No Equity second MortgageNone Equity second mortgage
Borrowers may have taken out a second mortgage backed by the real estate in supplement to the first fee mortgage. A lot of the customers who come to the Housing Rights Service have retained payment on the first fee (mortgage), but have begun to accumulate backlogs on the second fee. These types of loans can have high interest rate.
Usually, if a creditor falls behind, there will be significant back payments, making the whole issue of debts much more serious. Their additional cost of defaulting on the credit may mean that they are not in a position to make a satisfying offer to the second creditor. There is no agreed reimbursement schedule, so the second creditor usually starts the ownership procedure.
However, if a real estate is in deficit equity and sells after an ownership order, all revenues from the sales go towards the first fee, although the entire mortgage is not paid. That means that any creditor with a second fee on the real estate will not receive any revenue from the sales.
In a recent case, we traded between 165,000 and 175,000 pounds on a real estate asset. Amount due on the mortgage was £194,000. Obviously, the sale of the real estate would not relieve the secondary creditor, as the full sale proceeds would not replace the mortgage liability.
Conversely, the grant of ownership and the sale of the real estate would cause disproportionately high damage to the debtor, who would become sheltered as a consequence of the act; the sale of the real estate would not provide any economic advantage to the second insurer. That means that no order for ownership is issued, but the creditor can take the case to the courts if the circumstances change, e.g. if the residential real estate markets improve and the real estate is assessed more as overdue.
When it is clear that the second fee owner knew or should have known that the real estate was in a completely adverse equity situation, the judge may decline to allocate his expenses. Captain of the above case said it was not appropriate to initiate ownership action if it was unlikely that the claimant would make a gain.
If there is only minimum equity, what happens? The Housing Rights Service has expertise in handling real estate where there is a very small amount of equity in the real estate. These cases must take into account the associated cost and the real value that the object is expected to achieve at the auctions.
It is likely that if it seems that the amount of equity capital is such that it would be absorbed by the cost of a forced disposal, this case will generally be shelved. Customers can ask for a postponement so they can get an unbiased assessment if they believe there is little or no equity in the real estate.
The shortage of equity in a real estate asset will not stop a judge from making a monetary judgment against your customer if the creditor selects this rather than seeking a title order. When a postponement is allowed, customers should still make all the payment they can for the second load-lending.
Once the residential real estate markets improve, the customer should consider a voluntary commercialisation of the real estate to be sold. You should consult your customers about this policy with your creditor, who may otherwise go back to the courts to request a title order. Professional Resource on Mortgage Debt is an indispensable resource for consultants who want to learn more about the ownership procedures and opportunities available to customers facing the threat of a claim.