We want to offer an extension of 12 months instead of a secured loan as requested by IP

[MelanieGiles]

IPs are not allowed to earn commissions for referrals of cases to third parties from IVAs under their control, for direct personal gain. If a commission agreement exists, then the commission earned is an asset of the estate, and must be introduced into the estate for the benefit of creditors, with the IP taking a realisation fee only.

Michael is right to highlight the effects the ability to remortgage may bring in the future, but protocol based IVAs already cover this within the body of the proposal, and all clients are clearly advised of this requirement from the outset. With the repayments not to cost more than 50% of the then disposable income, there are built in controls in place to ensure that any further borrowings are kept to an affordable level.

[UpToMyNeckInIt]

The IVA protocol/affordability clause is a fair point - standard stuff for most IVAs where the customer owns property.

...still precious little comfort for this customer, who has been paying nearly £700 a Month in IVA payments. The secured loan repayment may well be deemed 'affordable' in this example. Even so, (at the extreme), the thought of taking out a £14,500 loan over 15 years at £230-£240/month (18.4% APR), means a total paid back of around £28,000. That's a £13,500 OUCH!!! (+ the £3,300 arrangement fee naturally).

At what point is the customer allowed to start repaying the principal capital on the mortgage?

Customer's IVA contract apparently requires 'remortgage' not 'secured loan'. On that basis for starters, in my opinion, they should tell their IP where to file that loan offer!!!

[Adam Davies]

Hi

The fact that the secured loan can't cost more than 50% of the current IVA payment is a fair safeguard, however it doesn't stop interest rates rising and the cost of the loan rising.
It would be better if any secured loan had a fixed rate for the term

Regards

[Michael Peoples]

I agree Andy and the loan may well be fixed but the same argument applies to a remortgage. Interest rates will increase in the future and any percentage increase will have a greater affect on a £200k mortgage than a £15k loan.
Once remortgage products become available again people could be forced to switch mortgages under Protocol and raise funds. They could lose their lifetime tracker deals and be exposed to greater swings in interest rates for their entire mortgage. Their payments may initially be 50% of the IVA payments but a 1% in rates increase would add £167 per month to a £200k mortgage and the clients would probably wish they had taken a secured loan for £15k fixed for the duration of the term.

[UpToMyNeckInIt]

Hi Michael & Andy. Good advise there as always.

Notice that you have avoided the issue of the apparent contract wording in this instance though.

Would be great to have your views on the IVA customer being compelled to take out a 'secured loan', rather than letting the IVA conclude. (Based on the IVA Ts & Cs requiring to raise funds specifically by way of 'remortgage'(an approach which I assume will, in the current climate, fail)).

Thanks.

[Michael Peoples]

If the IVA says remortgage and there is no minimum dividend requirement the IVA can just be extended. However, any deviation means creditor consent is required and it may be in the IVA proposal [or modified by creditors] that equity must be raised. Creditors used to request a sale if that was the only way to release the equity and few would accept a twelve month extension when there was the equity available and the means to repay it.

There is also the question of commission which has been raised. While IP firms probably do not receive commission it is in their interest for IVAs to close down after 5 years with equity release rather than 6 years without. The IP gets 15% of the lump sum which would be more than the twelve monthly payments and there is also one year less work to do. When the market does change there will be a lot of remortgages forced on people and assuming a sixth year extension is a very dangerous thing to do.

[UpToMyNeckInIt]

Cheers Michael.

15% of released equity goes to the IP - didn't have a clue on that one!

Don't think many of us IVA-ers assume we will get a 12-Month extension as a matter of course in lieu of being unable to release equity - as you say a lot can happen in 3-4 Years. In my case I agreed to an IVA as it was my only real option.

Oh well, just got to see what the deal is when my turn comes.

[Lucyl]

Docs state min dividend of 68% inc full realisation of equity via remortgage or 40% without any equity should remortgage not be possible. We will actually have paid back approx 50% after 60 payments taking in to account increases over the term that we have made.
Docs state failure to remortgage will not be deemed as failure of IVA and there is no extension clause included. Surely creditors initially also signed to accept closure after 60 months if remortgage unsuccesful?

[UpToMyNeckInIt]

...seems entirely reasonable to me. Great that your iva does not allow for a 12-Month extension in the event of failure to remortgage (which seems to be the norm in 'new' IVAs).

The wording of your contract seems straightforward enough to me.

Not that you need to by the sounds of it, but going back to your earlier post, your offer to extend the IVA by 12 Months is more than generous.

[UpToMyNeckInIt]

.

[UpToMyNeckInIt]

bump.

[gamemaker]

Just maximize the debt repayment as penury and honor the age old adage - 'my word is my bond'. In an iva we undertake to repay as much debt as possible.

As Michael have said, a loan could be cheaper than a 4th year remortgage.

Creditors are getting smart and unfortunately there is little to do to wriggle out of the loan initiative if asked to persude it.All the talk of 'protocols',it lacks teeth and it aren't a 'bullet proof vest' against creditors

[UpToMyNeckInIt]

My word is my bond as well - especially when it is documented in a formal, concise IVA contract.

Forcing an IVA customer to take a secured loan (when no such provision has been written into the documentation) is a breach of that contract on the IP's side.

Granted, if the customer had been offered a sub-prime remortgage, and the IP suggests a loan that works out cheaper, all fine and dandy.

However, I understand that in accordance with the IVA contract, this customer attempted remortgage, and was refused (no surprises there). The wording of their contract does not even provide for an extra year payments, so the IVA should be concluded.

If I wanted to enter an agreement with my creditors where the goalposts can be shifted, I'd have gone for a DMP!!!

Breach of Contract is a well-established legal principle. Therefore I don't agree that 'there is little to do to wriggle out of the loan initiative'. The terms and conditions of ones IVA are clearly defined in black & white.

On that basis, if you take the customer perspective verbatim, I believe their IP is acting unprofessionally in this matter. If it were me, I would be well on the way to making a formal complaint, to the IP's accrediting body, the FSA, DEMSA and the OFT. (Also possibly seeking out legal advice with a view to pursuing a legal action against the IP).

For the price of a few stamps, and a little time, I reckon a few well-constructed letters are all it would take to get the IP to drop it.

Just my opinion though.

[Lucyl]

Not trying to wriggle out of anything here gamemaker.

Look at it from this perspective then, we cannot remortgage but loan sharks or pay day lenders will happily lend us some or all of the money required to fulfil our side of the agreement. Not such an attractive prospect now is it??

I understand that there is still money to pay and will happily extend the term until the debt is cleared. What I don't want to do is be tied to a secured debt at a grossly inflated rate and disproportionate fee because I cannot remortgage. If this is to be the case, the original term should have said that at the end of 60months, a defined amount needs to be paid by any means, we don't care how, and we don't care what financial problems it causes you either.

[MelanieGiles]

My own view is that IPs should steer well clear of giving clients any advice as to the choice of borrowing if equity is required to be raised. We are not qualifed to do this, and an independent financial advisor will have far more knowledge and experience to offer to their clients in this regard.