Removing Name from Secured Loan?

swardean

Hi All

I took out a secured loan in 2006. At the time my partner was living in the property and the loan company insisted it was a joint application.

We split up last year and although the original mortgage is in my sole name and my ex-partner has no interest in the property. The loan company says they cannot remove her from the credit agreement sue to new government guidelines that were implemented in March.

Although I can afford the payments on my own (due to much higher salary now), I want to break any financial relationship.

Also, my partner would like to apply for a mortgage of her ownand this is holding her back.

Due to new lending regulations it is difficult (due to the amount of equity in the home) for me to get a replacement loan.

Does anyone have any advice or understand what the loan company is referring to, when they mentioned the government guidelines?

Thanks, Dave

TonyMMM

It is quite simple - at the moment they can come after either of you for the full loan amount (joint and several liability), which is very much in their interest. Allowing one of you to be removed from the agreement would just weaken their position.

They may be referring to affordability guidelines that are preventing you re-mortgaging on your own - but the only option to remove her is to find some way of re-financing in your own name.

swardean

Thanks Tony, I understand the rules regarding, joint and several liability and I can easily afford the loan on my own.

There interest is already protected as they have a charge on the property, so don't really understand what difference it makes to them to remove my ex-wife.

They explicitly said there was government legislation as to the reason they cannot do this. I don't think this is the case and they are more than likely just fobbing me off.

[Deleted User]

swardean wrote: »

There interest is already protected as they have a charge on the property, so don't really understand what difference it makes to them to remove my ex-wife.

Forcing a sale of a property isn't easy work - they would rather guarantee the ongoing payments.

BrassicWoman

apply for a loan with another company and repay this one?

Clive_Woody

swardean wrote: »

Thanks Tony, I understand the rules regarding, joint and several liability and I can easily afford the loan on my own.

There interest is already protected as they have a charge on the property, so don't really understand what difference it makes to them to remove my ex-wife.

They explicitly said there was government legislation as to the reason they cannot do this. I don't think this is the case and they are more than likely just fobbing me off.

I am far from an expert but I suspect the government legislation bit is nonsense. Call them back and ask them what legislation this is that prevents the other person's name being removed from the loan. Ask them to confirm this in writing.

Why they just didn't state that their lending rules do not allow them to remove a person from a secured loan unless it is repaid in full is beyond me as I suspect this is the case. As stated it gives them reassurance by having 2 people named on a loan rather than 1.

Either way I suspect your ex-wife's name is not coming off the loan until it is repaid in full.

National_Debtline

Hi Dave

swardean wrote: »

The loan company says they cannot remove her from the credit agreement sue to new government guidelines that were implemented in March.

It sounds like the lender has not explained itself terribly well. They are no less able to remove her name from the agreement now than they would have been prior to March. It's just that they are not willing to advance you a new mortgage in your sole name to pay off the existing one, and this is precisely what they ought to have said, without any references to these or those government guidelines.


I'm sorry that none of this particularly helps to resolve your predicament (or your ex's, for that matter).


Dennis
@natdebtline

swardean

Thanks for the comments. Yes it seems they just don't want to do it rather than they can't.

financegeek

The legislation they're referring to is the mortgage credit directive, which came into effect in March this year. This brought secured loan regulation under the banner of the FCA along with first charge mortgages.

It's most likely therefore that they can't remove your ex partner from the loan for affordability reasons. Affordability calculations tightened up under FCA regulation and amongst other things they now have to stress both the first and second charge payments in line with FCA guidelines, to ensure it would remain affordable if rates were to increase.

them referring to the March regulation is a bit misleading. Essentially what it probably comes down to is that you don't meet their affordability criteria as a sole applicant, so they won't remove your partner from the loan, the same as a first charge mortgagee wouldn't in the same circumstances.