Debtor hands back house keys to mortgage lender

[ivebeenknocked]

Hello,

 

A debtor who had a charging order/preliminary OFS hearing against them from a 2nd creditor, have now handed back the keys of the property to their 1st mortgage lender. The mortgage lender is now trying to sell the property without the 2nd creditor being involved. Can the mortgage lender simply sell the property for any price they want just to cover their own debt and simply ignore the 2nd creditors charging order or do they need the 2nd creditors permission to sell.

Anyone with any advice would be greatly appreciated....

Edited June 21, 2013 by ivebeenknocked

[honeybee13]

Hello there.

 

I expect the legal guys will be along later. I thought that a lender selling in these circumstances was meant to obtain the best price possible, but I'm not sure if they always do.

 

You'd think they should involve the second lender, wouldn't you? Hopefully someone will know the answer.

 

My best, HB

[spamheed]

The mortgage lender is obliged to seek the best price, if this is sufficient to cover the first and second charge, ie the initial mortgage and the CO amount, then all good and fine.

 

However, if the amount raised is only enough to cover the initial mortgage, the first charge would be covered, but not the second - it would then be down to the 2nd creditor to take any action they deemed necessary against the mortgage company, if unsuccessful, or if the sale went uncontested by the 2nd creditor, then the CO would revert back to an unsecured debt.

 

Given that the debt had already been taken through the courts, the 2nd creditor would, I believe, be prevented from bringing any further action against the debtor

[ivebeenknocked]

Even if the 1st lender was to sell for the best possible price, it's still no guarantee that the selling price would cover the 2nd charging order, which is what I thought the point of a charging order was for in the first place.

[spamheed]

A charging order is literally a debt secured against property, when and if YOU were to sell said property, You would need agreement from both creditors as YOU are liable to both the Mortgage issuer and the holder of the second charge and are legally obliged to meet your liabilities.

 

If, however, you abandon the property you are also effectively abandoning your liabilities and although said liability still exists (to both creditors) it is literally every man for himself - the mortgage issuer is obviously obliged to seek the best price to settle their own account, they can chase you for any shortfall after any sale is concluded.

 

As the mortgage issuer carries no liability to the owner of the second charge at all, they are not obliged to pay them anything, unless there is a surplus after sale, in which case it would be used to settle YOUR secondary liability (at the request of the 2nd creditor) rather than being returned to you, as would happen if no such charge existed.

 

As the property is no longer owned by you, any debt secured against such property would revert to unsecured status and would require separate enforcement, however the law states quite clearly that a creditor cannot bring a second case through the courts against the same debt.

 

When they go for a CO, they are gambling that you will not lose the property and will eventually pay them - no guarantees

[ivebeenknocked]

Ok, thanks for your help. By the way, I'm not the debtor, I'm actually the 2nd creditor, hence my cryptic username. I was under the impression that once a charge has been issued, the charge holder can block the sale of the property if they feel there will not be enough equity in to pay their debt. After all, the debtor was not repossessed, they voluntarily handed back the keys to the lender, just to spite and knock me some more. In this situation, I thought the only way the lender would be able to ensure the sale takes place is to first get the charge holder (me) to allow it.

[spamheed]

I appreciate your position, but the second charge was taken out against the debtor and not the mortgage company, you being able to prevent the mortgage company from recouping their losses would never be allowed to happen as the debtor has no active role nor benefit from the sale. The mortgage company is always the priority debt and it would be nothing more than a paper exercise for them to receive a court order enforcing such a sale

[Ganymede]

How is your Charging Order registered against the property? Is it a Restriction or an Equitable Charge?

[ivebeenknocked]

UNILATERAL NOTICE in respect of a final charging order dated xx xx 2012.

[Ganymede]

Oh dear who advised you to do that?

[ivebeenknocked]

brief

[Ganymede]

I wouldn't have advised to register the CO like that.

 

If the debt is in a sole name and the house is owned in the same sole name I would have registered an Equitable Charge. This is essentially the same as a secured loan or second mortgage.

[ivebeenknocked]

A solicitor offered me 20K, (approx. half of debt) to walk away, so I'm guessing that they must be fairly confident to have offered me that in the first place if they thought I will win.

[Ganymede]

It's not about winning or losing. Have you got a CCJ against the debtor or did you go straight for the Unilateral Notice?

[ivebeenknocked]

Yes, I've got a CCJ.

[Ganymede]

It's too late now but I think you've been badly advised. As long as they don't apply to have the UN removed you'll be ok.