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

[Pennyless]

In my honest opinion the bottom line in particular relation to the OP's question on equity release is that he is required to "obtain two mortgage quotations from reputable brokers and/or mortgage lenders".

Therefore he will of complied with his "equity release" clause if he simply go's to two major high street lenders, who I would of thought would examine his "affordability" criteria closely and offer or decline a mortgage on that basis.......not having to search out a sub-prime lender who could arrange a mortgage at extortionate rates.

For example I could not get a loan from Barclays today at even 15% but I bet if I picked up the phone to one of the advertised loan companies on TV I could obtain a loan at 2000%.

I would imagine that some new loan Company will eventually cotton on that they could pick up a nice bit of business from those in IVA's who would be bound by their terms of "equity release" to accept an "offer" at any given interest rate, however high.....with the added effect that during the term of their IVA, a client has effectively and unwittingley transferred what was originally UNSECURED debt to SECURED debt........something many IFA's would class as at the least a "risky" financial move.

For my part, also having the "equity clause" in my IVA, I will comply to the letter but will not be seeking a remortgage with spin off's of the likes of W*nga.com or other similar sub-prime lenders who will effectively charge high rates and get security over my house. If Barclays et al see me as a bad risk when it comes to remortgage and will not make me an offer then so be it.......I have complied with my IVA equity clause.

If in doubt on equity clause I would imagine it would be money well spent on employing an IFA to check out your alternatives.

It does unfortunately appear that some IP's are now happy to take 5/6 years "fees" for looking after their client, often I would imagine receiving more money in actual fees than the individual creditors receive in debt, but then at the end of the IVA period leaving their clients high and dry with a sub-prime loan, which eventually will cause more financial problems for the client, which if we remember in many cases is what recently caused the financial meltdown in the first place. Full circle for some clients I would envisage.

Maybe future IVA clients should now start to strongly consider "consoladation" loans at the outset of debt problems rather than jumping on the IVA wagon.....after all at the end of 5/6 years on a stricter than stricter budget, effectively the "consolodation" loan is in some cases exactly what they'll end up with....."a rose by any other name".

[Steve.dw]

Hi everyone

It looks as though I have stirred up alot of feelings in general.

This was the proposal for the secured loan put forward.
Loan £7750.00
Broker fee £1162.50
Completion fee £795.00
TT fee ? £35.00

You will see that all the fees work out at £1992.50 which is an extra 25% of the initial loan, work in the APR 19.1% paying £122.63 pm over 15 years total pay back £22073.40 and that was my shock.

My problem was not the releasing of funds, I signed up for that, it was the fact that I was never made fully aware of all the ins and outs. I have just over 4 years left on my mortgage and the truth to be told I only found out this weekend, that was I to remortgage it could of only been over the duration of my existing mortgage, another clause also comes into action, that when you remortgage it can not be for more that 50% of your monthly payment into the iva.

I was told this would either exempt me from a remortgage as the equity I was able to release would under the terms and conditions set out in my iva be less than £5000 and therefore my iva would finish on it's due date or that I would be put forward for the extra 12 months.

I have had a call this evening and I am being put forward for the extra 12 monthly payments.

I got myself in this mess and wanted to do the right thing, this was one of the hardest decisions I have made when going into this, I did not see this as a easy way out however and after many months (16) I was in a no win situation and has the saying goes was robbing peter to pay paul and in the end I could not do that anymore.

Once again I would like to thank everyone who has helped me in this and I would strongly recommend that if anyone is looking at this and thinking of going into an iva then READ AND STUDY THE PAPERWORK before you sign up.

Many thanks

Steve

[Foggy]

Well done, Steve. 12 months is a pain, but better for you in the long run and, at least didn't come as much of a surprise as the secured loan option.

Yes, things like this do cause a bit of a stir, but it's good to air these subjects

[mole]

A fantastic post Pennyless and completely sums up my views on this issue.

Current IVAs has the clause, "obtain two mortgage quotations from reputable brokers and/or mortgage lenders" and that is exactly what the debtor should do as this fulfils their obligation.

In future proposals the creditors may get wise and change the terms. That is fine, for new proposals they have that right.

[Shaun Vickery]

There is a great deal of misinformation surrounding this issue. That said, we do encounter debtors who do appear to be genuinely unaware of the equity release clause so any effort to ensure that they are clearly explained at outset has to be beneficial.

As a well-respected firm operating in a heavily regulated environment (we are authorised and regulated by The Financial Services Authority) we are extremely sensitive about protecting not only our own reputation but, just as importantly, that of the many insolvency firms we work with. We have also engaged with TDX and their creditor forums, the IPA and debt buyers, specifically in connection with the services we provide.

We are aware of, and monitor, discussions contained within IVA forums, in particular iva.co.uk. Dissatisfaction with solutions provided is, in fact, extremely rare and I am very happy to share with you feedback results which we gather as part of this process. More detailed analysis is available however 89% of all respondents rated us either excellent or very good overall, the remaining 11% rated us good, and nobody rated us average, below average or poor.

Unfortunately, as is usual in these cases it is only the few debtors who are unhappy who tend to approach these forums, albeit that we appreciate that they are an extremely useful resource for debtors looking for additional support. One such recent case we are aware of has been extremely inaccurately represented by the debtor who created the post (not the one featured in this thread) and there were a number of extremely key and relevant other factors which happen to have been omitted and which would shed an entirely different light on their circumstances. Of course it is impractical and inappropriate for us to respond to, or provide details of the specific case without undermining the forum and the debtor themselves but suffice to say that had the circumstances been described in their entirety, the responses would also be likely to read entirely differently. In the absence of the missing information I would actually have otherwise agreed myself!

In any event the service we provide in connection with IVA equity release is to independently assess a debtor's ability to release equity from the property. Without fail we notify the debtor at the outset that they are not obliged to continue with us. If they agree to proceed, both Mortgage and Secured Loan products are taken into account in our assessment however at present a suitable mortgage is less likely to be available as a result of such lenders presently lacking appetite for business of this type. In any event Advisers should not recommend a mortgage solution where they believe that a more appropriate solution exists. If they were to do so they would be failing to act in the best interests of their client, which of course they have an obligation to do, both professionally and morally. We can provide a flier entitled 'IVA - Secured Loan vs Remortgage' which summarises some of the really key issues regarding this.

It is also crucial to note that any instructions received from IP firms are adhered to in all cases. For instance, where we have received instructions to ensure that the increase in monthly payments do not exceed 50% of the monthly IVA contribution then the monthly repayments will never exceed the amount instructed unless the debtor specifically requests a shorter term. Clearly if the customer does have an existing loan secured on the property which is to be redeemed then the existing repayments on this will be taken into account.

Finally, whilst I see rates reported on one forum post at 18.9%, these are not correct. Rates range from 11.9% to 17.9% and the typical rate is 12.9%. Bear in mind however that, ironically, because the actual amount of the loan is very often restricted by 50% of the IVA contribution then in some circumstances the higher the rate then the better the long-term result for the debtor. This is because this will reduce the amount that they need to borrow. In this case, when the case is reviewed in 12 months time to see whether there is an opportunity to settle the loan (there are no Early Repayment Charges) by way of a further advance or remortgage, then their total debt is less because they have had to borrow less to settle the IVA!

Any fees we charge cover the costs of property valuation and all other third party fees, and are in fact deducted from the amount passed to creditors. Therefore it does not increase the amount of the loan. In a remortgage situation significant fees can be payable by the debtor, many of which can be up-front.

I'm happy to arrange to provide anything further but you really can be assured that these matters are treated with the utmost level of professionalism and responsibility.

[North East Derbyshire CAB]

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

There is a great deal of misinformation surrounding this issue. That said, we do encounter debtors who do appear to be genuinely unaware of the equity release clause so any effort to ensure that they are clearly explained at outset has to be beneficial.

As a well-respected firm operating in a heavily regulated environment (we are authorised and regulated by The Financial Services Authority) we are extremely sensitive about protecting not only our own reputation but, just as importantly, that of the many insolvency firms we work with. We have also engaged with TDX and their creditor forums, the IPA and debt buyers, specifically in connection with the services we provide.

We are aware of, and monitor, discussions contained within IVA forums, in particular iva.co.uk. Dissatisfaction with solutions provided is, in fact, extremely rare and I am very happy to share with you feedback results which we gather as part of this process. More detailed analysis is available however 89% of all respondents rated us either excellent or very good overall, the remaining 11% rated us good, and nobody rated us average, below average or poor.

Unfortunately, as is usual in these cases it is only the few debtors who are unhappy who tend to approach these forums, albeit that we appreciate that they are an extremely useful resource for debtors looking for additional support. One such recent case we are aware of has been extremely inaccurately represented by the debtor who created the post (not the one featured in this thread) and there were a number of extremely key and relevant other factors which happen to have been omitted and which would shed an entirely different light on their circumstances. Of course it is impractical and inappropriate for us to respond to, or provide details of the specific case without undermining the forum and the debtor themselves but suffice to say that had the circumstances been described in their entirety, the responses would also be likely to read entirely differently. In the absence of the missing information I would actually have otherwise agreed myself!

In any event the service we provide in connection with IVA equity release is to independently assess a debtor's ability to release equity from the property. Without fail we notify the debtor at the outset that they are not obliged to continue with us. If they agree to proceed, both Mortgage and Secured Loan products are taken into account in our assessment however at present a suitable mortgage is less likely to be available as a result of such lenders presently lacking appetite for business of this type. In any event Advisers should not recommend a mortgage solution where they believe that a more appropriate solution exists. If they were to do so they would be failing to act in the best interests of their client, which of course they have an obligation to do, both professionally and morally. We can provide a flier entitled 'IVA - Secured Loan vs Remortgage' which summarises some of the really key issues regarding this.

It is also crucial to note that any instructions received from IP firms are adhered to in all cases. For instance, where we have received instructions to ensure that the increase in monthly payments do not exceed 50% of the monthly IVA contribution then the monthly repayments will never exceed the amount instructed unless the debtor specifically requests a shorter term. Clearly if the customer does have an existing loan secured on the property which is to be redeemed then the existing repayments on this will be taken into account.

Finally, whilst I see rates reported on one forum post at 18.9%, these are not correct. Rates range from 11.9% to 17.9% and the typical rate is 12.9%. Bear in mind however that, ironically, because the actual amount of the loan is very often restricted by 50% of the IVA contribution then in some circumstances the higher the rate then the better the long-term result for the debtor. This is because this will reduce the amount that they need to borrow. In this case, when the case is reviewed in 12 months time to see whether there is an opportunity to settle the loan (there are no Early Repayment Charges) by way of a further advance or remortgage, then their total debt is less because they have had to borrow less to settle the IVA!

Any fees we charge cover the costs of property valuation and all other third party fees, and are in fact deducted from the amount passed to creditors. Therefore it does not increase the amount of the loan. In a remortgage situation significant fees can be payable by the debtor, many of which can be up-front.

I'm happy to arrange to provide anything further but you really can be assured that these matters are treated with the utmost level of professionalism and responsibility.

Hello again Shaun

Thank you for the lengthy reply (we are presuming that your post is in response to ours - in some way at least)

We have had a quick read through but our first impressions are that our basic questions have not been answered especially given your previous post as quoted by us.

You also make a few more points that we as a Citizens Advice Bureau who deal with many enquiries regarding IVAs find very interesting.

Given a little more time we will study what you have written further and then come back to you, that is a promise.

The issue of secured loans and IVAs is very much of interest for us for obvious reasons as is probably the case for many others and we would more than welcome clear clarification on the subject.

We ourselves are no strangers to open forums and always try to bring an independent view and perhaps add a little balance here and there on occasions.

Again many thanks for your very interesting response

NED-CAB

[Tina Shortland]

Great response from NED-CAB and it wil be good to read their more in-depth response to your post Shaun once they have had more time to digest it.

[Michael Peoples]

Thanks Shaun for the detailed answer and good to see NED-CAB are taking it on board. This whole issue needs addressed as every day people are told conflicting things about IVAs and equity release and the outcome can vary.

What everyone needs is consistency and Protocol does not provide this.

[North East Derbyshire CAB]

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

Great response from NED-CAB and it wil be good to read their more in-depth response to your post Shaun once they have had more time to digest it.

Hi Tina

Thank you for the kind words.

We are having a good look at this one including the protocol and the wording of a number of IVA proposals / terms in our possession etc along with other contacts & websites etc.

To be able to accuratly advice anyone on their options at the outset of a debt enquiry, then it is obvious that issues such as equity release in an IVA has to clearly explained and clarification is paramount on this one.

An IVA is a formal insolvency solution so how can you have areas like this that are not clearly explained and clarified is what we and probably many reading this who are currently subject to an IVA are asking.

People entering the later stages of an IVA if and where equity release may be appropriate surely have the right to know what to expect and not to end up facing any 'surprises' if that is the right word.

What is interesting on the aspect of secured loans to release equity in an IVA is what appears to be their fairly recent introduction to the scene and by who'm (someone can put us right on this however if we are missing something)

We will come back on this one after further investigation, research and thought.

NED-CAB

[Pennyless]

Shaun thats a great post...very candid indeed..could you please let us know how debtors are actually referred to yourselves? It is the first time I have looked at your services and as I've said before my Equity Release stipulates that I seek to remortgage at month 54, which I intend to, not only with my current lender but also another high street mortgage lender.

My only trepedation with your post is it appears that you and the Company you represent are in no way impartial.......your after a hefty chunk of commission by obtaining sub-prime loans where major lenders would refuse on "affordability" issues. I imagine TIX and other companies representing creditors will welcome your services with open arms, after all you get commission, creditors get the maximum available return without risk to themselves, homeowners hand over their homes security to a pride of high risk investors and the only possible loser in this is the IVA client.

I've no doubt that The Select Partnership will be the only or last high risk lender to "monitor" these boards or to seek affiliations with IVA Companies and creditors but to tell the truth if I was looking for an IVA Company at this point, informed of an Equity Release clause and knew of the IVA Companies "connection" with a Company such as the Select Partnership......I'd move onto another Company.....after all the Equity Release clause then moves from being a possibility to an outright certainty......at any cost to the client.

It all seems to be becoming clearer as to why some IP's are posting that IVA clients will soon be able to obtain finance.....after all there will always be some Company that will fill the gap, not that I for one minute never expected it, however, I would suggest that IVA clients stick to their protocol wording on Equity Release and seek to remortgage with major lenders.

I do think your sentance "Unfortunately, as is usual in these cases it is only the few debtors who are unhappy who tend to approach these forums" is slightly belittling to some of the fantastic posters on this forum who give up their own time......not just working hours.... to seek advice or help others and expect nothing in return. We dont all come on here because we're unhappy.....some of us actually view this forum as a "support" forum for ourselves and others and to pass on our own experiences.

[North East Derbyshire CAB]

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

Thanks Shaun for the detailed answer and good to see NED-CAB are taking it on board. This whole issue needs addressed as every day people are told conflicting things about IVAs and equity release and the outcome can vary.

What everyone needs is consistency and Protocol does not provide this.

Hi Michael

Thank you for the positive comment on our involvment with this issue.

We have read your posts on this thread with genuine interest.

You have some interesting opinions and make a number of good points.

We are not sure that we would agree with everything you say Michael however, which probably will not come as a surprise to you and perhaps a number of other forum members.

It is good that forums like this do give people and and agencies such as NEDCAB the genuine unhindered chance to debate, discuss and raise issues such as the current topic of secured loans in IVAs.

It is fair to say that we are somewhat of a lone voice on here as far as genuine charity advice agencies are concerned which is a shame as these can be serious issues for those concerned and an independent input has to be beneficial as we hope and are quite sure that you would agree.

NED-CAB

[nickjohn]

Personally when I entered into my IVA it was on the basis of a 5 year term with a 12 month extension should I not be able to raise a lump sum via a re mortgage.

The IP's agent was fully aware of the size of our mortgage and fully aware that at the time it was taken out it was 3 times my income and at the time of my IVA (due to my income halving) it was some 6 times my income. Given the drop in income I would not be able to raise any more via a re mortgage because my income is just too low so the 12 months extension was always going to be the final route.

In my opinion if the IP now starts to say I must look at a loan and the only criteria for affordability is that the repayments must not be more than 50% of my IVA repayments then this is moving the goal posts.

The IVA I have says that at the end of year 5 my lump sum payment is £30k, if I put this into one of the loan calculators on the internet it shows a monthly repayment of less than half my monthly IVA repayments so I would pass the affordability test but the amount I would be repaying over 15 years is some £62,694!!! and I would be in debt for a further 15 years..

We keep hearing that it is the IP's duty to get as much back for the creditors as possible and that if you have equity then you should release it but if these things have always been the main criteria why have they not pushed them before and why is it that we are only starting to hear about them now.
When I entered into my IVA then why did the IP not say "at year 5 you have to raise £30k through either a re mortgage, loan or lump sum off a friend or family member".

We keep seeing posts off people who believe the IP has an ulterior motive for pushing PPI reclaims, organising secured loans, organising mortgages etc and you can see why.

We also see posts of IP’s saying all these things are untrue and they will consider suing posters who keep spreading lies yet you have one of the largest IP’s (at least I think they are one of the largest) who is happy that the UK economy is struggling, sees the economic environment as favourable for indebted consumers and sees this as an opportunity to make further profits, who make substantial revenues from the IVA’s via third parties, receives commission income from the referral of loans and receives fees in respect of PPI reclaims. They also own their own PPI reclaim company..

When I see these things I for one think some of the IP’s may have an ulterior motive for some of the things they do..

[Foggy]

Whatever the industry says, over the past two and a half years since I joined this forum I have seen a definite hardening of IP's towards maximising creditor gains. I have mooted on here before that the switch, led by the creditors, to a percentage based fee structure ( commission if you will), is a driver for this and this is the reason creditors have brought this about.

[nickjohn]

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

Whatever the industry says, over the past two and a half years since I joined this forum I have seen a definite hardening of IP's towards maximising creditor gains. I have mooted on here before that the switch, led by the creditors, to a percentage based fee structure ( commission if you will), is a driver for this and this is the reason creditors have brought this about.

This coupled with the general down turn in the number of new IVA's being agreed means the IP's have to maximise the fee income from those left. This is why so many businesses have been selling their IVA's, they get a quick return for a high percentage of the projected fees and the buyer has a larger database to work on..

[Michael Peoples]

NickJohn. You would never qualify for a remortgage or a loan so an extension would be appropriate. Any remortgage or loan is only suitable for those with the equity and the means to repay.
I think that there is a fear that people will be made to remortgage or take a secured loan that they cannot afford to repayu when this would not be the case.

NED/CAB.
Thanks for your comments but I would not be posting on here if everyone agreed with my opinions as where would be the fun in that!