Transfer of Equity issues. Help needed...

BoarderGaz

Hi,

Background: My girlfriend owns a flat with her ex-boyfriendbut he moved out 4 years ago and has made no contributions to the mortgagepayments. My girlfriend had to change the mortgage (with Cheltenham &Gloucester) to interest only at the time as that was all she could afford onher own. Her ex is currently unemployed and has a very poor credit rating. Wewant to do a transfer of equity to take his name off the mortgage and add mine andchange to a repayment mortgage which in our mind would lower the risk toC&G and put a line under my girlfriend’s past.

The issue is that the property has been valued at less thanthe amount of outstanding mortgage (LTV around 110%) so C&G have declined our request for aTofE.

To us this seems ludicrous as I am a much safer bet with aperfect credit history and a secure, well paid job. It would take usyears to pay off enough equity for C&G to agree on their terms for the TofEand all the time my girlfriends ex would have his name on the mortgage (whichcoincidentally he doesn’t want!).

We would like to know what our options are as we want tofight this decision. Regardless of who’s name is on the mortgage, the sumoutstanding will stay the same so why should it matter?

Can anyone shine any light on why they have made thisdecision and also what else we can do to overturn their decision?

Thank you in advance.

Gareth.

holly_hobby

No lender will permit a transfer of equity (TOE), whilst there is negative equity - and there are no avenues open to you to try and "force" them to do so (no matter how logical you may think a TOE would be in the circs).

Whilst the ex remains party, he also remains liable for servicing the mge, and would also be pursued for any unpaid shortfall (for a period upto 12 yrs) that may occur on redemption.

I understand what you are saying, in that even if chased he has little to no capital to offer - so its entirely possible that the lender will result out of pocket. Whilst by comparison you have an income and it would make more economic sense for you to be party to the mortgage.

The reason why they won't permit a TOE where there is neg equity, is because the original mortgagor would be essentially transferring his exposure and legal responsibility of the debt and shortfall to A.N.Other - which lenders aren't in favour of.

The answer would be to make a lump sum reduction to mitigate the excessive LTV, thereby permitting the TOE (assuming you have sufficient income and clean credit record to satisfy the lenders status checks), or simply sell the property, see what the actual sfall is, and then purchase or go into rented, whilst you both redeem, the residual mge os, and save a sufficient amount for a deposit.

Hope this helps

Holly

getmore4less

holly_hobby wrote: »

Whilst the ex remains party, he also remains liable for servicing the mge, and would also be pursued for any unpaid shortfall (for a period upto 12 yrs) that may occur on redemption.

If they(mortgage company) do the right things it can be a lot longer than 12 years.

The debt does not just disapear after 12 years from the date of the shortfall except in very specific circumstances.

antrobus

I believe that it should be possible to appoach the ex-boyfriend and;

(a) purchase his beneficial (and maybe even legal) interest in the property for a nominal sum (e.g.£1) and in return,

(b) indemnify him against any future liablility to C&G

Obviously you'd need to go through a solicitor to get this done, but wouldn't this achieve what you want? Isn't your main concern that any financial contributions you make towards repaying your girlfriend's mortgage might ultimately result benefit the ex-boyfriend if he claims half the house in the future?

holly_hobby

getmore4less wrote: »

If they(mortgage company) do the right things it can be a lot longer than 12 years.

The debt does not just disapear after 12 years from the date of the shortfall except in very specific circumstances.

Not sure what you're basing that comment on ? Its certainly not on statute - which in this case is the Limitation Act s20(1) and s20(5).

To be clear, the unsatisfied mge (capital ) debt may only be lawfully pursued through the courts for a period of upto 12 yrs from the event, with os interest pursuable for a period up to 6 yrs from the event. (it should be noted in fact that under MCOB and CML it is seen as good practice to pursue only for 6 yrs, but this is a voluntary timeframe, with the legal maximum remaining at 12 yrs as discussed above).

After this period has elapsed without payment or acknowledgement, it becomes Statue Barred. Which of course doesn't mean that the debt doesn't exsist, but that judicial pursuance/enforcement is no longer an option available to the lender, and it will not be displayed on any CRA records of the individual.

If however the lender secures a CCJ WITHIN the periods defined above, the mortgagor can not use the Limitation Act as a defence against payment.

And in such events if the OC wants to re-register an unsatisifed CCJ after the 6 yr registration period has elapsed, this would be with the express permission of the courts (which after 6 yrs of no satisfication, is rarely given TBH). If the Judge refuses the OCs application for extension, then the CCJ "drops off" as per any regulated debt at its 6th anniversary of registration, with any subsequent repayment agreement made between the OC/Assignee and mortgagor/debtor, then on purely a voluntary basis.

If the shortfall is in a repayment plan, the repayment schedule can of course be over any agreed extended period. If the repayment agreement is not maintained/satisfied, the statue clock starts from the date of latest payment or acknowledgement of the os debt. And its in THAT situation, that the statute clock and final date of lawful pursuance may be seen to exceed 12 yrs from the actual date of the event - but that is the ONLY situation where the 12 yr pivotal date of pursuance v event date, could be lawfully exceeded.

Hope this helps

Holly

holly_hobby

antrobus wrote: »

I believe that it should be possible to appoach the ex-boyfriend and;

(a) purchase his beneficial (and maybe even legal) interest in the property for a nominal sum (e.g.£1) and in return,

(b) indemnify him against any future liablility to C&G

Obviously you'd need to go through a solicitor to get this done, but wouldn't this achieve what you want? Isn't your main concern that any financial contributions you make towards repaying your girlfriend's mortgage might ultimately result benefit the ex-boyfriend if he claims half the house in the future?

That would make no difference to the mortgagee noting the ex BF as joint mortgagor, refusing his release and his being jointly liable for servicing of the mortgage.

Nothing can indemnify a mortgagor from pursuance of an os debt by the mortgagee.

A sep deed could be drawn up, re the split of equity on disposal of the property, with the ex BF noting his agreeance to the forfeit of any benefical interest on disposal - the same can't be done for the debt however.

Hope this helps

Holly

DVardysShadow

BoarderGaz wrote: »

Hi,

Background: My girlfriend owns a flat with her ex-boyfriendbut he moved out 4 years ago and has made no contributions to the mortgagepayments. My girlfriend had to change the mortgage (with Cheltenham &Gloucester) to interest only at the time as that was all she could afford onher own. Her ex is currently unemployed and has a very poor credit rating. Wewant to do a transfer of equity to take his name off the mortgage and add mine andchange to a repayment mortgage which in our mind would lower the risk toC&G and put a line under my girlfriend’s past.

The issue is that the property has been valued at less thanthe amount of outstanding mortgage (LTV around 110%) so C&G have declined our request for aTofE.

To us this seems ludicrous as I am a much safer bet with aperfect credit history and a secure, well paid job. It would take usyears to pay off enough equity for C&G to agree on their terms for the TofEand all the time my girlfriends ex would have his name on the mortgage (whichcoincidentally he doesn’t want!).

We would like to know what our options are as we want tofight this decision. Regardless of who’s name is on the mortgage, the sumoutstanding will stay the same so why should it matter?

Can anyone shine any light on why they have made thisdecision and also what else we can do to overturn their decision?

Thank you in advance.

Gareth.

About your best bet is to keep the mortgage on interest only - and not let equity accrue in the property. This is in order to leave nothing for the ex to try and get his hands on.

At the same time you should save like fury to build up 20% equity in a separate account [normally I would be advocating paying down the mortgage - but for reasons given this is not advisable for you]. And from time to time - every 6 months or so, you need to review the value of the property and the prospect of a ToE with C&G or a ToE and a mortgage with another lender

antrobus

holly_hobby wrote: »

....Nothing can indemnify a mortgagor from pursuance of an os debt by the mortgagee.

That's odd, because its standard boilerplate law in consent orders.

As in;

AND UPON the [Petitioner/Respondent] undertaking to the court to use [his/her] best endeavours to procure the release of the [Respondent/Petitioner] within [ ] days from the date of this order from any liability under the mortgage secured upon [ ] in favour of [ ] and to indemnify the [Respondent/Petitioner] against all such liability.

holly_hobby

Its the element of negative equity that is the issue, and why the lender has refused the TOE, its not a straight forward separation/divorce case, whereby the above order would be placed.

The only way to procure the releasement of the ex would be to reduce the LTV to back within the black, no other way I'm afraid.

Therefore a mortgagor ie the ex - can not be indemnified (be isolated) from being jointly pursued by the lender, for any unserviced debt - as a court wouldn't support it if the lender sought a pursuance order of the mortgagors.

Its like taking a personal loan, and having an indemnity policy written, stating that you can't be pursued by the provider re any default on payments.

If Antro. I've correctly understood what you mean re the indemnity policy - if not and I've got the wrong end of the stick .... I apologise.

H x

antrobus

holly_hobby wrote: »

....

If Antro. I've correctly understood what you mean re the indemnity policy - if not and I've got the wrong end of the stick .... I apologise.

H x

Yes, I think you misunderstand what is meant by the promise to indemnify (in this case) the ex-boyfriend 'against all such liability'. It has nothing to do with the lender. The ex-boyfriend remains jointly and severably liable for the mortgage debt, it just means that (in this case) the OP would be liable to repay the ex-boyfriend if and when the latter was required to pay anything to the lender.

Obviously that's not ideal. Obviously what the parties want to to in this case is to arrange matters so that the OP can simply take over the old boyfriend's commitments, but that's been kyboshed by the lender. The next best thing is to go for the beneficial interest/indemnity because it (a) doesn't involve the lender, (b) protects the OP and the girlfriend from any claims by the ex, and (c) leaves the ex in a better position than before.

holly_hobby

Ah I see ... as you say he can't be indemnified from the lender & debt, and not ideal as he'll remain party, but it would be a half way house as a private arrangement between the parties at least.

H