 11 & 9)
Amount of child benefit received: €260 per month
Amount of Mortgage Interest Supplement received: None

Home loan
Lender: AIB
Amount outstanding: €175,800
Value of home: €100,000 - 120,000 (approx.)
Interest rate: SVR 4.4% (interest rate was originally 4% - my mistake on original post)
Monthly repayment: €1156 per month
Amount in arrears: approx. €4,300

Summary of discussions and agreements with the bank:
Was on interest only until December 2013 when we were supposed to return to full cap & int payments. We have been trying since last August to secure a meeting with the bank to try and come to a resolution. This has been through letters and phone calls to the bank. The only correspondence we've been getting back from them stating that it's under investigation and they anticipate a response in 20 days. We've had 3 of these letters so far (in Dec 13, Jan 14 and Feb 14) as well as 2 previous letters prior to Dec 13, stating similar but with no time frame given.

We are struggling, and as a result we have cancelled the DD for the mortgage as it would only be taking us overdrawn each month as well as being returned unpaid - incurring more fees, we are however continuing (attempting) to manually pay the interest only amount of €450.00. We did inform the bank of this action in writing and we have had no contact from them about it.

Early last week I had a call from the Arrears Support people asking for us to pay the arrears. I tried explaining to him that we have been trying to arrange a meeting to sort this out and his response was "you will NEVER get a meeting with anyone from arrears support, I'll talk to my line manager and will ring you back......" Not heard a thing since.

How important is retaining the family home to you?
At this stage we are both fed up with it and just want a resolution, if we have to surrender/vol sale etc.... so be it. We feel like we’re in limbo at the moment, we’ve been in contact with the IMHO and I’m hoping something can start to move along soon.

What is your preferred realistic outcome?
We are still happy to try and work with the lender to try and obtain some sort of a realistic outcome.

Apologies for a long one!!
 
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