Loan company won't release deeds. Any way out?

Rosey321

Hi

We're in the process of selling our house at the moment. We have accepted an offer from some first time buyers, the 'sold' board is up - the surveyor has been.

Our plan is to downsize and move to rented property because we can't keep up repayments and we are swimming in debt, and a move would save us several hundred pounds a month.

I have another thread on our situation in the 'debt-free' section' However, to keep it brief here, this is a small summary of our finances.

House sale price 185k, mortgage outstanding £170k, Firstplus loan outstanding (2nd charge) 65k, Welcome loan outstanding (third charge) 20k.

I'm sure all the figures are jumping out at you here!

Now, Firstplus originally seemed helpful and told us they would let us turn our shortfall into an unsecured debt, and we could work out repayments from there. They were meant to send a 'shortfall' form. After 4 requests for this form, my wife phoned yesterday again, only to be told that with these figures, they would not release the deeds to allow us to move, unless we had 50% of the loan in equity to pay back to them - which there isn't.

My wife told them that in the current climate, we have got the best possible price for the house (which we have), that we wouldn't be able to keep up payments if we were forced to stay and surely it would benefit them to allow us to move. The operator just said 'I can't comment on that', obviously tied by red tape.

Funnily enough, I half expected this kind of response initially but as no-one told us this from the offset, we have been packing boxes etc in readiment for what seemed like it was going through.
Now, we certainly have no way of making up the difference.

Our solicitor has said that there is a lot of this going on at the moment, and that she will deal with them directly too. She has about 30 years experience so I'm hoping she knows a loophole or two!

Anyway, does anyone here know of a good solution? I've read many bits about 'mortgage shortfalls' on the web and how you can be pursued for 12 years. I gather therefore these are cases where these companies have allowed sales to go through (I'm sure many of these however may be repo cases!). However, surely they must know that doing a repo would earn them less?
We are fully prepared to pay the debt back eventually - although many sites say not to acknowledge the debt, and hopefully it will disappear after 12 years!

My main priority though now, is how to help this move go through.

Any bright ideas or experiences anywhere??

silvercar

YOu have to persuade them that you are getting a good price for your home and that you can't afford the repayments any more. I would even suggest going as far as telling them that you will be handing back the keys to the mortgage lender if the sale doesn't go through. You could even go a step further and tell them you are contemplating bankruptcy, at which point the debt would be written off. Offer them a payment plan and see what they say.

You are climbing a difficult hill with this one. You also need to get Welcome to agree a deal.

Rosey321

Who, figuratively speaking, holds the aces here then would you think?
Obviously, they have the deeds, but I believe we have the best price possible!

I have seen many bits on the web that suggest that lenders must reasonably get the best price for a property, this next paragraph comes from the FSA website too:

Lenders duties: giving consideration, where no reasonable payment arrangement can be made, to the customer being allowed to remain in possession to effect a sale;

Does it work in our favour too that it took a whole year for us to get an offer?

Surely, if it was left to a lender to sell they would undoubtedly get less due to the state of the market as well? News reports suggest a plummet of 2.5% in house values already since we accepted the offer.

Am I right to still be clinging on to some hope...?

fast_track

Your solicitor has to take them to court to ask the judge to set aside their charge and allow you to sell. What they want is for you to borrow the money to discharge their loan. As you are looking at a mortgage shortfall debt here you will probably need to apply for bankruptcy after the move. To have borrowed money when you know you can't pay it back may mean that you are subject to a bankrupcty restriction order. The other method is to petition for bankrupcty imediately. Your home then becomes the property of the Official Receiver who certainly would want to get top dollar for it. They can also arrange low cost conveyancing (about £200) if appropriate.

Good luck - but be aware that First Plus do not willingly allow house sales where there is a shortfall.

Rosey321

Pardon my slight naivety but what does it entail when people suggest 'handing the keys back to the lender'?

The opportunity today has risen to put an offer in on the rented property that we really want that was snapped up a couple of weeks back - it would massively lower our outgoings. Apparently, the prosepective tenants failed the credit checks ironically!!
We told the agents about our less than brilliant credit history ourselves, but they seemed to suggest the checks look mainly for CCJS which we have never had.
I've also wondered that if there is a question mark over our credit, is it possible for my wife's mum and dad to apply to rent the property and that the credit check is done on them - except we live there and pay the money back to them? Is this possible? Their credit check would be perfect!

I was thinking that if we could move and rent (before anything more adverse happens!), we could then 'hand the keys in' or even go bankrupt if need be and let everything take its course of action from there.

Is any of this feasible?

Trollfever

From the information given:

Assets £185k
Liabilities £255k
Defecit £70k

http://www.insolvency.gov.uk/

silvercar

handing the keys back means voluntary repossession. You give the keys back to the lender and sign a form to say that you are passing "ownership" or equivalent to them. Check on the bankruptcy board before signing a form from them; there is a clause that you don't want to sign that would give them the right to chase for the shortfall for ever.

If your credit rating is low, you could ask your in-laws to act as guarantors, this means the tenancy is given to you but they would be liable for the rent if you failed to pay.

Moving to rented before further problems could work. I have heard of people not making further mortgage payments, to save for a rental deposit, in your situation.

maninthestreet

If my understanding of the OP's opening post is correct, there are loans to the value of £255K secured on the property, but the property sale will only raise £185K - how could any sale of the property be allowed to proceed if there is £70K of negative equity? Even if Firstplus allow their loan of £65K to changed from secured to unsecured (won't that mean a higher rate of interest to pay?), there is still the £20K loan from Welcome to consider.

Rosey321

Thanks for all advice so far.

Using the in-laws as a guarantor sounds like a good idea.
What I haven't mentioned so far though is the additional 20k unsecured debt we have as well - most of which we are on DMPs for.
I know this would go very much against us in a credit check which is why I was thinking along the lines of the in-laws applying for the rental themselves.

I'm sure the addition of this 20k info will add further to the advice of going bankrupt!

I think we have virtually resigned ourselves to this now - we have been fighting all we can for the past year now and maybe now is the time to admit we need this way out. It's worse for my wife because she is a teacher and doesn't like the idea of her name in the press for all the pupils and children to see. However, things have been so bad that I think the prospect of a fresh start and a clean slate may tip the scales to going down the br route (although I gather that secure debt may still follow us around for a few years still which might come back to haunt when we least expect!).

Please however keep the short term advice coming re: the renting etc. All very much appreciated.

Thanks again,

Trollfever

doesn't like the idea of her name in the press for all the pupils and children to see.

My understanding is that it will only be advertised in the local press if the OR feels that it is appropriate.

mightymouse

Hi

Could you manage, if you only paid the mortgage? (not the secured loans)

Keep very accurate records and if you have a willing buyer then it might come in useful later if you do NOT go bankrupt.

In this market it is unlikely the second charge will go for repossession.