What should we do?

[carlmcmullen]

Creditors would only ask for up to 85% LTV and as this is what she intends to take out they would already be up to the max.

However..... should property prices increase then yes there may have to be some compensation to creditors, either by remo or extra 12 payments.

However very good point about sub prime mortgage rates it will limit the amount you can borrow within your budget.

[Skippy]

But if Lulu is already in and IVA that doesn't have the equity clause (I'm guessing that it doesn't as she had to sell her house at the start) then how can the modification be added later?

[Adam Davies]

Hi
A property purchased post IVA can't be included in the IVA for equity release purposes.
Regards

[carlmcmullen]

I assume the proposal would have to have a variation - could a modification not be put forward then ?

[J-DOUBLEYA]

Hi Andy, i think you will find that its the asset the creditors will want considered not how it has arrived. The same applied to a windfall.

The point is, if there is equity in this asset and its value increases beyond the accepted 15% retained there is likely to be a 'scoop up clause' to collect same. Under the new protocols CRA rating this is likely to be only provided by a sub prime lender so not cost effective.

[Adam Davies]

Hi
There is no need for a variation when purchasing a property as long as you have your IPs permission and it does not affect your ability to pay your IVA.
I purchased a property post IVA and used the equity that it made in two years to offer a full and final settlement
Regards

[J-DOUBLEYA]

surely it depends on what conditions are put in the VA ?

[carlmcmullen]

Post MOC is not my strong point, and if you say it has been tried and tested then i cant argue it.

I do find it very strange though that the IP does not have a duty to report on such a substantial asset and do nothing with it.

[J-DOUBLEYA]

Hi Carl,

Like you, I am not an IP but i have come across some strange conditions in my time and was of the opinion that most Creds had things just about sown up. I dont doubt Andy's experience but i thought there was a clause that scooped up windfalls not there at the inception.

Ok. Andy used his to offer a F&Final. what would have happended if he had chosen to retain this ? surely there would have been an issue then ? My guess is that there would either be a call for additional payments in lieu of equity or a RM .

[carlmcmullen]

I would probally suggest that the fact Andy used his equity as a full and final exactly the same as if he was to re-mortgage and had the F&F not taken place then i suspect creditors would of wanted some equity in the final year.

And yes i to would say that a 15% deposit may well be seen as windfall.

I often see Grant Thornton and KPMG putting foward modifications on how to deal with equity on rented cases as they are standard for every case so it may be that if the they voted on this particular case there may well be some modifications.

Lets assume the IP allows the purchase for the property and two years down the line interest rates increase and payments to the IVA become hard - i doubt creditors would agree to a variation at this point !

[J-DOUBLEYA]

I agree .

[Adam Davies]

Guys
We will have to disagree on this point.
I would not have purchased if the property was to form part of my IVA.
Here's Melanies reply to a similar question and as an IP with many years experience I think that we have to take it as difinitive

http://www.iva.co.uk/forum/topic.asp?TOPIC_ID=8826

[J-DOUBLEYA]

OK.. i submit - Thats what i like about this forum. lots of opinions and facts as well.

Thanks for the direction Andy, looks like the equity is not classed as a windfall as long as the property is not sold ! I am still suprised but strangely enough I can see the logic in this.

[Adam Davies]

So basically only if you sold the property during the IVA would it be classed as a windfall,an equity release to offer a full and final is voluntary act made by the debtor and it would not be made if the variation was not accepted.The IP/creditors have no power to make you release this equity unless it was written into the agreement at the time of the creditors meeting and i've not read of any such clauses.
If someone purchased post IVA and became bankrupt then,obviously,any equity would transfer to the OR,however the purchase of the property using third party funds should be drafted in a way to protect the initial deposit from the OR so that it reverts back to the third party.
Regards

[Adam Davies]

The funny thing is that this is the exact same question that I first posted way back in April 2006 as I had the same thoughts and concerns myself
Regards