Monday, Dec 22, 2008
Margin Call
This is Money: Repossession threat for couple who never missed a payment
A couple have been threatened with repossession even though they have never missed a payment on their mortgage. Peter and Marian Addyman say NatWest has given them a week to repay the £226,000 loan or face losing their home.
They bought their home for £250,000 in 2004. Two years ago they took out a second mortgage for another £100,000 to consolidate their debts. They insist they were entirely open with NatWest about this.
When their fixed rate deal with NatWest ran out at the beginning of this year, they took out an interest-only tracker at 0.04% above base rate.
NatWest has written to them stating after 'reviewing' their arrangement it was withdrawing the mortgage. They had 30 days in which to secure a new loan or it would begin recovery action and inform credit rating agencies.
27 Comments
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1. paul said...
I wonder if this crunch will redress the inequity of the credit rating system.
If a bank fails to pay a debt owed to you, you can send the bailiffs round to the branch (as has been done a number of times recently), but the credit reference agencies such as Equifax and Experian will not be interested mostly because the banks are their biggest customers. If you have ever tried to get your credit records amended, you will know how much contempt the agencies hold their data subjects in.
In addition, none of the banks keep "white data" or evidence of a good payment record. Why? Because that would empower you to take your shiny credit record to another bank.
The current arrangement is therefore less about whether an individual, an institution or the management of an institution are creditworthy and more about how the cabal of interests can best be serviced to keep the whiphand over the populace.
2. Landedgentry said...
http://www.debt-glossary.co.uk/loans-advice/a/acceleration-clause.html
3. mark wadsworth said...
Like all cartels, banks face a sort of Prisoners' Dilemma.
For an individual bank, there is a big advantage to being the first to call in all loans that are in the slightest bit risky.
For the cartel, there is an overall disadvantage, as this just speeds up the HPC, which, it appears, they think can be magically staved off.
4. pelethar said...
I'm sure they will backtrack from this under pressure. What's their motivation for the reposession anyway?
5. little professor said...
This couple have £326k of mortgage debt secured on a £250k house. Plus the fact that they managed to build up £100,000 of unsecured debt in just two years tells you all you need to know about their financial skillz. Natwest just want to get to the front of the queue to get their money back, this couple are clearly going bankrupt.
6. Landedgentry said...
The second mortgage now increases the risk of default on the first mortgage now that prices are falling therefore the bank can invoke the acceleration clause as I understand it.
7. plato said...
Had to read this a couple of times. £226k mortgage?
Was the interest only arrangement actually signed?
Is Natwest withdrawing this kind of mortgage or is it specifically this one, due to the case circumstances?
In any case a £1k second mortgage with a finance co! Must be costing a fortune altogether ! I would say their finances look a little fragile to say the least,but need more precise facts.(such as income)
The Risk seems mighty high on the evidence so far.
8. andrew said...
Not good behaviour by a bank at all, but this is the sign of things to come, I don't think Natwest will reverse their decision, expect reposessions to go ahead next year regardless.
The government only has to be seen to be doing something, remember, they can't comment on "individual cases".
I had a simillar experience a few years back when trying to re-mortgage, the fixed rate went down to 5% for a 5 year fixed deal, the bank kept asking for more documents as proof of x, y and z even after all documents had been supplied they dragged the whole application on for longer than 6 months until the original offer had expired, then eventually agreed a deal of 6.5% when the rates went up for a short while.
The reason given for not providing the loan at 5%, was simply the underwriting company could not authorise the loan, this was a big bank, the real reason is that they knew they were not making enough money on the loan.
9. little professor said...
Plato - Natwest has said this mortgage is an 'exceptional case' due to the couples' individual circumstances. As stated, they have a £100k mortgage with a finance company, which they may have fallen behind on. And they've had credit card defaults in the past.
Credit card debt could cost you your home
10. mrmickey said...
I can see this going round and round in the coming years. As more people default on their mortgages the banks will attempt repossession, this will be polically unpleasent so the government will stop the banks from proceeding. This will put the banks under more pressure turning up cap in hand to the government for more bail outs.
11. theboltonfury said...
what's the problem?
The bank own the house anyway, plus another 100k or so. Why did the couple expect them to keep tolerating their credit gorging?
These are the times we live in created by us all. Banks and borrowers alike
12. will said...
Although it appears that this couple were reckless in their borrowing - It just shows the power the Banks have over anyone who has any type of mortgaged borrowing.
13. a saver said...
As LP says "this couple have £326k of mortgage debt secured on a £250k house. Plus the fact that they managed to build up £100,000 of unsecured debt in just two years tells you all you need to know about their financial skillz."
It would be bad business for a bank to allow this situation to continue. People don't seem to realise that lenders allowed people to do this when house prices were inflating rapidly but they've had a wake-up call and things are different now.
14. plato said...
thanks lp....... Repo in the making then!
15. night said...
Mark @ 2
Prisoner's dilemma is based on the assumption that everyone is selfish and is acting in their own interests rather than the interests of the group. Solution? Everyone has to stop being selfish.
Perhaps the UK needs to go back to Sunday School...
16. mrr19121970 said...
I heard a similar story from a friend who works for bank-X in Germany.
The client had his mortgage with bank-X, who also provided the financing for the company he worked for (just a regular guy, not the owner). They decided to call the loan to his employer, and him at the same time. They knew by pulling the loan on his employer, that he'd probably loose his job, and then not be able to keep up his repayments and would loose his home too.
It was just business.
17. rm96696 said...
Why did this couple borrow 326000 pounds against a house thay may (though probably with a good dose of optimism) be worth 250000? Why were they lent the money? Did all these people think that this house was a magical money box that could cover whatever debts the owner wanted to run up?
18. mountain goat said...
rm96696 - I bet the was an Estate Agent ready to price it at that 18 months ago.
19. growler said...
sadly, they'll get repossed and then the bank will get support from the legal system to get a CCJ against them for any monies outstanding. OK - they were at fault in getting into deep debt, but the bank leant the money. In my view, any money secured against a house means that. When the house is gone, that's the end of it. Maybe this way banks will be more cautious - and the borrowers less the victims of financial agent provocateur.
20. theboltonfury said...
I do actually feel sorry for this couple but it's precedents like this that can be the only the way to prevent this huge mess happening again
People need to see carnage
21. greytornado said...
Not sure we have been told the entire story by the press in this case. I suspect that there could possibly be another reason that may be less than obvious. Read the full story in the press & think laterally.
22. Landedgentry said...
Not sure if my last post got through, but in this case the mortgage probably has an "acceleration clause".
The definition for Acceleration Clause:
Clause used in an installment note and mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain event, such as failure to pay an installment by a certain date, change of ownership without the lender's consent, destruction of the property, or other event which endangers the security of the loan.
Notice the last bit "or other event which endangers the security of the loan." The second mortgage, although permitted by the first lender when prices were rising now probably increases the risk of default, and the value of the collateral is diminishing, the first lender wants their cash back quick.
23. pelethar said...
Exactly, greytornado. It doesn't add up in the current climate. Bank chiefs are falling over themselves to make promises about minimising the number of reposessions - why would they suddenly decide to be so aggressive to this couple? There must be thousands out there in a similar situation. I think there is something crucial we don't know.
24. crunchy said...
23. pelethar said...Exactly, greytornado. It doesn't add up in the current climate. Bank chiefs are falling over themselves to make promises about minimising the number of reposessions - why would they suddenly decide to be so aggressive to this couple? There must be thousands out there in a similar situation. I think there is something crucial we don't know.
crunchy- :) Just keep rationalising.
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