Facing arrears and repossession. Advice needed.

BTF

Hi,

I've read these forums for some time but my financial situation has now reached a crisis and I was wondering if I could get some advice.

To give some back story-10 years ago I was a young single professional earning a decent salary and living what to be honest was a pretty extravagant lifestyle. I then met my now wife and soon asked her and her 2 kids to move in with me buying a house at the edge of my means, however stupidly I failed to moderate my spending meaning I started to live my life on credit. Credit cards were taken out and maxed out, loans got bigger then got consolidated first with a remortgage then a secured loan then help from my brother who moved in when he moved back North or a bonus at work- I even tried payday lenders probably the stupidest thing on my list of stupid things.

About 2 years ago the bubble burst. I was managed out of my job and though I was able to do the same work self employed old mental health issues started to effect my work and the amount of work I was able to cope with dropped off. We entered into a DMP and I rang my mortgage company who kindly agreed to make my loan interest only for a maximum period of three years-review able 12 monthly. With that and my wife who has a part time contract doing a lot of overtime we have been able to struggle on despite me having to quit my profession and take a minimum wage 25 hour contract as we both search desperately for full time work.

Last Monday I rang for my yearly review to be told that as a result of a policy review no new interest only periods or extensions of these were being offered, as the FSA had decided these could cause long term problems. The best they could offer me was a reduced payment £200 more than what were are paying now but with any thing less than the full repayment amount (£500 more than we are paying now) being added to the account as arrears. This would be reviewed in 3 months with the possibility of legal action and repossession to be considered then. Selling the house is not an option the mortgage and secured loan are 205k and the house was last valued at 195k 2 years ago since when we have discovered damp in one wall and have a patched up hole in the living room ceiling.

We seem to me to have no option but to default and be repossessed one way or the other so I have already started looking for rented accommodation which would work out about at what we are paying now (would be about £150 more than our current mortgage secured loan but other costs would be less).

Truth to tell I've known this day would come eventually but now it has I am fighting panic somewhat and a million questions are going round my head. Should we look to move out asap and go for a voluntary repossession ? My last interest only payment is this month would it look better in the repossession proceedings and what seems like the inevitable future bankruptcy (when the shortfall is added to our existing debts) if I paid that and only defaulted when the payment goes up or should I start saving for a rental deposit asap. What would be an appropriate nominal amount to pay to the mortgage/secured loan company while we search for other accommodation ?

I'm hoping we've got about 6-9 months total before we are kicked out does that sound about right ? I'll be heading down the CAB today and contacting CCCS who our DMP is with does anyone know any other good sources of advice please.

Apologies for the lot of questions and long post. Any help is welcome. Thanks in advance.

BTF

PS reading that post it doesn't appear as if I am fighting panic very well. Apologies for the jumbled thoughts. Also if I have posted this in the wrong place any advice on the best place to post it would be welcome.

Gary123456790

Hi,

Sounds like you are resigned to having to move out, and by the sounds of it that may well be the only option.

BUT please try and sell the property yourself. This is just what the mortgage company will do anyway, but with all their costs of selling (charged at an hourly rate) put on top of your debt.

PLUS they will ruin your credit rating by showing all your missed/reduced payments while they sell.

Find out if your lender will allow you to sell with a shortfall - they may allow this to be converted into a loan, then sell your property quickly for the best price you can get.

Finally live within your means (sounds like you may be doing this already!).

You could post on the debt boards of this forum, with a statement of affairs which shows your incomings and outgoings and get some comments there.

Good luck.

Gary.

holly_hobby

The mge lender, have already been pretty good, and under FSA regs of treating customers fairly, they must assist where they can,

The FSA regs of really shying away for interest only mges, is really relevant to new business - albeit all lenders must check their existing book (at least once) over time to see that all mortgagors have a sufficient repayment plan in place.

The situation is a little different here, ordinarilly where the mortgagor finds themselves in difficulty one of the options is to switch wholly or partly to IO with a review (which seems to be the case here, albeit you were already an IO customer).

They transfering your to C&I (permitting a role up of underpayment as arrears), is taking it to the letter re FSA IO guidance/regs, but then again, if you have no vehicle in place and on going affordability issues with no sign of a turnaround, there is only so far that they bend before they break - which is where the 3mths review and possibly seeking a future possession order will come from - which I am sure you can understand (although difficult when happening to you) if you look at this from a sustainable business angle.

Now, just to play devils advocate, just because they may seek a possession order, DOES NOT MEAN they will be automatically awarded one by the Judge - IF - you are able to prove to the court that you have a scheduled repayment plan in place and that your financial circs are temporary, and how you intend to resolve the situation - with they granting the lender a suspended possesion order (although if you breach any payments following this, the lender will be able to seen an automatic possession order without leave).

Of course, if you can't evidence to the court that there will be any change long term to your circs, then the Judge may well decide that its to no ones benefit to just delay the inevitable - and the order may be granted.

So its really about facing facts - if you believe you can resolve your issues or they are indeed long term.

If long term, put the house on the market, tell the lender that you are selling (with proof of marketing if requested), ask for leave to remain on interest only in view of the pending sale, and get as much as you can, in a reasonable period (although the market tends to be slow towards the end of the final quarter, with next spring being the next typical bouyant time, BUT thats not to say the markets dead !)

In the meantime, contact Shelter, an absolutely fantastic organisation whom will provide advice and support - http://england.shelter.org.uk/ ... and I believe are more proactive than CAB, but use every available source open to you !

You have done the hard part and have realistically assessed your situation and accept that you may have to (temporarily ?) jump off the property ladder, which is to be commened, and I mean that, many people just stick their head in the sand hoping it will just go away, when of course it never does !

Anyhoo, hope this helps in the meantime ...

Holly

BTF

Thank you both for your responses they are much appreciated.

Yes over the last 2 years we have made every effort to live within our means but my loss if income and previous recklessness and stupidity have just dug us too much of a hole to climb out of.

Just to clarify we were originally on a repayment mortgage but were switched to interest only 24 months ago so yes the mortgage company have been pretty good. Much as I wish they could have given us one more year us finding jobs which guarantee an extra £5-600 per month was a long shot though possible, there has been no change to our circumstances over the last 2 years and I understand their decision. Hopefully if we are upfront with them about what we are trying to do they will give us some leeway with the payments to allow us to save for a rental deposit.

I have had some advice from CCCS have an appointment with the CAB and will take up both your suggestions to post on the debt boards and contact Shelter.

I am grateful for the advice about selling the house ourselves I must admit I had just assumed that with our negative equity that was a non starter. Thank you again.