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NRAM Demanding Full Loan Repayment

jason_living Offline Mute
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01-10-2012,03:56 PM
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NRAM Demanding Full Loan Repayment

Does anyone have experience of NRAM demanding full repayment of loans (commercial loans but secured on resi properties) due to LTV breach? I would welcome the opportunity to discuss this with anyone who has been or is in this situation.

Thanks

Jason
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Simon Allen Offline Mute
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01-10-2012,06:30 PM
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RE: NRAM Demanding Full Loan Repayment

Hi Jason

It's not just NRAM but most lenders who have accepted minor breaches in the past are now looking at them in more detail. Usually this results in an act of default and either renegotiation of pricing or demanding repayment.

By law there is usually nothing you can do as you have signed the agreement. What you have to pay though could be open to negotiation.

What could you get against the properties from another lender depending on your circumstances and the rent from the properties?

On your current debt an example may be-Portfolio valued at £500k on a LTV covenant of say 70% so debt is £350k . If value is now £400k then you would usually need to repay £70k to get it down to £280k. So if you can get a new loan of £280k you could offer that as full and final settlement.

No guarantee that you will get it though as very much depends on your personal asset & liability situation, what the security is and what their internal targets are.

They are there to recover money for us the taxpayer. Sorry didn't mean to be a Robert Peston or Daily Mail reporter but that's how they do it.

How much time have you got,what evidence do they have that you have breached the covenant-can it be challenged? Whatever you do please continue to make the due payments or no one will remortgage it.

I see a lot of this with the other banks so if you want to give me the full story I can be more specific about what may be open to you
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Kevin Wright Offline Mute
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01-10-2012,07:54 PM
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RE: NRAM Demanding Full Loan Repayment

Hi Jason

It helps to understand the backdrop when trying to work out why NRAM would call in a loan.

They operate a closed loan book and their primary objective is to run down the loan book until it can be completely would up. They also have a responsibility to obtain a reasonable price when selling off the book but this is secondary to the primary objective. Much the same way that a receiver works, which is more or less what they are only on a bigger scale.

This primary objective is what sets NRAM apart from other commercial lenders (apart from one) who are also calling in loans. With the other commercial lenders, they are re-balancing their loan book so that they are less heavily weighted in property. With NRAM there is no re-balancing it is full tilt into oblivion.

They can choose to let this take its natural course as people die, people sell properties etc....

They can also choose to stimulate and accelerate this process by engineering circumstances that give them an excuse to call the loan in. One of the easiest ways to do this is to come up with a valuation low enough so they can say that there has been an ltv breach. Hey Presto, they now have the perfect reason to call the loan in and remain true to their primary objective.

Borrowers have spent fruitless hours arguing, pleading, paying to get their own surveys done to show that the portfolio value is truly higher.... all to no avail as NRAM can bat all these aside and focus on achieving their primary objective.

They have shown themselves to be totally unwilling to negotiate settlements.

You have to decide how much real value you have in the portfolio and how much it is worth saving. This needs to be a logical not emotional process

Your two realistic options
1. Give them a chunk of cash to bring it back within ltv limits, as Simon says
2. Let them take the portfolio and look to buy back the most suitable bits from the sell off

Point to note

If it was any other commercial lender than NRAM, then a debt forgiveness negotiated settlement of circa 50% can and is being achieved. I know because we do it.

Check out the forthcoming October 2012 issue of YPN, where there will be a featured article on commercial debt forgiveness

Kevin Wright
07889 526979
kevinwright@thinkpositive.co.uk
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john_corey Offline Mute
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02-10-2012,07:39 AM
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RE: NRAM Demanding Full Loan Repayment

To the accounts in the bunch,

Is debt that is forgiven taxable income in the UK. I know the USA will tax any debt forgiven unless 1 very specific exception applies.
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Kevin Wright Offline Mute
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02-10-2012,09:06 AM
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RE: NRAM Demanding Full Loan Repayment

Never heard of that in UK John but an accountant can give the definitive answer
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jason_living Offline Mute
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02-10-2012,12:26 PM
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RE: NRAM Demanding Full Loan Repayment

Simon/Kevin

Many thanks for your input.

NRAM have commissioned valuations of the properties and as Kevin says I see little if any merit in trying to attack those valuations. Unfortunately I do not have funds available to reduce the LTV to within terms and I suspect that may not in any event stop them taking further action because, as Kevin says, their sole mission in life is to get rid of loans.

There are two portfolios, one in Ltd Co and one in personal names so they will be looking to me to recover any shortfall in the latter case. It would therefore seem that buying back properties would simply then give me an asset for them to come after.

I have put a 'reduced settlement' proposal to them and whilst I believe this makes sense commercially I have yet to come across anyone who has had success on this basis with the UKAR banks (NRAM & B&B/MX). If anyone knows different I would be very interested to hear from them.

I have been advisesd that they may be looking to take control in order to use surplus cashflow to pay down the loans and then undertake an 'orderly' sale in due course. If that is their intention then I will be arguing strongly that we should continue to manage the properties but account to them for all monies.

If anyone has any direct insight into how NRAM/UKAR are likely to play out the situation I would be very pleased to hear from them.

Thanks

Jason
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