Hi. Told to take out a loan against my property at the end of my IVA. Advice please

[Hyperdrive]

Nickjohn what I`m saying is, if you have a valuable asset come the "end" of the IVA, they will get as much of it as they can.
Recessions are cyclical, and no more land will ever be made.

[nickjohn]

They may want as much as they can get but if you have no way of releasing the equity due to financial constraints on borrowing the money then the only other option would be to sell. My understanding was always that the IP did not want to go down the "sale" route hence the option to either re mortgage or 12 more payments.

[nickjohn]

True no more land may ever be made but at the moment in the UK we have only built on about 6% of what we have so we still have a very long way to go..

[Hyperdrive]

And if people would rather live in the 6% of land already built on?

[nickjohn]

They will have to save for a long time to get the deposit required to buy and then hope they keep a nice job so they can pay the mortgage, alternatively they could rent..

I am not saying we should limit where people live I am just saying that just because the IP may want a chunk of your equity if you have no way of funding it then the way the IVA's are worded is that if no re mortgage is possible then you make 12 more payments, thats what I signed up to.

If the IP is adamant they want as near to 100 p/£ then maybe they should stop telling people they can write off up to 50% of your debt or you make 12 more payments if a re mortgage is not available.

Quote from one of the larger IP's web site:

"most commonly IVAs do last 5 years but we cannot guarantee this (if you have missed payments), or are not able to remortgage and therefore offer up to 12 payments in lieu of equity."

[Foggy]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Michael Peoples

I do not think IPs are moving the goalposts. We have clients entering an IVA stating they will remortgage and introduce equity in year 5 but they have no intention of doing so. First of all posters wanted to hold on to the word 'remortgage' to avoid releasing equity by way of a secured loan, and now, posters do not want to remortgage because the rates are penal.

Many posters here state they would have looked at other options had they known they would have to release equity but what about those options? Bankruptcy and possibly lose your home or a DMP means unending payments, no legal protection, secured charges and possibly losing your home.

If you have to release equity to fund the IVA, the maximum loan to value is 70-75% meaning you retain at least a quarter of the equity in your home. In a DMP or bankruptcy you could end up with none. Try the other options by all means and see where it goes but I do not think it is IPs or creditors who are moving the goalposts.

Michael. First of all my reference to moving goalposts was not specifically in connection to equity release.

In general, relating to the whole of the IVA, even experts have since acknowledged that goalpost have been moved in various areas.

Anyway. Relating to equity release. I object to "First of all posters wanted to hold on to the word 'remortgage' to avoid releasing equity by way of a secured loan". No! They are not simply trying to "avoid" the obligations of the IVA, as you infer. They are simply trying to get the IP to honour the exact terms --- as they have had to do over the past few years.

If a proposal states "remortgage" then that is what it refers to ... not some secured loan or selling a kidney.

The max LTV is more often 85% and, on here, I have heard mention of some IP's going for 100%.

[UpToMyNeckInIt]

It’s IP’s pulling stunts like this that give the industry a bad name. (A great shame as I am sure that most IP’s play it fair, and for many people, including me, an IVA is a great product).

I accept that there will be scenarios where a re-mortgage will be more costly than a loan and vice-versa.

Also who is to say what will happen in 3-4 Years time? Hose prices could increase (and are already starting to do so here in the south East), and mortgage companies might relax lending criteria for those of us in IVAs etc.

Surely the consideration at present is: If you have a choice to take a high-interest secured loan, in lieu of (however unlikely), being unlucky enough to having been offered a sub-prime re-mortgage offer, as the loan works out cheaper, then great!!!

But as widely discussed on this forum, the chances of getting a remortgage in an IVA is seemingly impossible. (Has ANYONE ever got one recently?). Thus in most cases, 12 month extension it is (if you have the required equity etc), IVA ends if not.

However, the issue now seems to be an IP requiring their IVA customer to take out a secured loan, where the attempt to remortgage has failed. The customer, as per their contract, feels that the IVA should instead end/be extended by 12 Months - and rightly so!!!

Hence why, we have now heard of one or two customers, armed with the relevant contract law knowledge, being able to successfully resist the secured loan rip-off.

Good luck to them.

[Michael Peoples]

My main point is that equity release is only available to those who have equity and can afford it. No one will lend money for a remortgage or a secured loan if they do not qualify under affordability and these people will have their IVAs extended. However, those clients who have the equity and the means to repay the loan should honour their commitments to their IVAs.

Creditors are already getting wise to protocol IVAs where there is equity and are putting minimum dividends into the proposals which could lead to the sale of homes down the line. This would be less likely to happen if creditors could see that every attempt has been made to release equity before an extension is granted.

We as a firm have only 2 or maybe 3 clients who have raised equity by way of secured loans and most of our clients get extensions. However, I personally think this will change as creditors see people with ample means and equity receiving extensions when morally I believe they should be offering some form of equity release in line with the proposal they signed and creditors approved.

[UpToMyNeckInIt]

Hi Michael,

I accept that loan or mortgage - it's all restricted according to affordability. Also, that IVA clauses may change in time to reflect the economic situation etc.

I have no issue either with the secured loan option, BUT only where an IVA customer would otherwise have to accept a sub-prime remortgage offer, as per the standard terms of the contract. (Which as you correctly allude to, may well work out considerably more expensive than the loan in the long-term). In these circumstances, I would commend the IP for doing a good job.

But, I do expect my IVA company to honour THEIR contract (they drafted it. I merely agreed the terms - as did the creditors). Morality does not come into it. An IVA is a legally binding contract - on all sides.

Hence, no IVA customer should be compelled to take out a 'secured loan', when the IVA contract has no provision for equity release by this means.

Just my opinion though.

[Shaun Vickery]

We are employed to assess debtor's ability to release equity from their property in order to conclude their IVA. No-one is ever forced to take a secured loan unless the terms of their IVA specify such but there are many instances where it is beneficial to the debtor to resolve it in this way, particularly where it can be combined with an early full and final offer. Creditors are undertandably concerned about the gap between what debtors undertake in their IVA and equity actually being released. In the spirit of an IVA I wouldn't have thought that releasing equity up to 65% of a property value where a debtor has agreed 85%, and where affordability rules (ie. 50% of IVA contribution) are observed is unreasonable.

[Michael Peoples]

UTMN.
The forum is all about opinions and I know that many people disagree with me on this point. However, those in an IVA must agree to any 'reasonable' request from their IP and an equity release by way of a secured loan may be deemed reasonable. If the loan runs the same length as the existing mortgage and the payment is a maximum of 50% of the IVA payment, then it is effectively the same as a remortgage and could be considered reasonable.

Like you this is only my opinion and I am not an IP or a lawyer but I think in the circumstances I describe above a secured loan is a fair outcome for all concerned.

Foggy.
I am not trying to offend anyone but trying to explain what I think and this is also what many creditors are starting to think. If there are not changes soon I can see more IVAs being rejected or modified to include the property.

[Foggy]

I agree, Shaun. However, we have had a couple of instances where, shall we say, less sympathetic, IP's have tried to bully client's into taking unreasonable secured loans contrary to the terms agreed in the proposal. These were resisted and, after some arguement, the agreed terms were applied.

Instances like this, coupled with current general PPI disquiet, puts those in an IVA on guard against sharp practice.

[plasticdaft]

Maybe a few less adverts claiming an iva protects your home would help.

Perhaps more people being realistically advised that with significant equity the cheapest option for them may be bankruptcy if they could end up tied into either a costly sub prime remortgage or costly sub prime secured loan, meaning they could lose the house eventually anyone, without gaining an insolvency firms thousands of pounds in the process.

Paul

[UpToMyNeckInIt]

...Like I say, in the right circumstances, I don't disagree with the secured loan principle.

Obviously, where there is significant equity as Shaun describes, then the prospect of being offered a sub-prime remortgage is more of a possibility. In those circumstances, a secured loan might be a viable and cheaper alternative.

Shaun, out of interest, what sorts of APR's are we talking about for an IVA customer?

I cannot see anything obvious on your website. It might help ease concerns if some examples were published, together with any arrangement fees you may charge.

I think that part of the problem is that some of the charges that customers have quoted on this forum are rediculously high: 15-20% APR, and having to pay £2000-£3000 'arrangement fee' for the privilege is frankly insulting, but not it seems, unusual.

[North East Derbyshire CAB]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Shaun Vickery

We are employed to assess debtor's ability to release equity from their property in order to conclude their IVA. No-one is ever forced to take a secured loan unless the terms of their IVA specify such but there are many instances where it is beneficial to the debtor to resolve it in this way, particularly where it can be combined with an early full and final offer. Creditors are undertandably concerned about the gap between what debtors undertake in their IVA and equity actually being released. In the spirit of an IVA I wouldn't have thought that releasing equity up to 65% of a property value where a debtor has agreed 85%, and where affordability rules (ie. 50% of IVA contribution) are observed is unreasonable.

Hello Shaun

A very interesting post from you and thread in general

We hope you dont mind us posing a few questions on the subject of IVAs and secured loans

How many current IVAs have terms or clauses where it actually specifys where a secured loan must be taken?

Are there plans to introduce such excact terms in new IVAs?

You state that you are employed to assess debtor's ability to release equity from their property in order to conclude their IVA - what ecactly does this mean and as another poster has asked what are the fees and charges involved if appropriate?

We ask this as we see many people in IVAs who do not really understand the equity release clause and this was before the introduction of secured loans into the equation.

The whole issue of secured loans in IVAs is also of interest to us as debt advisers for obvious reasons.

PS - A warm welcome to the forum from all here at NEDCAB

NED-CAB