Benficial Interest and Secured Loans

Ineedaname

I agree with DD. I think FP have just seen an opportunity here and if you don't reply they won't press it.

Chuckie1998

I will sit on replying to Firstplus then, and see what happens. Hopefully they can't stop the transfer from going through if I don't complete their request for a new credit agreement to be signed. Especially as I have already paid the OR £1500 !

debtinfo

Ineedaname wrote: »

Just to throw my thoughts in having read the discussion.

It seems to me that the OR does not need permission to assume 'ownership' of the BI in the first place, that has nothing to do with the lender whether there is equity or not, they just take it as an asset in the BR.

So if they don't need permission to take it, then the BR surely does not need permission to buy it back. It's a transaction between the BR and OR with nothing really to do with the lender.

When it gets taken into the bankruptcy it is by operation of law ie it automatically happens whether the Or or any one else wants it, if you buy it back it is by agreement of the parties involved, that is the difference, if it vests back after 3 years instead of being bought that is also by operation of law

debt_doctor

debtinfo wrote: »

When it gets taken into the bankruptcy it is by operation of law ie it automatically happens whether the Or or any one else wants it, if you buy it back it is by agreement of the parties involved, that is the difference, if it vests back after 3 years instead of being bought that is also by operation of law

But things can automatically be taken only if no one has the legal right to stop it - and if they (the lenders) don't have the legal right to stop it then they don't have the legal right to prevent the outcome of the sale of what they could not stop.

DD

Ineedaname

debtinfo wrote: »

if you buy it back it is by agreement of the parties involved, that is the difference

But the parties involved don't include the lender as they weren't a party to the legal vesting in the first place? The parties involved in the actual transaction are only the OR and the BR surely?

silvercar

debt_doctor wrote: »

But things can automatically be taken only if no one has the legal right to stop it - and if they (the lenders) don't have the legal right to stop it then they don't have the legal right to prevent the outcome of the sale of what they could not stop.

DD

I'm not sure.

If you want to remortgage a property with a secure loan, the secured loan company have no right to stop you paying off the main mortgage but you do need to get a deed of postponement signed by the secured loan company for the new mortgage that is replacing the old one - even though the secured loan is unaffected by the remortgage. So in this case the secured loan company have the power to prevent the remortgage but they don't have the power to stop you repaying your original mortgage.

Ineedaname

I can understand that because a remortgage could put full repayment of the secured loan at risk in the future, i.e. they may not get all their money back.

But who holds the BI doesn't affect that as the main lender and then the secured loan will get paid back first. Money is only paid to anyone who holds the BI if there is a surplus after loans secured on the property have been paid off.

silvercar

I can understand that because a remortgage could put full repayment of the secured loan at risk in the future, i.e. they may not get all their money back.

No it doesn't change anything as fas as a secured loan is concerned. If for example I moved my main mortgage from NR to NatWest for exactly the same amount, it would not effect a secured loan in the slightest. I would need the secured loan company's permission for the NatWest charge to be registered as first mortgage on the property, but I would not need their consent for paying off the NR mortgage.

We are getting side tracked. The point here is whether the OR will allow the BI interest to revert to the bankrupt without the written consent from FP.

Given that money has already been paid over, there is a second question. Would the OR be right to refuse to register the reversion of the BI if FP refuse to consent? and if so should the money be returned?

Ineedaname

I'll rephrase my original comment then:

"I can understand that because a remortgage at a higher value could put full repayment of the secured loan at risk in the future, i.e. they may not get all their money back."

On that basis it is probably easier to have a say on ANY remortgage than to specify "only if at a higher value".

Not sidetracking, just commenting on your input earlier on.

Yes, we are still awaiting the OP confirming what is happening in their situation. But I think the discussion is extremely interesting and useful.

I don't think it's so much whether the OR will 'allow' the transaction to go ahead without written consent from FP, but whether the OP can prove such consent is not legally required if the OR does push for it.

silvercar

I'm playing devil's advocate here and I want to state that I hate the power that second charge holders wield over borrowers and sometimes main mortgage lenders.

From FPs point of view:

They gave a secured loan based on then property value. They gave it at a rate which reflected the fact the loan was secured on the property (so it would be a higher amount and/or a lower interest rate than an unsecured loan.

Then house prices fall and the borrower becomes bankrupt.

So now they have a loan which in name is secured but in reality is not fully secure. Should the property be sold any shortfall will fall into the bankruptcy and so lost to FP.

Then they are told that the BI is reverting back and they have been asked for permission for this to happen. So they review their risk and actually they are unhappy. They gave the loan on the basis that they had security for it and failing that they could chase the borrower. Both those options are now limited, in particular the latter option has gone.

So they have been given an opportunity to ask for the borrower to accept liability. Why wouldn't they go for it?

So, if their consent is being sought, they will ask that the borrower agrees to be liable for the debt again. From their point of view, no harm in asking.