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A question for those coming to the end of an Interest Only mortgage

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  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    jamesd wrote: »
    Don't call them. Write to HSBC. Make them an offer of their choice of either:

    No where in the contractual terms does the borrower have the right to amend the repayment schedule. Blackmailing carries no weight. Certainly in a Court of Law. Not least that contract law is well established. Judges follow and uphold the law not opinion.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    You may not be familiar with the "pre-action protocol" for mortgage repossession cases. That isn't blackmail, it's what lenders and borrowers are supposed to be doing. Specifically:

    "5.2

    The parties must take all reasonable steps to discuss with each other, or their representatives, the cause of the arrears, the borrower's financial circumstances and proposals for repayment of the arrears (see 7.1). For example, parties should consider whether the causes of the arrears are temporary or long term and whether the borrower may be able to pay the arrears in a reasonable time.
    "

    What I described to animox is an offer to repay the arrears that will arise in six months in a reasonable time.

    In addition:

    "7 Further matters to consider before starting a possession claim

    Starting a possession claim should normally be a last resort and such a claim must not normally be started unless all other reasonable attempts to resolve the position have failed. The parties should consider whether, given the individual circumstances of the borrower and the form of the agreement, it is reasonable and appropriate to do one or more of the following –

    (1) extend the term of the mortgage;

    (2) change the type of mortgage;

    (3) defer payment of interest due under the mortgage;

    (4) capitalise the arrears; or

    (5) make use of any Government forbearance initiatives in which the lender chooses to participate.
    "

    What I described is not blackmail. It is what HSBC and animox are supposed to be doing to avoid the need for repossession. It will place animox in the position of having made a reasonable proposal to their mortgage lender to resolve the problem in a reasonable time for a person who they have already committed to have as a customer anyway for many more years on the repayment portion of the mortgage.

    None of this means that HSBC will like it. It's just what they are supposed to be doing.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    jamesd wrote: »
    None of this means that HSBC will like it. It's just what they are supposed to be doing.

    Forced on them retrospectively, presumably?
    Free the dunston one next time too.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    So a borrower can just not pay back the debt at end of term and they have the right to have the debt treated as arrears.

    One of the options to avoid/delay repossession is

    you are taking active steps to sell the property at a realistic price
  • jamesd
    jamesd Posts: 26,103 Forumite
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    kidmugsy, if the parties are unable to reach agreement, whatever the judge decides.

    getmore4less, not so much a right as something that a court can order as a just resolution to the problem when the circumstances make it appropriate.

    I'm not necessarily particularly keen on the people who have not repaid me for loans because of bankruptcy, or DRO, nor partial repayment only that I'm compelled to accept because of an IVA. The law permitting those options exists for a useful purpose, as do the pre-action protocol and need to persuade a judge to grant a repossession order rather than making it an automatic right of a lender.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    edited 6 August 2014 at 1:51PM
    It's also worth noticing that animox is a trapped borrower due to the credit rating effects of the business failure and that the FCA specifically waives normal checks for such people, recognising that they cannot just remortgage elsewhere. So far HSBC appears to be following the course of ignoring those provisions, a course that will eventually result in the pre-action protocol and perhaps court hearing happening.

    There's no need for HSBC to refuse to deal with this by extending the term or switching to repayment. At the moment the teams that deal with normal applications have declined but that doesn't mean that those who deal with more problematic cases will. Knowing that HSBC can choose to remortgage is why I suggested offering that switch to a repayment mortgage as one of the options of the repayment proposal to them.

    It's also worth considering that the FCA has specific guidance on what lenders should be doing in cases where an interest only loan cannot be rpaid at the end of the term, given in FG13/7 - Dealing fairly with interest-only mortgage customers who risk being unable to repay their loan. Among other things:

    "3.5 Examples of potential options that firms could consider either before or after the mortgage matures are listed below, but this list is not exhaustive and firms can abide by Principle 6 in other ways:
    a switching the mortgage to a full or part capital-repayment basis
    b extending the mortgage term incorporating a switch to a full or part capital-repayment basis
    c extending the mortgage term to provide more time to repay the capital outstanding or to sell the property
    d accepting overpayments to reduce the end-of-term balance
    e combining part redemption and any of the above
    f extending the mortgage term on an interest-only basis
    "

    A specific example that the FCA describes as "poor practice" is "Insufficient time given to customers to consider options or to make alternative arrangements. In particular, when no maturity options are offered to customers."

    While examples of "good practice" include "Switching the mortgage to a full, or part, capital repayment basis after checking customer’s affordability and with the customer’s agreement", "Extending the mortgage term to provide more time to repay the loan outstanding (where appropriate to the customer’s circumstances)" and "Facilitating switching to alternative products or repayment arrangements, where it is in the customer’s best interest, by working with customers to overcome potential barriers such as fees/charges".

    All that takes us back to Leon W's original point: Leon W isn't seeing the repossessions that would be expected if lenders were ignoring all of this, so at least most of them must be acting properly to avoid using the repossession method.
  • I'm eagerly following this thread...
    1. 9 years left on IO £105k mortgage.
    2. Approx 5% equity.
    3. Making £100 per month overpayments.
    4. Not optimistic about ability to remortgage due to £25k salary.
    5. Young family and fear of repossession - eek!
    Any advice would be very well received. Will continue to follow...
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