Is this above board?

[vjl]

We have a together mortgage with NR. We are currently trying to apply for an IVA through Grant Thornton and can offer 65p in the pound as a return. NR is by far our biggest creditor. They have offered to secure the unsercured debt and take on another secured debt we have against the house and then we can proceed with an IVA for the rest of our creditors while still making the same payments. Is this above board and what are the risks and implications for re mortgaging in the future? Are we better off holding on to see what happens with this take over bid?

[MelanieGiles]

Hi there

Well it puts Northern Rock into a preferential position over the other creditors, as they will eventually get their debt paid in full whereas others may not. If you are in default with the unsecured loan element of the together package, and there are grounds for Northern Rock securing, and they are one step ahead of the other creditors in this regard, then there is probably no preference.

There is also an argument, although I am sure that your other creditors would not agree, in that if NR were to reject your IVA proposals then the others would suffer far worse than under the present suggestion - for instance if you were to declare yourself bankrupt. So commerciality may win the day.

So long as your IP properly explains that this has happened within the proposal, thus allowing the other creditors the opportunity to vote accordingly, I personally would not wait any longer as you will suffer from ongoing creditor pressure and at the end of the day a change of owner in the bank may not necessarily mean a change of policy.

There is no risk to you for mortgaging in the future, but presumably this will leave you with little or no equity?

[vjl]

We haven't defaulted on anything yet and are in the process of entering a DMP to ensure we don't until an IVA can be approved. By securing the together unsecured and our existing secured debt it would leave us with no equity in the property. We are concerned that when our fixed rate is up with the NR wll they hammer us with a high interest rate and we will have to sell up anyway. If that is the case we may as well declare ourselves BR without securing the debt if that is going to be the long term outcome because we are in negative equity anyway.

I know that our IP hasn't contacted any of our other creditors until the NR is sorted out. No formal IVA proposal has been put forward but no-one is willing to because of NR rejecting everything that comes their way, we want to do the right thing for the future as we have young children and don't want to end up with nowhere to go
....

[Adam Davies]

Hi
Why do NR continue to be so different to all other creditors ?
It is not right and should not be accepted,they have signed upto the banking code of conduct but seem to have intimidated most IPs into preferential treatment.
From my perspective they have steam rolled the IVA industry into submission
Regards

[Andrew Graveson]

Spoke today to a possible client who has got into some debt trouble.

Their mortgage fixed period is coming to an end. They are with Northern Rock. Northern Rock are unable to offer them a transfer to a new product as a result of the debt trouble.

For this reason a remortgage elsewehere, or a steep increase in mortgage costs moving onto the N Rock SVR are the options.

To be fair this could be the situation with any lender and isn't specific to N Rock.

The problem is where someone has had their remaining equity secured in order to enter an IVA the choice of possible new mortgage lenders could vanish. This is because lenders to those in IVA's are not going to offer 100% LTV mortgages in the current mortgage market.

The caution is therefore if you choose this course of action you must be prepared at some point in the future for the existing mortgage to remain affordable at the Standard Variable Rate whenever that comes into play.

If this isn't the case the risk is that the IVA could fail and the whole exercise would be entirely counterproductive.