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Why am I having to pay an equity release loan for a year and then possible remortgage at the end of the 12 months? Why can't I go straight into a remortgage?

What do you mean Rose by having to pay an equity release loan as part of your IVA? Is this something that your IP has told you that you have to do - and if so how does it work?

Debt Free Direct have written to us to say that they have referred our case to a company called The Select Partnership who will help us to release equity from our property.

We are about to pay our 60th IVA payment at the beginning of November.

This company have since told us that they are going to make an offer to DFD and that it will be in the form of a loan from them until we can possibly remortgage in 12 months time. I don't understand why we can't go straight for the remortgage. Wasn't this supposed to happen after the fourth year?

I have a feeling that you might be being offered a secured loan on your property with the possibility of a remortgage at a later date. Most of us in
an IVA are not able to remortgage and therefore we
have to pay a sixth year of an IVA which is often preferable. I think you are being offered a secured loan but there is no guarantee that you will be able to remortgage in a years time . Watch the interest rates and the length of the loan .

How is you IVA worded with regards to the equity release, it should detail what happens in month 54 e.g. in month 54 you must get a valuation on the property and if there is more than £5k equity then you must get quotes for a re mortgage.

If you are not able to get a re mortgage (as most people find they cannot get) then the IVA continues for another 12 months.

If your IVA does not include a clause saying that if you cannot get a re mortgage then you must take out a secured loan then don't take out a secured loan just make another 12 months payments.

As said above if you take out a loan there is no guarantee that you will be able to re mortgage after the 12 months and if you can the interest rate may be very high, overall this may end up costing you more than just making a further 12 payments..

Also why are the loan company making the offer t0 DFD, surely the loan offer should be made to you as you are taking the loan out not DFD...

If DFD are talking direct with the Select Partnership and they in turn are discussing loan options on your behalf direct with DFD have you instructed DFD to act as your agent in negotiation of the loan??

Whilst the Select Partnership are a reputable company, I am not a fan of secured loans to substitute a person's ability to remortgage whilst in an IVA. In most instances I think that clients would prefer to extend the IVA by 12 months, and then not have to re-mortgage at the end, but as with all things the individual circumstances of the case will dictate if this is a sensible route.

Perhaps one of the DFD representatives who post on the forum could come on and explain the secured loan option from their own perspective, as I am sure it would help their clients who are forum members understand this view and to prepare a little better in their own cases.

"You might be required to re-mortgage your home towards the end of your plan if you have equity in your property"

The words of DFD on their website, no mention of secured loans. I would check your proposal and if it make reference to the term remortgage I would tell them to stuff it.

Rose,

Yet again, it is DFD implicated as the protagonists in this dodgy practice. In fact, they seem to be the ONLY IVA company doing this (I stand to be corrected of course).

I assume you have checked your IVA contract terms, if not well worth looking over: Does your equity release clause mention attempting a 'secured loan' and/or 're-mortgage'?

My contract specifically requires me to attempt a 'remortgage'. Importantly, IVA customers must realise that there is a difference between a 're-mortgage' and a 'secured loan', and that you cannot be compelled to take out the latter (assuming one has a protocol compliant IVA with standard terms). You can quite rightly opt for the 12-Month extension instead.

Protocol-compliant IVAs will probably contain the following wording:

'where the debtor is unable to obtain a remortgage, the supervisor will have the discretion to consider accepting one of the following alternative proposals:

• a third party sum equivalent to 85% of the value of the debtor’s
interest in the property; or

• 12 additional monthly contributions (with the aggregate sum paid to
the supervisor being limited to 85% of the value of the debtor’s interest
in the property).' (Quoted form the 2010 protocol, but I don't think this has changed in the 2013 version).

Therefore, if my IP tries the 'go for this secured loan' approach, I think I would have reasonable grounds to refuse, arguing that the request falls outside the terms of contract.

Furthermore, I understand DFD are owned by the Fairpoint Group PLC, who in turn also own a company called 'LoanExtra.com'. I wonder therefore if this is the sub-prime product is being offered to DFD customers by effectively their 'in-house' firm, or some other loan company owned by Fairpoint?

"'where the debtor is unable to obtain a remortgage, the supervisor will have the discretion to consider accepting one of the following alternative proposals"

I thought the IP was to put forward your proposals and it was up to the creditors to accept or reject them, didn't realise that the IP could decide whether to accept or reject on the behalf of the creditors....

The proposal gives the IP that discretion - therefore they are entitled to exercise same.

Hi

I think the problem here is a lack of communication and explanation to the "customer"

This has huge implications for the customer and should be clearly explained, including costs and timescales

Rose68 can you give further details about the amount and costings once you know them ?

Regards

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

The proposal gives the IP that discretion - therefore they are entitled to exercise same.

This seems like an area which could be open to manipulation by the IP, we have heard many times that revenue fees to IPs has dropped and that they are looking at other areas to improve income if it is at their discretion to accept or reject the further 12 months payments over a secured loan then what is there to stop them railroading all clients into secured loans for a higher value this in turn would give the IP a higher fee income as their fees are based on a percentage of monies received.. We have also heard comments that some IPs are using preferred partners to secure these loans so no doubt they make some form of income from this as well..

Nickjohn,

I think I would interpret the contract wording slightly differently. To me it suggests that the Supervisor (IP) ONLY has discretion to accept either a 12 month extension AND/OR a 3rd party sum, in the event of a remortgage attempt failing.

Surely then, the IP would have to seek creditor approval to accept a secured loan? (Although I am sure that would be a rubber-stamping exercise. As long as they get their money, I am sure the creditors are not too concerened about how it was obtained).

Hello Rose68,

Please find my email address in my profile. If you could drop me an email I will look into your case further, and get back to you with an update and to answer any questions.

Thanks,
Matt