Advice needed on full and final offer

[Bourdieu]

Hello all,

Before I contact my IVA Supervisor for advice I thought I would seek advice on this forum.

My situation is as follows:

I am approaching the end of my first year of a 5 year IVA on original debts of £47,000. My agreement requires a minimum dividend of 45p in the pound to creditors with an estimated dividend of 53p in the pound which includes a lump sum payment in year 4 of minimum £8000 on equity release from my shared ownership flat. The Nominees and Supervisor fees on top of this are approx £8000 including petitioning creditors costs, restriction on property costs etc. My estimated total contributions over the 60 months is £33,800. My current monthly contributions are £430. I have paid approx £4600 thus far into my IVA.

My Abbey mortgage on my shared ownership flat (I own 75%) is interest-only and I currently pay £410 per month. The fixed rate I originally received is due to end in a month's time and I have renegotiated my mortgage at a significantly higher interest rate fixed for 3 years (because I am in an IVA and because of recent increases in interest rates they wouldn't give me a better rate). My monthly payments on my mortgage will rise to £570 in November, an increase of £160 per month.

Obviously I cannot afford this increase so I will need to inform my Supervisor of this fact and I presume they will need to re-assess my monthly contributions. However, a close friend who I have confided in has offered to lend me a lump sum as a full and final settlement, although I am not sure the amount they have offered is sufficient. My question is, what do you think would be a fair and acceptable amount to offer as a full and final settlement?

Any help would be much appreciated,

cheers

M

[Adam Davies]

Hi
The first question is are you sure that you are able to release equity in the fourth year ? Other members have found it impossible to remortgage and release equity as it is a shared equity property.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[aguise]

Hi there
I think the usual accepted figure is arounds the same as they would have got in the iva.
Wait for other answers though.

Ang


Please visit my blog at http://aguise.blogs.iva.co.uk/

[Bourdieu]

Hi Andy,

I purchased the flat as part of the 'Dream Start Scheme' from Barratts for key workers (I am a teacher). As part of the scheme Barratts lent me 25% of the purchase price of the property and they are entitled to receive 25% of the market value on sale of the property. I have looked at the Draft Legal Charge for this scheme and my Abbey Mortgage terms and conditions and nowhere can I see reference to not being able to release equity from remortgaging. I have only skim-read it however.

kind regards

M

Hi
The first question is are you sure that you are able to release equity in the fourth year ? Other members have found it impossible to remortgage and release equity as it is a shared equity property.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[Bourdieu]

Thanks Ang,

Would this be the original amount they would have got in the IVA or the new amount assuming my contributions for the next 3 years will be reduced as the result in the increase in my monthly mortgage payment?

kind regards

M

Hi there
I think the usual accepted figure is arounds the same as they would have got in the iva.
Wait for other answers though.

Ang


Please visit my blog at http://aguise.blogs.iva.co.uk/

[mikebdomain]

Hi Bourdieu, I believe Andy is referring to the current credit crunch (new keyword of the week) and the way it is affecting sub prime mortgages.

A lot of new sub prime lenders have recently pulled all their products or reduced their loan to value (LTV) allowance especially where adverse credit (IVA, CCJs, ex BKO etc.) is concerned.

That said, new products are now starting to enter the market and in a few months things should start getting back to normal, albeit with slightly increased rates.

A share ownership where you are not buying the remaining share is difficult to remortgage and raise equity whilst in an IVA except where a low LTV is required e.g. max 75%. That said, everyones situation is different and there are a lot of brokers out there with thousands of products, it might be worth having a ring round mortgage brokers to see what is available. Don't forget you will need the permission of your IP / Creditos before you can remortgage.


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[Bourdieu]

Hello all, an update to my situation and a request for further advice.

I have been in touch with my IP and he was rather vague on a settlement figure. He also notified me that I have 2 creditors that have not yet claimed (total of £3k owed) which is a bit worrying given my IVA was agreed in Feb 2007.

Anyhow, a recap of my situation. My IVA was agreed with a minimum dividend of 45p in the £ on debts of £48,000. There is also a clause requiring me to re-mortgage my shared ownership flat in year 4 for no less than 85% of the open market value and the equity paid to my creditors before the conclusion of the IVA. This was estimated in my statement of affairs to be a minimum of £8000. I am required to pay £430 per month into my IVA and have thus far paid £5100.

The costs (nominee's fees and disbursements, supervisor's fees and disbursements & 'irrecoverable Input VAT) of my IVA were originally put at £12,000 but a modification to my proposal capped the Nominee's fee at £2,500 and the Supervisor's total remuneration was capped at £4,000 over the lifetime of the IVA.

So my estimated orginal input into my IVA is £33,800 (£430x60 + £8000).

I have now reached a point where I will soon (within 2 months) be unable to meet my monthly contributions of £430 due to 2 changes in financial circumstances: (a) my mortgage payments are to increase by £160 per month and my fuel costs are due to increase by nearly £100 per month.

A third party (close friend) has offered to lend me a sum of money to reach an early settlement of my IVA on condition that it is accepted as a full and final offer.

My question (which my IP seemed reluctant to answer) is, what is a fair offer, even a ballpark figure, that is likely to be accepted given (a) the amount they would have originally got and (b) the imminent change to my financial circumstances?

Many thanks in advance for any advice you can give me.

[catullus]

I would seriously first look at your housing association agreement because I have never seen one that allows a remortgage for any other purpose than buying a greater share of the property.

If you have this restriction, you can't release equity and so the original proposal was flawed.

It would be a good opportunity, if this is the case, to propose a variation and F and F settlement on the grounds that the original objectives cannot be acheived (your IP should have checked this) and that your circumstances have materially changed.

If you cannot remortgage you can knock £8k off the settlement figure straight away and some of the Supervisors fees in years that he won't earn it.

Of course, it's always possible that the creditors will play hard ball and make you stick to the minimum dividend with a small discount for early settlement but, at present, creditors appear very prepared to accept commercial offers and I would have thought that 35p-40p would do it, depending on how lucky you feel, if the issues relating to remortgaging prove to be a red herring or you don't feel like running this argument with creditors

[Bourdieu]

Hi catullus, many thanks for your reply.

I don't have a housing association shared ownership flat but a 'Dream Start' scheme run by Barratts for key workers (in my case I am a teacher). I wasn't aware of any restrictions regarding remortgaging in this scheme but will take a good look at the conditions in the morning and let you know.

[Andrew Graveson]

Hi Bourdieu,
Sounds like this is a type of "shared ownership" scheme. I don't think Barrat's lent you the money; I think they have a legal charge on the property and that you will need to pay them 25% of the sale price on sale or 25% of the market price within 10 years. Please note this is based on a previous case I dealt with and you should take no action based on that comment without reviewing (with expert help if necessary) the exact arrangement you entered into.
If that's the case I think that most lenders would consider the case. What would be required would be a 'deed of postponement' from Barrat's to allow the mortgage to take place. They will possibly charge for this; as will the solicitor handling the remortgage. In essence that would be no different to remortgaging if you have a secured loan on a property.
These cases can be tricky and the exact nature of your current arrangement probably should be reviewed by a professional before planning with confidence or taking action.

Andrew Graveson
Independent Mortgage Broker & MD Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

[mikebdomain]

The 'Dream Start' scheme enabled first time buyers to purchase a selected property at a percentage of the usual cost and to move in immediately. No interest is payable on the remaining amount which the owners simply repay at market value within ten years or when the property is sold.

Andrew is quite correct; this is highlighted at land registry as a restrictive charge on the property, but, you are under no obligation to repay the amount before the end of ten years or unless you sell. So therefore you would not require a deed of postponement.

Do you have a copy of your title deeds? The charge or restriction would show quite clearly what is required.

For mortgage purposes this is not considered a shared ownership scheme. And I believe you will be able to remortgage the original mortgage amount, with a view to lower your rate, but doubt VERY MUCH whether you could equity raise. Primarily due to IVA loan to value criteria.

Always worth giving a mortgage broker a ring and going through a full fact find, most brokers will carry out a land registry search and download your title deeds (cost about £4) to get a clearer picture of what is required.. Before giving full advice.


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Specialising in adverse credit.

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Please read our Initial Disclosure Document(IDD):
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[Adam Davies]

Hi
25K is a ball park figure for you and will return the 45p dividend and an 8k lump sum for the equity clause.As a friend will loan this to you the remortgage part is not critical at this point.
You need to write to your IP and state that a third party is willing to offer a loan but only if it is used to conclude your IVA and that all your disposible income will be used to repay them.They also need to point out that your circumstances are changing and that you will struggle to meet the current IVA payments due to the increased mortgage and heating costs.
Good Luck
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[Bourdieu]

Many thanks to everyone for their advice.

Andrew & Mike: Having read my documents you are right, Barratts have a second legal charge placed on my flat (25%) which must be repaid as 25% of its disposal value within 10 years. However there is a clause which states "You must not create any other mortgages or charges on the property or take up any further advances that may be allowed under your mortgage." I take this to mean that I would not be able to remortgage with a view to releasing equity in year 4. Is this correct?

I also had a clause added in my IVA which called for the registration of a restriction against the Charges Register of my property such that my interest in the property be assigned to my IVA Supervisor. Does this make a difference or is this standard practice?

Andy: thanks for the ballpark figure. 45p on £48,000 is £21,600. My Supervisor & Nominee fees were capped at around £6,500 for the duration of the IVA. I have already (or will by the time of any variation meeting) paid £5500 into the IVA - I think it is common practice for Supervisors to take this initial year's dividends as fees? My third party is prepared to lend me £22,000 so this is the offer I will make unless you think this is flawed logic?

kind regards

[mikebdomain]

Hi Bourdieu

Andrew & Mike: Having read my documents you are right, Barratts have a second legal charge placed on my flat (25%) which must be repaid as 25% of its disposal value within 10 years. However there is a clause which states "You must not create any other mortgages or charges on the property or take up any further advances that may be allowed under your mortgage." I take this to mean that I would not be able to remortgage with a view to releasing equity in year 4. Is this correct?

According to this existing restrictive charge you will not be able to equity raise in your fourth year without first clearing the Barrats charge. If you will not be able to arrange enough to clear the Barrats charge then you will not be able to remortgage.

I also had a clause added in my IVA which called for the registration of a restriction against the Charges Register of my property such that my interest in the property be assigned to my IVA Supervisor. Does this make a difference or is this standard practice?

According to information gleaned from the IP experts on this forum, it is apparently standard practice to put a ‘none disposal restriction without notification’ restriction against your property, but I am surprised your IP has been able to put this sort of charge on your property – there is a distinct difference between a charge and a restriction… This sort of charge is usual in a bankruptcy where your interest is assigned and transferred to the OR. I would spend some time with your IP and explain the current Barrats restriction you have in place that will probably stop you from releasing equity for the four-year clause in your IVA.


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Mortgage Broker
Specialising in adverse credit.

see feedback and testimonials at:
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Check out my blog at:
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Please read our Initial Disclosure Document(IDD):
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[bagpuss]

mike could you email me please..? have a quick question.. thanks
Angie xx


My IVA Story......http://bagpuss.blogs.iva.co.uk/2007/09/ ... iva-story/