Sold in NE. Paying off shortfall as agreed. But bad mark on my ICB record?

[Blinder]

I sold a property for less than mortgage amount. Agreed with bank before sale that full residue will be paid off over a (still to be agreed) period of time at the same rate as the original mortgage. I had suggested at the beginning that 5 years seemed a reasonable period ( currently 16 years left on the original mortgage term) and they agreed that was reasonable, but that it would be confirmed, i.e. the term agreed, after sale.

Since property sold, payment made based on remaining balance, but based on remaining term. This happen automatically ( i.e. it wasn't a decision that I made. DD was just presented to my account for that amount)

Relief that property was sold ( and wasn't a stresser anymore) and wasn't interested in trying to get a reduced agreement figure so was waiting for bank to get back to me with the term that they wanted it paid off in. House sold in Dec. Mid Jan I phoned them in make sure that they had received proceeds of sale and to find out how much was outstanding. At same time phoned agent I had being dealing with just before sale to find out next steps. That agent had left the bank, and I was told that a new agent was handling case. He wasn't available but they would leave a message for him to look into it and get back to me. But didn't contact them after that to see what was happening. As far as I was concerned, the ball was in their court. I had submitted all paperwork they requested before sale ( notarised forms about my financial means) and was waiting for them to come back to me. I have to admit that the longer it was left, the better for me, as I had other debts to pay off at higher interest rates. Financially it made more sense for me to wait for them to get back to me, and use the extra money to pay off those debts.

However, in April I got my ICB credit report, just to see what it said. And there was 2 bad* entries by the bank for the mortgage account. ( * Well I think they are both bad ...)


There are two accounts related to this mortgage account in my ICB record.
The first has a start date of the mortgage start date. an opening balance of the original mortgage amount. However it has a latest balance of 0 which is dated January this year.
This account, in the payment history table, has an 'L' in the most recent indicator box.
It says in the legend that 'L means that 'A/C settled for less than full amt'.

The second account related to my mortgage account, has a start date of January 2017 ( same date as latest date for first account mentioned above). Starting balance of the residue of my mortgage after sale, and a latest balance dated February for the same amount.
In the payment history table is only one entry which is 'D'
The legend tells me that 'D' means 'Account in dispute'


I phoned them and asked about it. Person I was speaking to didn't really take much notice of the 'L' entry but said that he would talk to his supervisor about getting the 'D' entry removed as he agreed it wasn't warranted ,as I never disputed anything about the account and he couldn't explain why it was there. I said that he would phone back the next week about my ICB record. Haven't heard anything from him about it since.

Result of that call was that I should submit a new SFS ( as latest SFS they had from me was from 2014, when I first broached selling the house and paying off the residue of a period of time) and that they would send details to their credit department and they would make a decision about the term that the residue needs to be paid off.
Submitted SFS in April, followed up at end of May with a call to them, but it's still with their Credit department, and it might take about 4 weeks. I plan to phone back again end of June if I don't heard anything.

Anyway. the point of this post ( sorry it took so long to get to it ...)
Is the 'L' correct, because they seen to have settled the original mortgage account, but just put the balance into another account.


I plan on writing to them and asking for written confirmation that both entries on my ICB have being removed. And if they haven't being removed for an explanation as to why the bank think that they belong on my record.

Am I correct to assume that any out of the ordinary entry on a ICB is bad, and that I should make sure that both entries are removed? Or is the 'L' not that bad and I should just concentrate on getting the 'D' entry removed?

 

[Brendan Burgess]

The dispute is clearly wrong.

I think that the L is correct - technically.

"It says in the legend that 'L means that 'A/C settled for less than full amt'."

You had a mortgage secured on a property. You have now sold that property without fully discharging that loan.You are seeking an agreement to pay it off outside the ordinary agreed terms.

The L is bad. I don't think any other lender would give you credit if you settled a mortgage for less than the full amount.

You have acted very honorably throughout this. You were never in arrears? You have sent in all the information requested. I think that they should give you a clean record.

Let's say you had gone to another bank and borrowed the money to clear the shortfall on the mortgage. You would have a clean ICB record.

How much is the shortfall and are you in a position to discharge it in one go?

Does your credit record matter?

Brendan

 

[Blinder]

Thanks for reply Brendan. Never any arrears. Mortgage amount always paid in full and on time. Even when things were tight, other expenses cut to ensure it was paid in full.

I guess I can see where technically they are right with the 'L', However I probably just feel a little hard done by as it doesn't distinguish my ICB credit record from someone who asked for and was granted debt forgiveness for the shortfall.
Or does it?
Will lenders be able to tell by looking at my record?


ETA : Thanks for changing thread title. I was trying to make advice that I needed clear in title, but you're description is much better

 

[Blinder]

How much is the shortfall and are you in a position to discharge it in one go?

Shortfall is only just over 23K. Didn't have a lump sum to pay it off. In hindsight, if I didn't know at the time that it would affect my credit rating, I would have found the money to pay it off.
Still don't have lump sum to pay it off now.

Does your credit record matter?

It might do in the near future. Have mortgage on another property ( my current home). Same bank, also paid on time and in full with no arrears. For health reasons, I need to think about downsizing and moving to more suitable accommodation in next few years. At that stage don't think they will be enough equity in my home to buy a suitable place outright, so will probably have to get a smaller mortgage.
It's not something that I need to do now. However, the health issue is unpredictable, so can't tell if it will be a necessity next year, or not until 5 years time, or never .....
So the plan was to do it within next 5 years, and hope it won't become a necessary before then.

If they won't remove the 'L' from my record, it's also possible that I can wait 7 years in order to downsize. ( or whatever the amount if time required for it to fall off my ICB record)

 

[Brendan Burgess]

I think you should try to get it removed. I don't know whether they will or not.

But if they don't do so, don't worry too much about it.

If you need to downsize, it's very likely that your existing lender would allow you to sell your current home and give you a smaller mortgage on a cheaper house.

I wonder would they consider giving you a remortgage to clear the shortfall in full? They then have a secure loan. You will have just one loan to pay off. Your credit record would be fixed, although it might take 5 years for the L to disappear.

Brendan

 

[Blinder]

I wonder would they consider giving you a remortgage to clear the shortfall in full? They then have a secure loan.

I sure they probably would as the interest rate is higher on my mortgage.
Maybe I should share numbers to see if I'm making the correct decisions ( Making incorrect financial decision wouldn't be a first for me, it's how I got here )

PPR : 230K mortgage. Value approx 290. Interest Rate 4.25% ( 16 years left) - 1659 per month
Shortfall : 23K, interest rate 1.25% - currently 132 per month ( interest rate was the reason that I though I'd be better off agreeing to a term to pay it off rather than getting a personal loan at a higher interest rate to pay it off when the house was being sold)

Also have a loan. currently 9.6K (5 years left) Interest Rate 7.5% - 191 per month

Have about 5.5K in an emergency fund.

Net income is 4,200 per month.
Expenses (excluding debt listed above) is about 1.2K a month.
Debt payments above are 2K
Leaves 1K extra.

Have been using that to pay down debt, but I started at the highest interest rates.
Was used in first half of year to pay down CC debt. That is cleared now.
Currently planning on putting the extra 1K monthly into the Loan, which should be paid off in February 2018.

Then the plan was to pay the extra into the 4.25% mortgage, and just let the 1.25% shortfall be paid over whatever term they agree

The 4.25% mortgage rate should fall in the next few months. I'm around that 80% LTV part, and the bank allows me to switch to their 3.1% rate if LTV is < 80%
Rate would be 3.5% if LTV > 80%

I was going to wait until the shortfall term agreement was sorted before I started that, but since it's going on longer than I thought, I might start it soon. ( I was also waiting for a few more mortgage payments to go through, so ensure that I was under that 80%. It the valuer says it's only worth 285K, then I'm over the 80% LTV)


So given all that:
Firs step is to ask them to fix by Credit Report and remove the 'D'
If they do, then from what you are saying above , I think the 'L' will remain on my account anyway, even if I do roll the shortfall into the mortgage, so I might be better continuing with my plan above? and not worrying about the 'L' until ( if ever) it becomes an issue.

If they don't?


Thanks for you time