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mortgage shortfall query

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Posted (edited)

Hello

After repossession, if a property is sold  within a few weeks for a very low price which results in a large shortfall what would be the position of the lender?

And the position of the original owner?

By low I mean 25% lower than the lender's (conservative) valuation just 2.5y ago.

 

And if the original owner has no assets - ie  no income, no savings, no other property, no valuables, not of pension age - just have an executive plan set up for the future  by own old Ltd Co.

And if owner is  now classed as legally homeless with minors to support - will need benefits to survive.   Then what happens to the shortfall?

When the shortfall is huge - due to the low sale price.

 

Would lender try to bankrupt owner?   Or because owner has no assets etc this would be pointless?

Or would lender wait to chase for the shortfall in the future - in the hope owner's circumstances change and lender can stake a claim against any future property that may be bought?

 

Thanks

 

Edited by HP Mum

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they typically sell the shortfall on to a debt buyer.

don't think we've seen any claimform threads [which is all the owner of a shortfall can do - go for a CCJ] 

 

what usually transpires is the mortgage itself is full of £1000's of unlawful penalty fess for everything including its raining today and its the debtor fault, to numerous unwanted insurance policies inc building insurance when the debtor already had it in place [the only insurance you MUST have on a mortgage]

 

an sar might be worthy now..so one can atleast prepare for anyone latterly trying in on before important information hits the shredder to hide why the shortfall is so high.

 

now if there is any recourse in the property beign sold at a substantially lower value im not sure on. with out searching here... 


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Posted (edited)

thanks dx,

So the lender may try get a ccj on the shortfall.  Or may sell the shortfall on to a dca who may try get a ccj.

But they won't or can't go for bankruptcy - due to the no home, no assets etc??

 

Lender stated they will refuse to sign a waiver against them making further claims against owner for short-fall upon sale...  which seems to indicate lender would like to retain ability to claim.  

 

Actually -  how does a dca serve notice, if no known address?  

 

Edited by HP Mum

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as I said 

never seen a lender going for anything...

 

I would simply keep the owner of the shortfall updated with correct address

as should everyone on her credit file or any other debts that shes paid within 6yrs be told ..

don't forget DVLA licence and V5C's and ofcourse old councils re ctax etc etc.

 

dx


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The debtor should not be tempted to make small repayments, hoping to be left alone. The debt owner is not bothered by the small payments, it is the value of the debt being acknowledged and therefore starting the clock running again in regards to statute of limitations act, that is more valuable.  The hope must be the financial position of the debtor changes years into the future, so keeping the debt alive with small repayments is a key goal for debt collectors.

 

 


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Thank you both - helpful and reassuring

 

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This is getting a bit complicated.

 

The lender appointed agents.  One of which is also marketing an almost identical property - bit smaller, less outside space and no nice views, but fresher refurb - in same tiny street - 45% more expensive!

So can it be argued that the lender and agents have under-valued? That any sale will be to the detriment and disadvantage of the original owner?  Especially when the lender is suggesting there is likely to be a huge shortfall - for which the owner will be held liable....  

How does the original owner respond?

 

The property market is poor, but surely the lender and its appointed agents can't market and sell the property so cheap and also come after the original owner for the shortfall?

 

Does the owner have a voice in this?

 

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For the record, this thread has relevance to another thread about a broker breaching FCA regs.

 

The broker gave a loan on a fee-based advised basis - without any due diligence paperwork - which turned out to be wholly inappropriate for the borrower - who had no ability to make any payments at all - which then resulted in the property (as above details) being repossessed.

There is a live claim against the broker. 

Waiting to hear their response to the claim that they mis-sold and the borrower wants full restitution...

 

Although am also not sure what full restitution would really mean?

Given the property has been repossessed - yet remains unsold - could restitution mean that the broker could be instrumental in stopping a sale at such a low price (as indicated above)??

And instead the broker is obliged to return the borrower to the position they were in before the bad loan?  ie the broker steps in, pays off the lender (probably via insurance indemnity?), returns possession to the owner??

Owner would then need what they originally wanted anyway - a proper mortgage that is wholly suited to their needs - ie BTL.

+ compensation?

 

Does any of this make sense?  

There's a lot going on, but perhaps still time to salvage..

 

 

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Repossessed properties often sell for less than market price but the mortgagor can argue that it has been sold at undervalue.  A complaint to the mortgagee and then escalation to the Financial Ombudsman Service if it is not resolved is procedure.

Having no assets does not necessarily stop a statutory demand to start bankruptcy proceedings. Whether or not the executive plan is affected depends on whether it is classed a pension or not and what type of pension it is.

A future property purchase could be affected, depending on when the banktupcy is discharged or otherwise if a CCJ is granted. Don't forget the statute of limitations is six years for any interest owed after the sale but twelve years for any capital. A CCJ seems more likely even where an undervalue dispute is successful there is likely to still be a large shortfall.

 

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Posted (edited)

pension is protected.

 

I am ignorant of this - why would anyone start bankruptcy if there are no possessions or money?

Future property purchase?  That is unlikely

Edited by HP Mum

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Will - I agree that properties "often" sell for less than market price.  But 45% less is too much.  25% less is too much.

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The lender appointed agents.  One of which is also marketing an almost identical property - bit smaller, less outside space and no nice views, but fresher refurb - in same tiny street - 45% more expensive!”

 

“Marketing” doesn’t mean it will sell for that, and they may have to wait to get any interest / a sale.

 

What is most likely key is the way it was sold;

a) if auctioned (unless the auction wasn’t advertised!) they’ll claim it sold at “market rate” : the rate an auction attracted!

b) if not auctioned and the comparable (less desirable?) property goes for a higher value soon : much easier to claim sale at an undervalue. Expect them to claim the refurb made all the difference, though.

 

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21 hours ago, HP Mum said:

pI am ignorant of this - why would anyone start bankruptcy if there are no possessions or money?

 

Because the creditor or creditors can does not mean they will but there is no restriction which prevents a bankruptcy because a person has no assets. Disposable income is relevant too as creditors can enforce an income payments order where an agreement is not met which will last for at least three years. It can prevent certain types of employment and directorships amongst other possible restrictions, and also affects certain credit applications in future. Creditors may consider it a fitting consequence of the debt owed even where there is no monetary gain.

 

It makes more sense for the mortgagee to apply for a CCJ in this case as there is more chance of monetary gain in the future. Although there is not much it can do if your friend has nothing to take.

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thanks Will

And if theres no job/ no income?

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Nothing likely to happen within a few years of a repossession.  All they will attempt to do, is write to the debtor, so they comply with the Council for Mortgage Lenders rules on trying to stay in contact with debtor.  The rules were introduced around 2000, as some lenders were chasing up repo debts from the early 1990's, over 6 years after the debts were created. This was after having never written to the debtor.

 

Bankrupty very unlikely due to cost and little chance of return. Mortage lender will most likely have a way they minimise cost of the debt to them, in terms of the financial risk to them.  They may see the debt as a longer term asset, they can pass on to Debt Collection Agencies, where they have an agreement to share in any amounts collected. After say 10 years a debtor may be in a much better position financially, so the opportunity to recover the debt is much greater.

 

This is one reason, one of my relatives borrowed a few thousand from family, to negotiate full and final settlement of a £30k repo debt. They were advised that in order to move on with their life, that settling the debt in this way was the best option. It really depends on your position. But someone with a young family, might want to move on and not have the worry of being chased for a debt years later.


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6 hours ago, HP Mum said:

And if theres no job/ no income?

 

If there is no disposable income over £20 per month, there would be no income payments agreement/order and all debts owed at the time of the bankruptcy application would be written off, the bankruptcy would be discharged after 12 months assuming there is no bankruptcy restrictions order in place.

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Have the Mortgage Company supplied you with documents usually called "Mortgage Account History" which lists all the charges such as Repossession Costs,Solicitors Costs etc etc

FS

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firstship - not yet.  But the list will be long I am sure...

 

The shortfall will potentially be too large to ever be personally recovered...

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When you start to receive demands for money - you can send them this (Special Delivery)   and see what they come up with - usually gets rid of them for a long time as they don't want to send you that info  :)


Subject access request

  Please supply me with all data that you hold on me. This includes in particular, but is not limited to, the following:-

  1. Details of the agent(s) responsible for marketing the property,  a list of the offers received and how they were reviewed.

  2. Copies of any newspaper or internet advertisements relating to the sale of the property.

  3. Copies of the valuations received on the property (minimum of two is required under the CML rules).

  4. Selling agent’s report on activity and any reports relating to visits to the property to ensure security of the property.

  5. If the property was sold under value please provide reports and supporting evidence to prove that the best offer was obtained.  

  6. If the property was sold at auction, please provide reports to support the decision to sell at auction.

  7. Specific details of the fees or charges levied by any other agency in respect of this account and a detailed breakdown of said fees or charges and what each charge relates to and on what date said fees or charges were levied.

  8. 8. A genuine copy of any notice of fair use of my data as required by the Data Protection Act 1998.

  9. 9. A list of third party agencies to whom you have disclosed my personal data and a summary of the nature of the information you have disclosed.

 


Yours faithfully,

 

 

XXXXXX

 

 

 

 

 

 


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The above letter is a must from Ell-enn,you will find item 7  which covers the Mortgage Account History difficult for the Mortgage Company or better still the DCA who the debt will be sold to having the ability to comply with your request for complete breakdowns of every item

FS

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Thanks ell-enn.

 

Reference point 4 of the above doc to which you refer: "ensure security of the building":

 

The lender ripped out the burglar alarm and video entry system. 

They changed the locks - but now there's no other security.

The property is obviously empty.

And clearly people have noticed this.

So what happens if someone finds a way into the property

- because it is no longer alarmed (which was essential on previous insurance) ??

 

It should be noted that our family retain the Freehold of the building (not held personally/ it's protected). 

The lender only repossessed the lease. 

So the freeholder (us) still have rights over the land and the integrity of the building.

 

If squatters found a way in

- because the lender didn't secure it properly

- then does the freeholder have a separate claim against them? 

I don't even know if they've insured it?

 

It squatters got/ get in

- then the house can't be viewed or sold... 

which means the shortfall becomes bigger...

 

Any thoughts?

 

I have also double checked the figures.

I was wrong.

The almost identical neighbour property is listed 70% higher - by same agent. 

 

The agent is also marketing the property tenure incorrectly. This is provable. 

 

So should I pre-empt all problems and send in the sar now?

 

just to check - is it best to send the sar in before any sale deal is agreed?

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ell-enn said...

 

When you start to receive demands for money

 


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ok. thanks dx.

Demands are different from threats!!

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in what way?

 

dx


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Posted (edited)

I meant that lender is just threatening liability for huge shortfall - but no actual figures been demanded yet.

 

Lender lawyer advised a few potential buyers but when we asked for details lender won't disclose the exact amounts and specific terms.

 

They allege they have one offer close to their list price - but it's still super low in comparison to true market price - plus the buyer's offer is subject to having the Freehold.  The lawyer has demanded I "give away" - for free - the Freehold to help them sell the property.  It's not mine and its valuable.  

Edited by HP Mum

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