Foreign investor, properties in Poland, walk away from mortgages?

I think I see your problem: you don't read even the whole of the first paragraph of information which is put in front of you. If you had, you'd see the bit where it says "The bank eventually repossessed and auctioned his house". This might explain why you're having difficulties with your investments.

Actually its the above attitude is one which has caused many problems in my country...Sub prime mortgages ringing any bells for you? Massive losses in British Banking because of said sub prime mortgages ringing any bells for you? Seems more an American attitude than a British one.

You were happy to take a high risk low rate, but it's backfired on you and now you want to just walk away, people like you shouldnt be able to invest in foreign countries because from what I can tell from your posts is that you are irrsponsible and incapable of doing the right thing when things get tough.

I feel sorry for families who lose their homes when their circumstances take a turn for the worst, but greedy investers like you shouldnt be allowed into Europe.

Loads of people talking and I kind of see that knowledge of the Polish Civil Code ( KC ), or the fine print in bank-financed real estate purchases or last, but not the least, of the part of Polish Code of Civil Procedure ( KPC ) that deals with debt execution and reposession is really a superpower here. At least in regards to some people.

As to the author's problem:

1)


If the bank financed the purchase then someone had to sign the dotted line on the credit agreement. I take it that someone was the author, personally, not as an ltd or anything of that kind. Correct me if my assumption is wrong, since quite a lot rests on it here.

So in Poland it falls under a personal obligation of the author that can and in case of some banks will be aggresively sought from the author's personal assets ( regardless where they are located ) as well as from the property itself.

In a case where a property's value nowadays is significantly below purchase price ( which was covered by credit ) it isn't uncommon for the bank not to limit itself to just the property itself. Going after the property is easy ( mortgage ), going after the rest might be slightly more difficult, but still doable.

The above can be easily confirmed through even a cursory glance at the relative sections of the Polish Civil code that cover obligations ( KC - zobowiazania ) and the Polish Code of Civil Procedure ( KPC ) that cover repo.

2)


So, with the above in mind, jingling mail doesn't really work that well in Poland.

By walking away You'd be essentially asking the bank to cover roughly 120.000 quid of the difference between the purchase price in 2007 and the sale price now ( assuming they found a buyer that would pay what was mentioned ).

That's enough money for some Polish banks to have their legal team look at other recovery options.

3)


If it was the author personally who signed the dotted line on the credit agreement he will be unable to nullify the status of this as his "personal obligation" through the transfer of assets to an ltd or any other entity.

Assuming the mortgage isn't paid back in full on the day of purchase the author woudl still be liable on a personal level and the buyer's liability would be limited to the amount of the mortgage.

Of course it is possible for the bank to agree to various stuff which would modify the above, but I seriously doubt they'd be that stupid.

I have to agree with mglaze, there is a big difference between the USA and Poland in investment attitude. If mglaze had purchased property in the USA, he would now be handing back his keys to the lender, job done- move on. Furthermore most people on here are blaming the banks, most high street banks are nothing more than resellers of structured products, just like a supermarket. Now here is how it works, so some of you understand, you have an account with Bank X, they provide you with a account manager, every Monday morning there is a meeting of account managers from the bank and they are told what funds to push that week or which mortgages are best to place. The Bank has already structured a coms with the mortgage lender - fund manager, the poor account manager has to meet his target, he is working under management. Have you ever wondered, why you are invited into the bank every time you receive a lump sum, they monitor the accounts and are interested in selling you a product, so they get paid a coms.

mglaze, I was discussing CHF mortgages today with a colleague of mine, who is also in the CHF trap, as he mentioned when I speak to my friends, who have PLN mortgages, they are seeing incremental rises in payments, as the interest rates are north bound, so it is the double edged sword.

There has been a lot of miss-selling of mortgages in PL, the PL Government should set up an enquiry and be prepared to create some type of fund to help out the Poles who are truly in deep ****.

Never going to happen, in my humble opinion, the Polish government is so used to doing Poles up the poop chute it probably hasn't even noticed the problem yet <sarcasm>

mglaze

I don't know if you figured it out yet, but its seems very obviously that the banks will not allow you to walk away from the debt and will pursue your assets abroad. They will do this with a relatively small debt and your debt seems large.

Its not a culture thing, its Polish law.

exactly. The Polish government is just a tiny tiny miserable powerless cog in the so called "free market". Where are all the houses they promised to build??BROWN ENVELOPES.

The PL Gov, would have two probs,

1. How to help the lessor off, maintain their mortgage repayments.
2. How to stop the better off, abusing they system by putting their property in the names of drivers and maids, to take advantage of any possible handouts.

true, but all could have easily been prevented, if goverments actually governed, instead of been Chicago Boys. Now the sh1t is hitting the fan, like elsewhere.

Well, I think you are confusing the fact that the bank can (and should) pursue assets to cover a default if it is entitled to, with the fact that this loan (a bank overdraft if I read correctly) is not securitized. Yes of course a bank can pursue assets, even on a non-securitized loan. But that is still very different from a mortgage, which is already linked to a specific asset (the house) as collateral.

The point being here - when you have no inherent collateral on a loan, then yes perhaps the bank should be free to pursue all possible assets to cover losses. But when you have a loan that is already collateralized (by a house), then (in some countries, but clearly not Poland) the collateral is already clearly defined, and therefore a default is generally covered only up to the present value of that collateral.

All I was trying to say is, the case of Jaceck isn't exactly relevant, as an unsecuritized loan is a completely different beast from a mortgage.


If this was simply a case of a bad decision on a low-rate loan (i.e. with introductory teaser rate, variable interest, rising interest rates, etc.) then that would be different. Yes, plenty of people in the US are defaulting just because of those reasons. But the CHF component has added another factor that multiplies these losses even further.

In any case, I don't know what "people like me" should be able to do or not do, and I don't care right now. All I care about is maximizing my economic benefit and minimizing my risk, and I will make the best decisions accordingly. This is economics, not morality or ethics.

Until you know what your risks are, you can't make any assessments. If Polish banks can chase you for this debt (which seems likely and for this amount if they can, they will), you probably don't want to walk away.

Really you need to speak to a Polish lawyer about this. Need any recommendations? And no I'm not on retainer/reference fee from any!

Ok, purely from an economic standpoint:

Jingling mail, jingle mail, whatever --> doesn't get You off the hook according to Polish law.

Your risk will be rather small if You move back to the US, but I think it will take at least 1 trip to a US based lawyer to confirm that.

Should You remain in the UK there's a possibility ( at least 50% IMO ) that the Polish bank will go after Your assets ( if any are listed in Your name ) and earnings there, since as You may have guessed already You aren't the only foreign bloke in Poland that's thinking about pulling a runner.

Oh yeah, I forgot to mention it in the other thread, I think that in Your case the bank will be able to obtain a "bankowy tytul egzekucyjny" ( not gonna translate that ) which will somewhat make reposession slightly quicker ( less hassle in courts ).

Well, I have my lawyers on a little fact-finding mission already, firstly to investigate any possibility of transferring the whole thing to my Ltd Co, either as a "sale" or perhaps as some other kind of "transfer". Granted this is a longshot for investments that are over 100% underwater at the moment, but seems like it's worth a shot.

Secondly, yes I've thought about proposing the default idea to them and seeing what they say. I'm a bit hesitant to do this as they are the same lawyers I used to do all the property contracts in the first place - and so, although that business is long since concluded, I'm slightly worried about any conflict of interest there? Not sure if it makes sense to stick with lawyers I know and trust (as much as lawyers could be trusted I suppose) as opposed to going to an unknown for advice on that aspect.

If it gets past this stage to become a serious possibility, then yes I suppose I would have to at least do a bit of exploration with both UK and US lawyers, as I have assets in both. At this point things would be getting serious though, as just the legal exploration is going to start costing real money.

I am still looking at default as really the absolute last option. I suppose the order of things from best case to worst case would be:

(1) Hold out for a while, take the pain of insanely rising monthly payments, and miraculously CHF makes a quick devaluation (hmm have you seen CHF today?!) - but I can't sustain this level for very long. A few months, yes of course. A few years? Hmm, probably not.

(2) Variation on #1, but speak to the bank and convince them to give me another Dolpaty Max Rata agreement? Seems quite bad in the longrun, if fees are as high as they were the first time around. But could help me tread water long enough to see what happens with CHF, or to plan my alternate strategy..

(3) Somehow transfer to Ltd Co and start going down insolvency route;

(4) UK bankruptcy? Ok now we are getting to the serious end of things...

(5) Just walk away unannounced, pack up everything and head back to US... or perhaps South America? Hmm, what could the statute of limitations be on these things? At least some people seem to think the Polish banks can chase you wherever you go and take whatever you have. Well, I doubt it, but let's just say that's true - so if you disappear off the grid for 10 years, what happens when you come back? Does the bank literally own you and all your descendants forever and ever?

Don't play the game if You can't foot the bill.

Other than that:

1) I don't think I was clear enough, so once again.

If any of the credit deals were arranged in such a manner that the person undertaking the credit obligation was You personally as in John Smith and not some ltd then transferring the assets anywhere will not get You off the hook.

The bank will go after the collateral and will look for the remainder of the money by going after the person that signed the dotted line.

Transferring assets to an ltd won't change a bloody thing, the credit will still remain Your personal obligation and the ltd's liability will be limited to the collateral.

The bank may formally consent to the transfer of liability for both the mortgage payment and the obligation from You personally to an ltd but I doubt they'll ever do that unless they're a bunch of dumbos.

To sum up - even if You do the ltd transfer, then have the ltd go bankrupt it won't change anything in terms of Your personal obligation to the bank, unless they give You consent as specified above, which 95% of the time - they won't.

2)


How much are Your assets worth in the UK?

Less than Your investment in Poland?

3)


Not true.

Well it sounds like this is all most likely a purely theoretical discussion, as it might be near impossible to actually accomplish. But from what I understand, the definition of a Limited company is that it has "limited liability" - i.e. once debts and assets are encapsulated inside a Ltd co, that company can then be made insolvent without affecting the credit (much less the actual assets) of the individuals who may be involved with the company.

I suppose what you mean is that it just won't be possible to transfer the debt to the company, and so even if I manage to transfer the assets (at today's current value, free of their debt), I would still have to own the debt personally and will never find a way to transfer that? Which makes sense I suppose...but what do I know, that's why I have lawyers investigating..

But presumably, if (and it's a big IF) the assets and debt and basically the entire investment could somehow be transferred to a Ltd Co at this late stage in the game, then those debts would be a purely limited liability of the company, and no longer have any relation to "who signed on the dotted line". Right? I mean, limited liability is the central, fundamental idea behind the Ltd Co, right? Or perhaps I just have this idea completely wrong.

To add an interesting point to the mix, I would mention that, although most of the assets involved are currently owned by myself personally (and thus mortgages being in my name, and debts being my personal liability), some smaller portion of the assets are actually already under the ownership of my Ltd Co. For example, one of the property purchases required a separate deed of sale for ownership of a portion of the road in front of the property (don't ask why, I have no idea..) - and so I did manage to have that deed in the company's name. Now, this is probably a very tiny part of the overall assets, but it is something, and it does give me something to show that these assets could in theory be owned by the company, and it also raises an interesting point about the mortgage. If the mortgage is in my name, but some of the assets (even 0.1%) are owned by the Ltd Co, does that mean that some portion of the liability is actually a liability of the company? Well at this point, it's all legal mumbo jumbo and far beyond my expertise, but who knows, it could prove interesting..

It's a shame really, the entire idea from the outset was to establish the company as a Holding Co for these and other assets, and for all the mortgages to be arranged in the company's name. But in the rush to get everything finished up on time, it just didn't get done that way. Imagine if it had - I suspect we would be having a very different discussion now.

You're right. However, in Poland - it's just not going to happen. The banks will demand a personal guarantee from the directors/shareholders in order to agree to the transfer of liability - meaning that you're in the same situation as when you started. The same practice is widespread in Europe.


A word of warning - if the bank manages to use the European Arrest Warrant system against you (as they have been doing!) - then you'll find yourself persona non grata not only in Poland, but in most of Europe too. They can and will use the system against you.

Do you own property elsewhere? If so, what about selling that to pay the bills in Poland?

You cannot get rid of the debt by transferring it to a Ltd company, too late. As for running to the US, just don't try coming back to the EU as they will pick you up at the border. And hope the US never accepts a European arrest warrant. I'd expect many countries around the world will eventually accept them.

I still think you should wait for the CHF to fall, it may happen in a year or two.

mglaze, do you have a Polish wife or are you married?

No, no dependents.


Can you elaborate please? I still can't believe defaulting on a mortgage is a criminal act in any civilised country. Are you referring to a criminal arrest warrant? Or something else?

Also, let's be clear - you guys are jumping straight to the last option in my list. That is pretty much the end-of-the-world scenario for me, and not very realistic as long as British bankruptcy is still a feasable option.

1)


Polish civil law 1.01 ( ok, maybe 3.59 :-) ) :

It is not a theoretical discussion. I know what I'm talking about, I pretty much live real estate ( Polish real estate included ).

Of course You can transfer such assets ( flats in Poland with an appropriate "Ksiega Wieczysta" that were used as collateral for the bank and the mortgage hasn't been paid back yet ) into an Ltd in Poland. Anyone telling You otherwise is probably a goody two-shoes attorney or notary and as a ruthless real estate trader You shouldn't be doing business with them in the first place :-)

The Polish Supreme Court has issued a ruling quite a while ago which states that ownership is ownership and You can transfer it regardless of who holds the mortgage and what they agree to or not. You can pretty much transfer the bloody real-estate ownership while a "komornik" ( public official that does repo in Poland ) is out there trying to sell that ****. Some notaries won't be involved in such shenanigans, but it is legal from the standpoint of Polish civil law.

I could find the ruling, but then I'd honestly have to start invoicing You.

2) I've done Ltd's in Poland for what now is ages.

And Your conclusions from the quote above are based on a misconception. If the credit obligation came into existance between the bank and the ltd --> then hell, yeah, You're right, You sink the ltd, wave goodbye and move on to pastures greener.

But if it was You personally that signed the dotted line all that I wrote about the bank being able to go after Your personal assets applies. The only things that will possibly hold them back will be:

a) costs ( circa 100.000 quid IMO will be worth their while ),

b) creativity and knowledge of their legal eagles,

3)


The only way You'd actually be able to place the debt, the assets and everything else in an ltd while at the same time removing the personal responsibility ( and the possibility of the bank going after that person's assets ) of the person that signed the dotted line would be if You got the bank ( the creditor ) to agree to the transfer of both the ownership of the property ( which, taking into account what I wrote in p. 1 they can't really say "no" to ) and to the full transfer of responsibility to the new buyer.

And unless there's a bunch of chimpanzees manning that particular bank branch this is just not going to happen, that "ltd transfer" simply stinks of fun and games. I can't see a bank agreeing to that, especially since the amount of capital necessary to start an ltd in Poland is 5.000 zloty.

4)


Assuming You are going to stop paying the mortgage in the near future they'll just pick up Your credit deal, see who signed it, obtain a "bankowy tytul egzekucyjny" against this person and move on from there.

Hence I don't see why what I quoted above is relevant to the case.

5)


Indeed we would be. I run my stuff on ltd's and it has to yet bite me in the ass.

6)


European Arrest Warrant?

For not paying his mortgage?

Don't scare the guy, he really has enough problems already.

The only way the bank could get the Polish prosecutor involved in such a case would be if they could prove that the guy:

a) Used fraud to obtain credit --> not gonna happen,

b) Was never going to pay back his credit --> impossible, since he has made mortgage payments already,

c) Created and then caused insolvency to an ltd or a stock company in order to fcuk the creditors --> not applicable in this case.

Can't see any other possibilities.

So let's not get things mixed up here, this is a civil/commercial case, not a criminal case.

I understand some of You guys might think he's a "real estate speculator" responsible for the rapid growth of property prices in Poland or some other crap, but let's stay on the ground here.

No European Arrest Warrant will be issued.

So why don't you just rent out the properties and top up the mortgage?


It is completely legal in PL to have separation of assets, between Husband and Wife.

I suppose that is good for him. I have heard that banks have pursued debtors all over the world, in particular a £20k debt to Thailand. Ever heard of such a thing, banks chasing debts outside the EU?

This in't a criminal case.

Banks can go after him with anything from a normal seizure of assets to anything akin to the Polish actio pauliana, limited only by the creativity/skill of their legal team and the costs vs prospects of recovery.

Since the European Arrest Warrant is only used in criminal cases they will not be able to use it.

Hence really --> no need to scare the guy with that.

In theory.

The reality is somewhat different.

I heard on Polish Radio today, that 700000 people in Poland purchased property in Swiss Francs. Looks like moral hazzard is on the way.

The properties are (and have been from the start) rented out at market rates. This covers about 40% of the monthly mortgage payments, at the current rates, and with CHF going up every month this is getting worse and worse. So to be clear: 60% of the monthly cost is coming out of my pocket right now.

Interestingly - this is both interest and repayment. So perhaps another possibility is to get the bank to agree to go back to interest-only payments for the next couple years until the CHF comes back down.

Give me one basis for the use of the European Arrest Warrant in a case which involves a guy not being able to pay his mortgage.

Yes, exactly. I have heard similar things. I read recently that more than 50% of all mortgages in Poland are in Swiss Francs. How is it possible there are not loads of defaults happening already? My rental income covers less than 50% of the current mortgage payments. I am an investor, and although I am not super-wealthy by UK standards, I think I am a bit more well-off than the average local homeowner in Poland. I imagine that at least some of these 700,000 people are just normal, local Polish homeowners.

In the US, if someone saw their mortgage payments more than double in the span of 2 years, and the equity on their home drop to less than 50% of the value of the mortgage loan, and presuming that the person originally bought their home based on a budget that was within their means - then clearly they would not be able to afford the payments at over twice the original amount. And with less than 50% equity remaining, I think any decent financial adviser would advise that person to walk away. And in the US we don't even have this cross-currency effect to compound the losses.

So how is it possible that no people in Poland are already in this situation? Or what are these people doing? Or is it actually that all the people buying in Swiss Francs are actually foreign investors, and they are all so much more wealthy than me and aren't really bothered with these losses? For me personally, it is getting to the point that it is affecting the bottom line. So I can't imagine how it is for a normal homeowner who bought a home initially paying 1800 PLN per month, and now for the same home being required to pay 4200 PLN per month, but probably on the same salary they had as before.

If this was in the US, and you had a case where literally thousands of people were being sold loans with a highly leveraged cross-currency component like this, I can't even imagine the number of class action suits and public outcry that would be happening right now as people start to suffer 150% losses every month. Banks would never get away with this in the US. And yet here it seems some people have the nerve to imply that my not being able to afford this is somehow "criminal". Such a different mentality, it is just shocking. In the US we had such a huge outcry against the banks, just for the banks selling loans with "teaser" rates and then jacking those rates up a few percent after the first couple years. Let me tell you - that is absolutely nothing compared to these CHF loans - these are literally orders of magnitute worse for the consumer, and also far more complex.

Old man is on his knees praying in the middle of a pond

Young boy runs up to him and shouts ''Hey old man, your beards on fire''

Old Man: ''I know, but cant you see I'm praying.

But your actions have a knock on effect with the economy - as we all know!


But it was, you took a risk with a low rate foreign currency mortgage - sounds simple to me.

I would seem the American attitude of "just post keys back" is the cause of many problems! Its not that simple in Europe!