Tuesday, 11 October 2011

It is not Debt Forgiveness

By Jillian Godsil

Jillian at Raheengraney House.  www.sjpireland.com
Last night I was on RTE’s FrontLine with Pat Kenny. I was invited to participate in the audience as the programme was on negative equity, the property crash and what the banks and government were doing, or not doing in some cases.

As the programme moves very fast, I had to jump to my punch line and I think perhaps some viewers may have been less than sympathetic to my argument – which is seeking parity of risk and pain for banks and borrowers. However, if you will read on, I would quickly like to explain how I ended up in this situation of loosing my house and yet still being held responsible for the entire mortgage.

Some five years ago I was married and living in County Wicklow. My then husband and I had planned to run a guesthouse so we were living in a large 8 bedroom Georgian Manor House. The property was valued at one stage at €1.6million and we had a mortgage of some €800,000 on it.

However, divorce and the recession intervened and utterly changed my life. Had only one happened, then I might have survived, but the two together threw me into my present pecuniary situation.

We tried to sell the house, but the market began to slump. We got an offer of €1.1million in 2008 but that fell through. We received no more offers.

Three more things happened to derail my world. My now ex husband returned to the UK and became bankrupt giving all the debt to me. My own business, marketing, suffered terribly during this period and I could not afford to take a salary let alone make repayments. I moved out and moved tenants in. However, that was a chequered experience and when in January I lost my tenant, I realised I had to do something.

So I established the value of the house, some €500,000, and asked the bank to join with me in the sale. They said they needed an offer before they would talk to me. I made a video which went viral. In one week I got an offer, in two weeks the prospective buyer put down a deposit. He was a cash buyer.

However, the bank refused consent to sell three times. The reason being that the asking price did not match the mortgage. Then I realised that something was serious rotten in the state of Denmark.

Let’s go back to basics. The banks in this commerical transaction were the experts. They valued the house and using a sophisticated algorythim, came up with an amount they were happy to lend against my property. This is only the second house I have ever bought in Ireland. I was not the expert in the valuation, they were.

So, when that expert valuation turned out to be very wrong, how come they were protected from their professional assessment. Are not banks supposed to take risk in the lending, isn’t that why we pay interest on our loans?

I had put the guts of some €400,000 into that house and I stood to lose everything. I have moved out of the house, I rent elsewhere, I do not now have anything,. My life’s work and savings are gone.

The bank lent me €800,000 and looked to receive some €500,000 back, so they would only lose €300,000 on this business transaction. However, I had already paid interest over the years so the actual loose was even less than that. So, how could I lose everything and still have to be responsible for the remaining mortgage. Where is the risk for the banks?

Then in double whammy worthy of farce, as a tax payer, I am bailing out those financial institutions that will pursue me to the ends of the earth to repay a mortgage that they loaned to me based on a valuation that was wrong.

This is why I went on Front Line last night. I am not looking for anyone to forgive me my debt. I have lost everything I have worked for. I have paid very dearly for my mistake in taking out that loan. What have the banks paid? Where is their risk?

If I were a commerical developer, they would do a deal. Just because I am ordinary person they can wash their hands of all risk and consequences – instead penalising me for making a mistake, for the rest of my life and onto the heads of my children.

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