Equity release. Getting nowhere so advice would be welcome to make sense of this.

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by pepe » Thu Jun 15, 2017 8:47 pm
Hi. First time poster having read the forum over the last few years. Always found the advice to be helpful so what better place to ask now that I'm looking for some myself.

Bit of background. Been in an IVA since 2011. Proposal is exactly in line (word for word) with 2010 protocol and only modification regarding equity release in chairmans statement is that it happens in month 66 as opposed to month 54. (I'm the sole owner of my property)

So, the time came and I sent off my redemption statement and valuation.

Valuation £105,000
Mortgage £90,495.40

Got an email the day after saying "Thank you for providing your,documents etc etc"..........based on the information provided we can confirm that your arrangement is to be extended by 12 monthly payments to compensate your creditors for you retaining your share of any equity in your property rather than paying a proportion of this to them by way of sale or re-mortgage.

This surprised me as it was saying neither the IVA would end at 72 months nor was it asking me to seek to remortgage. Having read many examples of the calculations on here and using the examples in annex 7 of the 2010 protocol I got it that there would be no need to extend for 12 months. (105,000 x 85% = 89,250. Minus mortgage of 90,495.40. Equals (1245.40)

I therefore queried this and asked for their calculations and got the following reply:

Dear..... Thank you for your email. Your calculations were done as follows;
House valuation. 105,000
Number of owners. 1
Mortgage. 90,495.40
1st owner equity at 100%. 14,504.60
1st owner equity at 85%. 12,328.91

Total 85% LTV. -1245.40
Clients 85% LTV -1245.40
Current LTV borrowings. 86.2%

This showed that your current loan to value was over 85% so as per 1.7 of your equity clause as this was over 85% we would not ask you to look to remortgage to bring your current loan to value up to 85%. However as your interest in the property was 12,328.91 (over 5000) then 12 additional payments would be added to the in lieu of the equity.

There have been emails with various explanations going back and forth until Saturday when I said we were getting nowhere and would have to escalate matters. They acknowledged this and said a senior member of staff would be in touch. Tonight the team leader called and to be honest it got us nowhere, we are both still adamant that the other is wrong.

Edit. So I seem to be left with two choices. Carry on escalating or pay the additional 12 months. Prior to doing either any advice would be welcome.

PS. Sorry about the long post.
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by Foggy » Fri Jun 16, 2017 8:30 am
Hi -- this interpretation of what is a badly written and conflicting clause is becoming more common. It has been challenged in the past and, in some cases, the IP has backed down ,,,, but not all. I would insist they use the annexe 7 calculation only, as per your agreement.
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Lisa Thomas
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by Lisa Thomas » Fri Jun 16, 2017 11:05 am
If they are not prepared to back down then you may need a specialist solicitor to help argue your side. It will of course cost (and I doubt you have funds due to the IVA) but if you can find some funds may save you having the extra year to repay.

I can recommend someone if needed.
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Michael Peoples
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by Michael Peoples » Fri Jun 16, 2017 12:20 pm
The protocol wording is quite poor and subject to interpretation but you are correct in objecting to this. Ask for copies/recordings of the original discussion notes to see what was explained to you at the time as it is the IPs responsibility to explain the proposal and ensure that you understand it. If you feel mislead then seriously consider making a complaint and see what happens then.
Posts: 3
by pepe » Fri Jun 16, 2017 6:29 pm
Thanks for the replies everyone.

The crux of the dispute is the meaning of "85% my interest in the property"

I am adamant that it is the property value, they insist it is equity.

In one of the emails to them I quoted an exact example from annex 7 using my mortgage and valuation figures and asked them to do the same to show me how they got to their decision. This is the reply I got;

Property valuation 105,000
Outstanding mortgage. 90,000
85% of property value. 12,328.91
Less outstanding mortgage 90,000

In answer to your post Foggy I have quoted the exact examples in annex 7 both in emails and during the phone call. On all occasions I have been told that interest in my property means the equity which it clearly isn't.

Surely if there are examples to use in annex 7 of the protocol then how can it be misinterpreted?

I agree with you all that I should take it further (and I will) but I've now had communications with 2 levels of the company (Equity case officer & team manager) who are both adamant that I'm wrong. Do I go another 2 levels? 3? 4?

It just seems a totally unnecessary situation.
Posts: 3
by pepe » Sat Oct 14, 2017 12:16 pm
Hi All,
It's been a while since I posted the above so just wanted to provide an update and ask for a bit more advice.

I ended up exchanging correspondence with the complaints department in which I stated my case complete with my calculations. I got a long email back which went through their interpretation and ultimately they stand by their decision to extend me by 12 months.

In simple terms they said that I have £14,504 of equity of which 85% is £12,328 therefore I have more than 5k of equity but based on the 85% LTV rule on how much I can be asked to remortgage then I go straight to the extra 12 months.

They also stated that there is a difference between "85% of my interest in the property" and "85% of your LTV" and that the 85% figure only kicks in when deciding whether a remortgage is applicable or not.

Now for the advice. At the beginning of the email they stated that they had been in correspondence with the supervisors of my IVA to seek their opinions and at the end of the email they state that they have previously sort the opinion of the Insolvency Practitioners Association in respect of their adherence to the equity clause and they have been in agreement with the position taken.

After reading the email with the above comments I was of the opinion that I didn't really have anywhere else left to go and therefore replied that despite totally disagreeing with their view I felt I had no alternative but to reluctantly agree to the extra 12 months.

At the time all the above was going off a family member offered to put the money up to make a full and final offer which i politely declined as whether I was paying them back or the IP I would still be paying someone back. Anyway it's now (final) review time and once again they are offering to put up the money (whatever the payment is after review x 12 to cover the remaining years payments). However, as they know how angry I feel about all this they have also said that they will pay for legal advice if I want to go that route.

Thoughts would be welcome.
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by Foggy » Sat Oct 14, 2017 1:18 pm
Whether the IPA takes their side or not, I feel they are still wrong. The clauses they are referring to are badly written and their interpretation could, by the letter of the wording, be taken as correct. However, I do not believe this was the intention when written, as evidenced by Protocol illustrations and common practice over the years. Indeed, until a couple of firms discovered this loophole, they themselves used the usually accepted method.

As things stand we IVA users don't have a leg to stand on ... we have no pet "regulatory" body to stand in our corner. We are at the mercy of morally bereft leeches, as some firms are turning out to be, as they struggle to maximise their income streams.
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