Equity Release Clause

[northumbrian69]

There has been much discussion recently regarding 4th year equity release clauses and the detrimental impact they can have on the overall terms and conditions of an IVA, I am one of those unfortunate souls who has agreed to this modification before fully understanding the implications.
I believe there has been a recent DTI/BBA/Insolvency Service forum which is proposing a 'straightforward consumer based IVA', part of this proposal relates to 'equity release clauses' whereby the maximum sum released will be 85% of house value and maximum remortgage payment is restricted to 60% of disposable income.
My question is, if this proposal is agreed will these terms and conditions apply to current IVA's as well as future IVA's??

[Adam Davies]

Thats a very good question and I would hope that it will relate to all current IVAs.
Maybe Catullus can give us some further info.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[catullus]

Unfortunately the answer to that is no.Any changes to legislation are almost always forward looking rather than retrospective, otherwise we would get ourselves in a real pickle.
I don't think that the possible changes that northumbrian69 is referring to are as developed as he thinks. They've been published by the DTI as a consultation paper and there's a long way (12 months?)to go before they hit the statute book. I also don't remember that the consultation paper actually has anything specific in it about the current policy of buying out equity but I'll check and post again if I'm wrong.

[northumbrian69]

I printed off the report and items 27 - 33 under heading 'Treatment of Home Equity' is quite specific regarding proposed rules for the inclusion of homes within an IVA.
If these new rules were to be applied to current IVA's the picture would be a lot clearer, the way it stands at the moment I could be in debt for the rest of my life if the housing market takes off and I have to take on a huge remortgage to satisfy my creditors.
It begs the question, is it always best to do the honourable thing??

Unfortunately the answer to that is no.Any changes to legislation are almost always forward looking rather than retrospective, otherwise we would get ourselves in a real pickle.
I don't think that the possible changes that northumbrian69 is referring to are as developed as he thinks. They've been published by the DTI as a consultation paper and there's a long way (12 months?)to go before they hit the statute book. I also don't remember that the consultation paper actually has anything specific in it about the current policy of buying out equity but I'll check and post again if I'm wrong.

[catullus]

I'm not sure what report you are referring to Northumbrian69, I'm referring to the DTI's consultative document on IVA's dated May 2007 which I've had a look at this morning and doesn't deal with any specific changes to equity refinancing, certainly not in the paragraphs that you quote above.
The DTI's consultative document is the only one in existence that I am aware of that is likely to lead to legislative change.
Regardless of that, I'm quite sure that any new legislation would not be backdated to existing IVA's. Retrospective legislation is very very rare because lots of people will have acted on the existing rules assuming that they wouldn't change and retrospective legislation undermines this principal.
As to the rhetorical question that you ask, well the bank's make this very point when arguing that IVA's are over marketed. They say that an IVA for a homeowner is not 5 years, very often its much longer as a result of the requirement to remortgage.They have a point but I think that I would rather have a single secured debt whose interest rate should be lower and on which I can plan repayments than a pile of uncontrolled unsecured debt on which you pay eye watering interest and where he who shouts loudest gets paid first.

[Adam Davies]

Hi Catullus
My concern is the amount of people that have posted on this forum who have not really understood the implications of the equity release that they agree to.
I would be in favour of a visit to a solicitor so that the in,s and out,s are fully explained or if costs prohibit this a face to face meting with an IP and documents signed.
To agree to the equity release is like signing a blank cheque and while I do agree that equity should be released within an IVA I am concerned at the way that it is discussed and accepted.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[catullus]

Andy

I completely agree but with SIVA's now firmly on the agenda and banks pressing hard for a reduction in IP's fees I doubt the climate is right to expect creditors to give in on this.
The only thing that will change it is if we move in to a period of zero or negative property growth in which case you can bet your bottom dollar that you'll start seeing mods that insist that the debtor remortgages immediately which could be even more unfair.