Home repossesions without missing mortgage payment.......

[Swilly]

http://www.timesonline.co.uk/tol/money/property_an...

I couldnt be arsed to see if this had already been posted, but it seems that banks are now attempting to call in mortgages that arent making them money, under a 'small print' clause.

This appears very worrying especially to those financially astute people that took out mortgages at good rates some time back......

[smilerbaker]

from the have your say section of the story

"
Another paper has more of this story - they allegedly have a second £100k consolidated loan secured against this property. With an interest only mortgage and falling house prices, the property no longer covers the debt.
"

[smilerbaker]

anonymous said:

[redacted]

exactly 350k+ taken out on a house worth <250k, its a no brainer really.

[minimoog]

Comment under article said:

Another paper has more of this story - they allegedly have a second £100k consolidated loan secured against this property. With an interest only mortgage and falling house prices, the property no longer covers the debt.

So the bank appears to be reacting correctly to a toxic mortgage situation.

Edit: too slow!

Edited by minimoog on Tuesday 23 December 14:42

[toppstuff]

anonymous said:

[redacted]

I take your point but I'm still a bit troubled by this.

The bank advanced them the money , having had every chance at the time to make whatever checks they thought appropriate. Ultimately, they could have easily turned them down but they did not - instead they offered them a cracking deal on a very cheap tracker mortgage and they understandably took it !

Later down the line, the householders circumstances change and they have more debt. Perhaps they have had to pay for the husbands acute illness and expensive life saving operations using drugs the NHS won't pay for , for example...

They have kept their side of the bargain in that they have always maintained their payments.

Who knows, maybe they plan to pay off the capital when they inherit the cash when great Aunt Edna dies.

The point is this - the bank gave them an interest only mortgage at a very low rate. They could have turned them down. The punter has kept up their payments.

Until such time as the mortgage ends and the capital needs repayment, or they default on the payments, it seems to me that the Bank are out of order and behaving pretty badly.

[smilerbaker]

toppstuff said:

anonymous said:

[redacted]

I take your point but I'm still a bit troubled by this.

The bank advanced them the money , having had every chance at the time to make whatever checks they thought appropriate. Ultimately, they could have easily turned them down but they did not - instead they offered them a cracking deal on a very cheap tracker mortgage and they understandably took it !

Later down the line, the householders circumstances change and they have more debt. Perhaps they have had to pay for the husbands acute illness and expensive life saving operations using drugs the NHS won't pay for , for example...

They have kept their side of the bargain in that they have always maintained their payments.

Who knows, maybe they plan to pay off the capital when they inherit the cash when great Aunt Edna dies.

The point is this - the bank gave them an interest only mortgage at a very low rate. They could have turned them down. The punter has kept up their payments.

Until such time as the mortgage ends and the capital needs repayment, or they default on the payments, it seems to me that the Bank are out of order and behaving pretty badly.

but if you believe what others have posted, they also have another 100k loan secured on the house, so they have 350k secured on a 250k house. The mortgage company must have had a reason to look into there finances, they don't just do this sort of thing for fun you know.

[hornetrider]

I take it they must be having trouble paying the 100k secured loan then? ie missed payments on that? As surely if they are servicing their debt in the correct manner, then the bank has no need to intervene.

[jeff m]

There must be more to the story as another NPA is not what a bank wants at present.

[2something]

Agreed, there must be more to this story.

I read the original and it smelt a bit then.

[hornetrider]

anonymous said:

[redacted]

95% LTV? How do you know that? Is there another article?

As far as I can tell:

- They bought for 250k in 2004 - who knows what mortgage and what their income is
- They remortgaged on IO early 2008 - who knows to what value
- They have a 100k loan secured on the property

Who's to say what the house is worth now or what the outstanding mortgage on it is?

Unless of course you are privvy to more of the facts?

[toppstuff]

anonymous said:

[redacted]

That may well be the case. Certainly, the case can be made that the borrowers now represent a larger risk than they did when they took the mortgage out.

But shirley there are grounds to be a little uncomfortable about a situation where a lender freely and willingly gives money based on terms that they now regret ( as being too cheap, frankly ) and then invoke powers under the small print to effectively get out of the deal.

By extension, it could follow that all those people ( such as yourself Tonker ) who studiously seek out the best deal , may ultimately risk being forced out of the mortgage if the bank are upset that they deal they gave is too cheap in hindsight.

Banks are such nice organisations, I'm quite sure they would never willingly abuse such powers. Those lovely people at Barclays and the Woolwich would never dream of throwing out the unprofitable BoE +5bps tracker clients using the small print, would they ? They would stand by the deal if the borrower kept up the payments, would'nt they? Are we sure about that? Are we sure that the banks would not come after us in the same way if they took the view that the mortgage was simply not profitable enough?

[Deva Link]

toppstuff said:

But shirley there are grounds to be a little uncomfortable about a situation where a lender freely and willingly gives money based on terms that they now regret ( as being too cheap, frankly ) and then invoke powers under the small print to effectively get out of the deal.

You're missing the bit where they've taken another £100K consolidation (that's some consolidation) loan also secured against the house.

Someone mentioned they were low earners - depends how you define low, I suppose, but they must earn enough to have got the original £226K mortgage and the guy is a pharmacist and his wife works with mentally ill people (so she could be anything from a Care Assistant upwards) but they're likely to earning at least £70-80K.

[toppstuff]

Fair point.

But I stand by my central case. Given that they have not missed a payment on the mortgage, what is to stop other people who's only problem is that their mortgage is too cheap ( read: not profitable for the bank ) finding that the bank does they same thing to them?

What is to stop the bank using the same powers to withdraw the mortgage and demand payment back , from anyone who is in a deal with them which is "too good" and not profitable enough?

I've got a crackingly good BoE tracker mortgage , the type of which there is not a cat in hells chance a bank would offer these days with LIBOR still being pretty screwed.

Actions like these imply that maybe the bank can not be assumed to be good for their word, even if I play it straight and studiously make the payments and generally behave myself.

Edited by toppstuff on Tuesday 23 December 15:57

Edited by toppstuff on Tuesday 23 December 16:00

[Deva Link]

toppstuff said:

What is to stop the bank using the same powers to withdraw the mortgage and demand payment back , from anyone who is in a deal with them which is "too good" and not profitable enough?

Nothing.

But there would be uproar if they did that without cause. In the case in this thread you could look at it in several ways:
1) the bank grabbed the chance presented to them to recall a low margin loan
2) they reassessed the risk in the light of the other loan and found it to be outside what they considered reasonable
3) they found out about the other loan and decided to punish the borrowers for increasing the banks risk

Edited by Deva Link on Tuesday 23 December 16:06

[hornetrider]

Um, how do you know they lied about income on the mortgage proposal? Also, have they defaulted on any of their loans? They are not subletting, so I fail to see the relevance in any of ytour post.

If they are successfully servicing the debt they have, I can't see why the mortgage is being withdrawn. It's not their fault the arse has fallen out of the market and that now the value of their house is less than the mortgage plus outstanding debt.

If that is the attitude the banks will take, ie reposession if outstanding debt exceeds likely valuation of house, then thousands will be in the same boat, not just this couple.

My above argument is based on the fact they are meeting their obligations wrt to the 'consolidation' loan.

[pdV6]

toppstuff said:

But I stand by my central case. Given that they have not missed a payment on the mortgage, what is to stop other people who's only problem is that their mortgage is too cheap ( read: not profitable for the bank )

I don't think the bank have stated that at all. The MP has suggested it as a reason whilst seemingly ignoring all the other facts of the case.

Let's say Deva Link's figures are somewhere near the mark. Being generous, it looks like this couple have over £300k of debt secured against a property that's worth iro £200k at best. You can bet that 1/3rd of that debt won't be on a nice low base rate + a bit over 25 years deal either.

I'm willing to bet that they've "never missed a payment on the mortgage" by playing silly buggers e.g. making mortgage payments via credit card cheque or suchlike hence the need for £100k worth of debt consolidation loan.

[toppstuff]

No Tonker - that's fraud and the bank are right to get out.

Instead what if the bank gave you a BoE +5bps mortgage and you have been making the payments and causing no problems. A model borrower.

There seems to be nothing to stop the bank lamenting the fact that they succumbed to commercial pressures and threw the money around at Libor plus beer money, so deciding to use their powers to call in the less profitable parts of their book and effectively throw you out.

If that is in the contract, fair enough. caveat emptor and all that. But if the banks are to act in this way, I think it is equally fair that punters are going to judge them a lot more harshly.

I can see how the OP may well tell a story of a dodgy mortgage which has been found out and as a result the bank want to get out. But it also raises a few issues which I am uncomfortable with.

I guess this is a sign of things to come.

[scotal]

I'd be very interested to see the paperwork both for the mortgage and the secured loan.
I don't really see how there can't be an element of "optimistic form filling" by the applicants. Either for the Mortgage and/or the loan.

Seeing as the FOS is involved I'm not hugely surprised that RBS won't comment.

[fido]

toppstuff said:

What is to stop the bank using the same powers to withdraw the mortgage and demand payment back , from anyone who is in a deal with them which is "too good" and not profitable enough?

Nothing. If you cannot find someone else to take on the mortgage (i don't think anyone else does 150% mortgages?), then why should Natwest continue to facilitate their indebtness. Even if they didn't call the loan, Natwest could set the SVR to an uncomfortably high level. This is the whole problem of short-term, as the septics call them, 'adjustable-rate mortgages'. Right, i need to attend to my cherubims.

Edited by fido on Tuesday 23 December 16:22

[croyde]

Regardless of this situation a lot of banks demanded their money back on mortgages in the early 90s even when the monthly payments were being comfortably met.

I'm sure that it is in all our small print that the bank can demand repayment immediately if they want to. A very sobering thought.

Edited by croyde on Tuesday 23 December 16:35