Horns of a dilemma - advice sought

Have a buddy in Oz with a prob. which he’s asked me for advice on - so I thought I’d call on the collective knowledge of Pinsters to possibly assist

He got an opportunity to emigrate to Oz just before reaching the age cut-off - he did live there back in the early 90’s but had to come home (his Dad was ill) before he had a chance to secure residency via his employer/sponsor

Been in Ireland since then, got married a few years back, and bought a house in a Leinster town in early 2007 believing Oz was no longer possible (previous employer as would-be sponsor had gone bust with no paper trail etc.).

So his dilemma now is he has a house here which is in neg. equity, it’s not rented as he needs to complete some work on it - and of course he’s paying rent in Oz (where work is very thin on the ground he tells me - he’s a plumber/fitter)

He’s coming back in the next month or so to try to resolve matters - he’d like to just hand in the keys but knows that he’s burning his bridges if he does. AFAIK, he has a fixed-interest mortgage. So what are his options ?

He’d like to try to switch to an IO mortgage for a few years to see if that would tide him over hopefully getting rent to go some way to meeting his repayments - but presumably the bank will hammer him to get out of the fixed rate ?
What chance does he have of negotiating something given that the alternative for the bank is yet another house on their books worth a fraction of the mortgage on it ?

Appreciate any advice to detail what choice(s) he has, and he can then decide what route is the best one for him to take in his circumstances.

Why dont you buy it off him at a fraction of the ‘value’ and let him pay off a lump sum to the banks - say 50-70% of the outstanding debt. He could then offer this to the bank as ‘full and final’ payment. This would go down better if he had, for example, 200k outstanding, sold for 125k and offered 10k of his savings.

Alternatively, he could sell and make the offer on condition that they alter the terms/structure of the outstanding mortgage arrears.
The bank should jump at the chance to get cash, reduce a debt and have him continue paying at a vastly reduced rate; the loan is still live. He offloads a problem and keeps his bridges intact as long as he keeps up payments.

My experience of debt collection is that a serious offer in a serious situation is worth more than a dragged out affair that is never going to pay.

I’d suggest if he were going to take this approach he do it now because soon this will become commonplace.
When this happens the banks will become defensive and will have dedicated personnel/departments to go through everyones ‘books’ and finances and they will negotiate hard. As things are I’d think you wouldnt have too many retail debt specialists so if he was prepared he’d have the advantage.

Its a tough situation but the alternative is that the bank have a bad debt and he burns his bridges.

In summary, hes better off dealing with the situation than ignoring it and, crucially, by making the first approach/offer he puts the bank on the back foot in the event of any court action.

Edited for syntax

Not sure they are ready for this yet, and he is asking in writing for permission to sell it for what it is actually worth .

This is called a " short sale" , the bank is left short but not as short as they could be left !

He/she needs to do two things.

  1. Get their financial house in order. The banks may “play ball” with your friend but they’ll want to know exactly what assets (including savings) she/he has; what future potential earnings they can expect; and so on. Tbh, it seems like your friend has been running her/his financial affairs by the seat of their trousers. They need to create a concrete plan which the bank will believe is workable.

  2. If your friend wishes to send an offer where the bank is taking some sort of haircut, the proposal should be non-conftontational and honest. Bank officers can be notouriously stubborn and will play hard-ball from the get-go if they think your friend is mucking them about. Your friend needs give a history of why she/he is in this situation and how they will motivate themselves to alter their past mistakes to make things right in the future.

Don’t believe the hype that banks are on the back foot and will take any old offer your friend cares to throw at them. Your friend isn’t a billionaire, I take it, and won’t be talking with the CEO or top tier of the bank. They’ll be dealing with employees who have to perform their duties according to lending/debt resolution standards.

Two things strike me about the post. You say your friend has been in Ireland since she/he got married. Yet there coming home to sort things out with the banks. Story doesn’t jive.

Second, your friend bought a buy-to-let, by the sound of it, in 2007 and hasn’t finished work so that it can not be rented to bring in income by 4/2009. What the feck!

As an ex-banker, it appears to me that your friend has a good bit of dosh stashed away and has either been very retrobate in dealing with their financial situation or has been unable to juggle their finances due to the fact that they wish to live on two seperate continents. The economies on both continents have turned sour and your friend appears to be looking for an easy way out of their predicament.

The post may sound harsh, but I believe your friend better get their shite together. The facts, as laid out in the post, indicate the bridge is already smouldering.

Rockyraccoon, nothing could be further from the truth - I obviously made a hash of telling his story especially the chronology. Basically, he lived in Ireland until his mid-twenties in late 80’s when he went to Oz. Came back a no. of years later coz his Dad was ill, stayed, got married a few years back, and subsequently bought a doer-upper house and was in the process of moving in / making it inhabitable etc. when he got an out-of-left-field opp. to go back to Oz legit etc. so after much thought, he and his wife decided to take the plunge in late 08 and go down under.

His problem is that he bought at the height of the boom and recognises his NE situation. Obviously he doesn’t want to take a complete bath on it because he’s anything but loaded, and no, he doesn’t have money stashed away - believe me ! That’s why he bought a doer-upper in the first place…affordability, and he figured that he could do a lot of the fixing up himself over a period of time.

That’s the context he’s coming back in i.e. he wants more than anything else to sort his situation out - he’s just floundering in terms of understanding what options might be open to him and he obviously wants to try to salvage something from the current position he finds himself in.