I had the honour of being a speaker at a MABS seminar on the 21st of May, it was called ‘Keeping a roof over your head’ and it was focused on the issue of housing, and in particular that of the collections/repossession process of Irish Banks. One of the speakers was a solicitor named Colin Daly of the Northside Community Law Centre. He spoke about ‘Voluntary Possession’ which is the process of coming to an agreement with a lender whereby they take your house with your consent (you are not getting thrown out), it isn’t the legal terminology for ‘jingle mail’, ‘jangle mail’ or ‘sending the keys to the bank’ which is a totally different matter, it was a fascinating insight into the process and it is good to know that there are resources such as the NCLC out there for people in difficulty who need legal advice.
There was some information which was supplied by one mortgage lender regarding their process on ‘Voluntary Possession’ as well as extensive commentary by Colin on the topic. This blog will be a combination of the notes supplied as well as the commentary.
One of the most important messages from the talk was this ‘Surrender doesn’t save you, the property is almost secondary when it comes to mortgages, the mortgage/debt is tied specifically to you’ and that is really one of the primary issues with the likes of jingle mail, you might walk away, but there is no agreement in place , but it is a ‘head in the sand’ solution to dealing with the issue.
Voluntary Surrender is by definition a situation where the borrower gives possession of the property in satisfaction of the debt. The outline is as follows:
1. Lender consent is not mandatory, but it is preferable.
2. The borrower must submit a ‘deed of surrender’.
3. Family Home declaration issues must be satisfied.
4. BER cert may be required if the property doesn’t have one.
Again, it is vital to realise, that you can remain liable for the mortgage debt, it can follow you for many years after the event. Another issue when going down this route is that of the professional fees that are going to be liable to the debtor.
If the bank hire a solicitor to act on their behalf then that solicitor will charge the full rate on fees, for instance, if you wanted to use a solicitor you can usually strike a deal, a set fee etc. but if the bank hire them it is automatically the full rate as per the Law Society guidelines i.e.: a fee which is 1% of the valuation. The estate agents connected with selling the property will likely do the same.
All of these professional fees will be added to your final bill and because how they are incurred you in turn can expect maximum costs. A repossessed property also tends to sell for less, that often means that your debt is even bigger (in particular where the sale doesn’t clear the mortgage). Interest will continue to accrue on a mortgage while the house is up for sale so selling for less is often required in order to avoid that but at the same time it can lead to instant loss, leaving the borrower quite literally between a rock and a hard place.
Voluntary solution is perhaps, the worst solution available, in an extreme case it could even prevent the person from receiving other social services such as homelessness/housing services because the organisation in those areas may take a view that there was an element of ‘intentionality’ involved.
Indeed, in the UK abandonment of a property is actually an offence, it became on only after proper debt mediation laws came into being, in Ireland we lack that legislation and in effect you can be brought out to repay your debts a decade later and that is the kind of ongoing risk many people are not aware of.
So before you consider jingle mail remember, the residual debt remains with you if you walk away, and things tend to change a lot in the course of 10 years so don’t leave a trap set for yourself further down the line.
There has been a recent agreement between Mabs and the IBF in which mortgage lenders will agree to some form of mediation but the actual outcome of that remains to be seen, it is certainly true that private debt management firms are swooping in to take on clients that Mabs doesn’t have the capacity to meet, and it will be interesting to see if the IBF agreement becomes universal or if it remains tied to Mabs.
We published a repossession guide in the past for people in financial difficulty, it is free to download. We would also like to thank Mabs and Colin Delaney for the information provided by them which formed the basis of today’s article.