We often find ourselves (usually to our detriment) involved with meetings where a person brings us along to meet with the bank. Something about it always reminds me of that line from Slaughterhouse 5 ‘so it goes’, because there is always a sense of inevitability around them.
Yesterday I had one such displeasure with a subsidiary of one of our pillar banks.
They brought our mutual client in to discuss ‘options’, which is bank-speak for ‘take it or leave it choices’, they made their determination based on the clients most recent behaviour where they had met interest only payments for several months.
When asked if they had considered any other options (the usual host of alternative solutions) we were told ‘they were refused already’, but that decision it turns out was based on information provided eight months ago when the person was unable to make payments.
The ‘new deal’ is not nearly as good as what the old deal could have been, but there is a logical disconnect where you refuse long term solutions based on old information but allow a lesser one based on more favourable current information.
Oddly the suggestion was that there would be c. 3yrs interest only on the investment properties but only 12 months on the main home – upside down and back to front from an advice perspective (for me on the client side).
Part of the reason for the better current situation is cross-subsidisation which is a common occurrence, a person takes some rent and makes a payment on their main home.
The client in this case is insolvent, the lender kindly reminded them that they could appoint rent receivers on the investment properties (there is a PDH and two RIPs), but that on a positive note they could service the interest.
We challenged that servicing interest meant that the whole solution is predicated on a property market boom which doesn’t factor in the ongoing costs of property tax, maintenance, PRTB, insurance and income tax where applicable.
Why let factual details get in the way?
The collector had decided that it was now better for the client to hold the properties and pay interest rather than do a voluntary sale which they had pretty much forced upon the client prior to our involvement.
This is a move to keep the person on the hook while blatantly insolvent and lower their potential exposure at default on the loans when they do take them back in the future.
I was told ‘the properties will likely perform well’ to which I responded ‘if they are such a good proposition then why don’t you take them and do that’.
Again, ‘we can appoint receivers and if that happens…’ to which you have to respond with the standard reply ‘send in receivers and you’ve determined how this ends in advance, not us, you have made a decision on the outcome’.
All veiled threats and nonsense, while the person stuck with this debt is wondering where this all might end.
Frankly I don’t see how there won’t be a lot of bankruptcies, while they are far from easy it’s perhaps better to face the official assignee than a lender who will push to the bitter end. That’s fine, that’s their commercial decision, and to deny that is naivety of the extreme, but it doesn’t mean you have to play into it.
The nice thing about bankruptcy? Nothing, but it does have an end date.
Anyway, meeting ends, the person has ‘options’ which are more like binary decisions and off we go to fight another day and in the mean time we’ll put as many arrows back into the bank as humanly possible to disrupt their process, it’s an awful lot of attrition for what could be so much simpler.
Today being the first protective cert after about 6 weeks of the ISI being in operation is a big day, a lot of people have been waiting on this, I’m hopeful it works, nothing is ‘perfect’ and it naturally has some flaws which are either minor or massive depending on your ideological slant.
If a person can’t offer anything into a resolution then it corals them into bankruptcy, it’s the natural secondary choice (the same as some companies will get go into liquidation rather than obtain examinership), so perhaps what we should be watching isn’t insolvency progress, it’s bankruptcy progress.