how is negative equity paid back?

Comyface

My brother sold in negative equity about 7 or 8 years ago. The Halifax let him take out a 'Deed of Covenant' (think that's what it was called) for the shortfall. It was just like an unsecured loan AFAIK, but specifically for that situation. He had to assign his endowment to it, though, as security.

Ditch_Crawler

Comyface wrote: »

My brother sold in negative equity about 7 or 8 years ago. The Halifax let him take out a 'Deed of Covenant' (think that's what it was called) for the shortfall. It was just like an unsecured loan AFAIK, but specifically for that situation. He had to assign his endowment to it, though, as security.

Aaaahhhh....*sits back and sighs with relief* - this is music to my ears!

Dan_1976

There is a difference to changing secured to unsecured and borrowing money to repay the mortgage shortfall.

madeupname1

My view, for what little its worth, is that no bank is going to willingly just let your OH walk away from £15,000 negative equity without exhausting pretty much every opportunity to get him to pay it back. Just because the value of the security has decreased, does not change the fact that your OH borrowed X and that is the amount he needs to pay back. As other posters have mentioned, even if they go through the expense of repossession, any shortfall is still a debt that your OH will be liable to pay until he goes through some legal process, for example bankruptcy, to clear it. By all means talk to the bank and hopefully you will come to a sensible resolution. However, I think that resolution is going to involve paying back the amounts borrowed.

Ditch_Crawler

I just found this on the National Debtline Factsheet about Negative Equity:

Help from your lender

You may be able to sell your house with permission from your lender. You will need their agreement as they can stop a sale going through if the sale price will not cover the outstanding mortgage. You will need to persuade them that you have obtained the best possible price for the property. Point out that if the house was sold by your lender they would be likely to get a much lower price as the property would be empty and could fall into disrepair.
Check if your lender has an ‘assisted sale’ scheme that can help you. Some lenders will agree to an arrangement where you stay in your home while the sale goes through. There are special rules you have to follow. Your lender may want you to use an approved estate agent for the sale, and check the offers you get from possible buyers. In return, the lender will hold action while the sale goes through. They may even agree to help with your legal fees and write off some of the shortfall. Each lender will have different rules. Phone us for advice

The FSA Mortgage: Conduct of Business Rules say that a lender must “deal fairly” with anyone in arrears. It also says the lender must “give consideration to the customer being allowed to remain in possession to effect a sale”. This means that if you cannot afford to stay in the house, the lender must look seriously at allowing you to sell the house yourself whilst you are still living there.

There is also mention of the Mortgage Rescue scheme whereby the house might be bought by a Housing Association and rented back, but this depends on whether or not you would classed as homeless etc

Ditch

VIGILANT22

Ha ha...mortgage rescue scheme has assisted 0.01% of the population...........


Maybe time to face up to responsibilities and over commitment/borrowing...some people thot the party would never end........!

WhiteHorse

VIGILANT22 wrote:

and who said?

Lenders have a variety of options. Allowing a sale and pursuing the borrower(s) later for the difference is one.

Realising that they will never get the difference is another. In effect, accepting so many pence in the pound. It's standard practice in financial circles, as any liquidator will tell you.

Ditch_Crawler

Ditch_Crawler wrote: »

I just found this on the National Debtline Factsheet about Negative Equity:

Help from your lender

You may be able to sell your house with permission from your lender. You will need their agreement as they can stop a sale going through if the sale price will not cover the outstanding mortgage. You will need to persuade them that you have obtained the best possible price for the property. Point out that if the house was sold by your lender they would be likely to get a much lower price as the property would be empty and could fall into disrepair.
Check if your lender has an ‘assisted sale’ scheme that can help you. Some lenders will agree to an arrangement where you stay in your home while the sale goes through. There are special rules you have to follow. Your lender may want you to use an approved estate agent for the sale, and check the offers you get from possible buyers. In return, the lender will hold action while the sale goes through. They may even agree to help with your legal fees and write off some of the shortfall. Each lender will have different rules. Phone us for advice

The FSA Mortgage: Conduct of Business Rules say that a lender must “deal fairly” with anyone in arrears. It also says the lender must “give consideration to the customer being allowed to remain in possession to effect a sale”. This means that if you cannot afford to stay in the house, the lender must look seriously at allowing you to sell the house yourself whilst you are still living there.

There is also mention of the Mortgage Rescue scheme whereby the house might be bought by a Housing Association and rented back, but this depends on whether or not you would classed as homeless etc

Ditch

and this:


Help from the court

If your lender refuses to let you sell the house it is possible to apply to the county court for an order for sale under the Trusts of Land & Appointment of Trustees Act 1996.
The court can order a sale on whatever terms it thinks reasonable, even if your lender objects.
In some circumstances you can use Palk v Mortgage Services which is a case where the lender was ordered to sell the property after repossession rather than rent it out indefinitely. This was because the rent would not have covered the interest being added to the mortgage so the debt was still growing.
In the Halifax v Barratt case the court let the borrowers sell the house for the “best possible price” even though the Halifax refused permission for the sale. The borrowers were also allowed to take the sale costs out of the sale proceeds before the money went to the lender.


Ditch.

WhiteHorse

VIGILANT22 wrote:

Ha ha...mortgage rescue scheme has assisted 0.01% of the population...........

Agreed. It was a cynical political gesture that amounted to nothing.

Maybe time to face up to responsibilities and over commitment/borrowing...some people thot the party would never end........!

Agreed. It was some sort of collective madness.

VIGILANT22

Ditch Crawler.......Did the lender force you to borrow to the limit you did?...No, therefore you should pay every penny back that you owe....look at ways of redusing yr liability instead of googling as to work out how you ccan get out of paying back the money you borrowed