(04 Mar 2009)
Due to the economic downturn, we are unfortunately going to see more repossessions, but new rules are being introduced to give some breathing space to hard-pressed borrowers.
It seems the news agencies are tripping over each other eager to publish the latest increase in orders for repossessions appearing before the High Court. Not surprisingly the reports are that it is the sub-prime lenders with the vast majority of applications. There is no doubt that there certainly has been a major upsurge in this type of application due to people’s failure to meet repayments and the inability to sell the property.
Little did people realise that when they were signing those mortgage documents that it would end up with a repossession. Sure people knew they were singing a mortgage and knew the effect of a mortgage but did they ever give it any real consideration. Here’s something that you might not have known. Nearly all mortgage products are given on an ‘all sums due’ basis. This means that if you default in your repayments on any loan facility with the bank, the bank can repossess your property even if you never missed a mortgage repayment. For example, if you have a credit card and mortgage with the same bank and you default on payments on your credit card, but make all repayments on your mortgage, the bank can still repossess your ‘mortgaged’ property to pay off your credit card debt. A new code was introduced on the 27th February 2009 which applied to mortgages over your principle private residence (your family home). It states that banks and financial institutions cannot take legal action until the mortgage repayments have fallen into six months arrears. The two recapitalised banks, Bank of Ireland and Allied Irish Bank have extended this time period to twelve months. However, this new rule does not affect any legal proceedings for repossession that have started before the 27th February 2009.
So what about the property that you have not mortgaged, can the banks and other creditors get their hands on those assets? The simple answer is yes. If it has been proven that you owe a person a debt, then that debt will be registered as a judgement against you. If you fail to discharge that deb one of the remedies open to the 'creditor' is to register the judgement as a mortgage against the property and also get what is called a 'well charged order' and an order for sale. The creditor can also ask the Shefiff to repossess your goods.
The important point to take out of this is that you do not ignore solicitors’ letters in the hope that the problem will go away. It won’t. You should always make a repayment to a creditor regardless how small that repayment is. This will stand to you in the long run. If you cannot afford to repay the full amount due, make repayments of an amount you can afford regardless of how small that amount is. Talk to your creditor early, before the problem gets worse.
For further information please contact Sean Cryan at scryan@johnasinnott.ie