2nd Charge Mortgage, Sale of House & Repossession Proceedings.

Sorry please note my email address is snipped-for-privacy@blueyonder.co.uk

It is not appropriate to charge an early settlement penalty unless early settlement is instigated by you the borrower. In this case, however, early settlement is being instigated by the lenders.

Good grief! It's like a landlord trying to force a tenant to pay extra rent in lieu of notice period, when the fact that the tenant hasn't given notice is due to the landlord evicting the tenant! There was a case like that on Judge Judy the other week and she almost killed herself laughing.

Hmmm very interesting. So if I say to GE now that I am having to sell the house in order to prevent possession, then I can tell them where to shove 6 grand of it ?

Thanks Ronald - food for thought !!

I don't think so! In that case you would be terminating things early rather than them. You need to read exactly what the agreement says regarding early repayment. Furthermore it is unlikely that the holder of the second charge is going to give up their interest because they would be left with no security.

Peter Crosland

It is not an early settlement penalty, it is a redemption penalty, therefore if the mortgage is redeemed within the period then the penalty stands.

In this instance early settlement is not instigated by the mortgagee, it has been brought about by the lack of mortgage payments to sustain the loan by the mortgagor.

In my mortgage offer it states "early settlement penalty, payable if I choose to settle the loan early during the life of the loan."

So ?

Not from what he said.

He is selling the property, not them.

and you are choosing to settle, or are you being repossessed?

The £6k would not represent the "early settlement penalty" you are referring to for the life time of the loan

Settlement and redemption are effectively the same thing here. The penalty is for ending the mortgage agreement ahead of schedule.

That's a wrong analysis. The mortgagor may have payment difficulties, and this situation *entitles* but does not *force* the mortgagee to commence repossession proceedings. The mortgagee is exercising a choice here, just like a landlord isn't forced to but chooses to evict a tenant who is in unacceptable arrears with rent.

The only way I can see that an early exit penalty might apply after all is if the mortgagor tries to forestall repossession by achieving a quick sale ahead of enforcement of the judgement. This is a good move because after a repossession the mortgagee in possession would auction off the property, likely achieving a far lower price that the mortgagor probably could.

I believe an early exit penalty could be applied if the sale were achieved prior to repossession proceedings having been actually brought, because then (and only then) can it be argued that the mortgagor bears the sole responsibility for shortening the term.

But where a repossession order has been granted, the shortening of the term is clearly entirely at the behest of the mortagee (irrespective of whether the mortgagor manages to find a buyer in time). So the penalty is out.

It doesn't matter who's selling the property. What matters is who is responsible for the settlement/redemption being early. Where repo has been sought (and particularly if it's been granted), that can only be the lender, irrespective of whether the repossession itself actually goes ahead.

Chances are, the sly lender would seek to apply the ERP even they did repossess!

No it is not a wrong analysis, when the court grants a possession order over and above other remedies, it implies that other avenues have been tried and exhausted. Any DJ does not grant possession orders lightly. he choice you make reference to one that the mortgagee as well does everything possible to avoid. Comparing a mortgagee with a landlord is a wrong analysis.

It would apply to both situations, as the mortgage is being redeemed ahead of time in either.

Selling at auction is not an automatic assumpton you should make.

are you suggesting that having a property repossessed is not the responsibility of the mortgagor?

you are implying that there is a choice, there is not

what is sly about adhering to an agreement?

Unfortunately this is not the case. I got the meanest bitch of a DJ ever. I was in there for 7 minutes. She had not read my defence or the response to claim form. She wanted me out as quickly as possible. I am back in work, the arrears could have been cleared over a couple of years but I am sure she was trying to "bump her stats up." I am really annoyed at the way the DJ just took the side of GE. My defence was over 3 pages and she would have rather have been filing her nails.

I am selling but it's just co-incidence, unless of course the 2nd charge lender will not lift the charge, in which case, the repo will go ahead and GE will be responsible for terminating the agreement.

I just check the terms and conditions of the offer.

1. The financial illustation from the broker says my ERC in year one is 6%, year 2 5% and year 3 4%. The mortgage offer states 6% for 3 years. Do I have comeback here ?

1. Under Early repayment it states "for avoidance of doubt, the ERC is payable if we sell the property or you do."

Is this unfair ?

Jamie

PS Thanks for all your help so far

There is really very little of a defence to an application for a possession order, the best you could achieve is to demonstrate the ability to pay the existing commitment and any arrears over a reasonable period of time.

If you fail to convince the DJ that you have the facility to maintain this then any resistance to the order is bound to be unsuccessful. It is simply not true that sides are taken in this way.

it is most unlikely without a good legal argument, that the second charger would lift the charge. Who is to say you are not selling to a friend!

Hmmm, you ention ERC, so you now agree it was an "Early Redemption Charge" then and not an "early settlement charge"?

If it is comeback you are looking for, I would not mention the 6% ERC over 3 years as this would increase the penalty to £7200

No, why should it be, as you are protected against sale if you maintain regular monthly payments.

Clearly. What is more, these guys are almost certainly regulated by the FSA, so you have a good chance of getting it rectified. No chance there were two offers from the broker, or anything like that?

Brokers do not issue offers, they supply what are known as KFI's (key fact illustrations), an offer would supersede any KFI's issued by the broker

In message , Magictorch writes