nyneil
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Post by nyneil on Dec 4, 2018 22:08:30 GMT
It is as simple as knowing the difference between a debt and an equity investment. We are talking about property financing and not company shares, where the term equity investment is generally used. Borrower defaults on the [property] mortgage, then the lender becomes mortgagees in possession, which is debt either fully or partly converted to an asset [the property]. If your property is repossessed and then sold for more than your debt, the lender does NOT get to keep the surpless. Advice is given at the Council of Mortgage Lenders: www.cml.org.uk/consumers/payment-difficulties/what-to-do-if-repossession-occur/Quote: "What happens to your mortgage debt after your home is repossessed?
After your lender takes your property into possession they have a legal duty to sell the property for the best price that can reasonably be obtained. The property will generally go on the market as soon as possible and your lender will get independent, expert advice on the price it should be sold for and the best method of sale. If the sale of the property results in a surplus after all the money owed to the lender and any other secured lender has been repaid, then this surplus is returned you. Your lender should notify you of the surplus but if you cannot be contacted, the money will either be held by the court or your lender until you can be contacted. But if the sale proceeds are not enough to pay off the money you owe to the lender, then there is a "shortfall debt" which you still owe your lender after possession. Interest will usually continue to be charged on your mortgage loan until the property is sold and any shortfall is repaid. There will also be other costs charged to your mortgage account, including estate agents' costs in selling the property and legal costs." My expectation would be for the cost of administration and build out to be added to the debt and charged to the borrower. I'm prepared to stand corrected if that's not the case, but it's what i believe to be the case. Edit: Just for clarification, i was not suggesting these are retail / domestic mortgages, just that they are the same in principle; i.e. the most you can get back is just what you are owed, nothing more and possibly less.
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Mr_N
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Post by Mr_N on Dec 4, 2018 22:15:39 GMT
We are talking about property financing and not company shares, where the term equity investment is generally used. Borrower defaults on the [property] mortgage, then the lender becomes mortgagees in possession, which is debt either fully or partly converted to an asset [the property]. If your property is repossessed and then sold for more than your debt, the lender does NOT get to keep the surpless. Advice is given at the Council of Mortgage Lenders: www.cml.org.uk/consumers/payment-difficulties/what-to-do-if-repossession-occur/Quote: "What happens to your mortgage debt after your home is repossessed?
After your lender takes your property into possession they have a legal duty to sell the property for the best price that can reasonably be obtained. The property will generally go on the market as soon as possible and your lender will get independent, expert advice on the price it should be sold for and the best method of sale. If the sale of the property results in a surplus after all the money owed to the lender and any other secured lender has been repaid, then this surplus is returned you. Your lender should notify you of the surplus but if you cannot be contacted, the money will either be held by the court or your lender until you can be contacted. But if the sale proceeds are not enough to pay off the money you owe to the lender, then there is a "shortfall debt" which you still owe your lender after possession. Interest will usually continue to be charged on your mortgage loan until the property is sold and any shortfall is repaid. There will also be other costs charged to your mortgage account, including estate agents' costs in selling the property and legal costs." My expectation would be for the cost of administration and build out to be added to the debt and charged to the borrower. I'm prepared to stand corrected if that's not the case, but it's what i believe to be the case. These are charges, not mortgages mate.
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Mucho P2P
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Post by Mucho P2P on Dec 4, 2018 22:17:27 GMT
We are talking about property financing and not company shares, where the term equity investment is generally used. Borrower defaults on the [property] mortgage, then the lender becomes mortgagees in possession, which is debt either fully or partly converted to an asset [the property]. If your property is repossessed and then sold for more than your debt, the lender does NOT get to keep the surpless. Advice is given at the Council of Mortgage Lenders: www.cml.org.uk/consumers/payment-difficulties/what-to-do-if-repossession-occur/Quote: What happens to your mortgage debt after your home is repossessed?
After your lender takes your property into possession they have a legal duty to sell the property for the best price that can reasonably be obtained. The property will generally go on the market as soon as possible and your lender will get independent, expert advice on the price it should be sold for and the best method of sale. If the sale of the property results in a surplus after all the money owed to the lender and any other secured lender has been repaid, then this surplus is returned you. Your lender should notify you of the surplus but if you cannot be contacted, the money will either be held by the court or your lender until you can be contacted. But if the sale proceeds are not enough to pay off the money you owe to the lender, then there is a "shortfall debt" which you still owe your lender after possession. Interest will usually continue to be charged on your mortgage loan until the property is sold and any shortfall is repaid. There will also be other costs charged to your mortgage account, including estate agents' costs in selling the property and legal costs. The above regulations are for residential "retail" mortgages when the house is the primary residence. This is not what Lendy deal in. There is a difference in mortgage types and their legal standing and enforcement methods for primary residences versus investment property [non-residential] or secondary+ homes.
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SteveT
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Post by SteveT on Dec 4, 2018 22:19:37 GMT
It’s remarkable (and somewhat depressing) that individuals can lend substantial sums via P2P platforms without even a basic understanding of how Law of Property Act Receivership actually works.
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Mr_N
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Post by Mr_N on Dec 4, 2018 22:24:06 GMT
It’s remarkable (and somewhat depressing) that individuals can lend substantial sums via P2P platforms without even a basic understanding of how Law of Property Act Receivership actually works. Correct. So will L as agent be making unilateral restructuring of the investment so that they retain profits in the case of build out's, or will they be passing back to investors?
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SteveT
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Post by SteveT on Dec 4, 2018 22:30:48 GMT
It’s remarkable (and somewhat depressing) that individuals can lend substantial sums via P2P platforms without even a basic understanding of how Law of Property Act Receivership actually works. Correct. So will L as agent be making unilateral restructuring of the investment so that they retain profits in the case of build out's, or will they be passing back to investors? The process is controlled by the Receiver, not by Lendy. Secured lenders are entitled to return of their capital and accrued interest owed under the loan contract, and only after the costs of the Receivership are covered first (including any build-out that may be undertaken before sale). Nothing more.
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Post by Deleted on Dec 4, 2018 22:32:35 GMT
These are charges, not mortgages mate. You really need to do some basic research on this topic, 'mate'. www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/205 (Law of Property Act 1925) (1) (xvi) “Mortgage” includes any charge or lien on any property for securing money or money’s worth;
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Mr_N
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Post by Mr_N on Dec 4, 2018 22:35:30 GMT
Correct. So will L as agent be making unilateral restructuring of the investment so that they retain profits in the case of build out's, or will they be passing back to investors? The process is controlled by the Receiver, not by Lendy. Secured lenders are entitled to return of their capital and accrued interest owed under the loan contract. Nothing more. So when L are considering the build out's, once everyone is paid under the charge and the receiver relinquishes control back to the borrowing party, they retain the profits as if they had in fact been in control of the build from start to finish, minus the fees of the receivership process? I'm trying to understand when L is considering this action, where exactly they are sourcing funding for the build out which the borrower was unable to, and what it's actually going to be secured against.
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Mr_N
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Post by Mr_N on Dec 4, 2018 22:37:06 GMT
These are charges, not mortgages mate. You really need to do some basic research on this topic, 'mate'. www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/205 (Law of Property Act 1925) (1) (xvi) “Mortgage” includes any charge or lien on any property for securing money or money’s worth; These are fixed charges, not mortgages. A mortgage gives the lender the option of selling the property to repay the debt. In our case the charge gives us the authority to take receivership of the asset, including things like rent or business income "mate".
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SteveT
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Post by SteveT on Dec 4, 2018 22:40:24 GMT
It is the Receiver that would raise the funding for any build out, secured against the value of the property. That funding (incl. interest) has to be repaid before existing secured lenders (ie. Lendy and its lenders) receive a penny.
If there is anything left once all creditors are repaid in full, the borrower would receive it. But that is extremely unlikely.
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Post by Deleted on Dec 4, 2018 22:40:26 GMT
I tell you what Mr_N . I will use the Law of Property Act 1925 definition. You can use any definition you like.  |
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Mr_N
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Post by Mr_N on Dec 4, 2018 22:41:06 GMT
It is the Receiver that would raise the funding for any build out, secured against the value of the property. That funding (incl. interest) has to be repaid before existing secured lenders (ie. Lendy and its lenders) receive a penny. Excellent, thank you. And where the security is already valued at less than is owed to investors, are we having our first charge shifted with the expectation that the action being taken would be enough to repay all in that order?
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SteveT
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Post by SteveT on Dec 4, 2018 22:47:29 GMT
No idea. But I presume a Receiver is unlikely to favour the risks of a build-out over a simpler sale in current condition unless they believe the outcome for creditors would be materially better.
(You really should go read up about the Law of Property Act)
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Mr_N
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Post by Mr_N on Dec 4, 2018 22:53:06 GMT
No idea. But I presume a Receiver is unlikely to favour the risks of a build-out over a simpler sale in current condition unless they believe the outcome for creditors would be materially better. (You really should go read up about the Law of Property Act) Would administration vs administrative receivership give the same end result?
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SteveT
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Post by SteveT on Dec 4, 2018 22:58:27 GMT
No idea. But I presume a Receiver is unlikely to favour the risks of a build-out over a simpler sale in current condition unless they believe the outcome for creditors would be materially better. (You really should go read up about the Law of Property Act) Would administration vs administrative receivership give the same end result? Some basic reading to get you started: www.thegazette.co.uk/insolvency/content/302
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