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Sunday, 20 September 2015

The Dutch housing prices may rise again now, but people should not put themselves in jeopardy again by becoming fully debt-laden, while being stuck with a house that is hard to sell. Letter from a reader…

After eight tough years of dropping housing prices in The Netherlands, it seems that the Dutch housing market is finally making a turn-around with steadily rising sales figures and rising prices in the more popular living areas of The Netherlands.

This favourable circumstance could become a signal for many starters, successful entrepreneurs and financially healthy, higher ranked personnel with fixed labour contracts to run the gauntlet on the Dutch housing market and bury themselves again in mortgage debt, in their quest for the house of their dreams.  What could go wrong anyway?!

While I don’t want to be their “party pooper”, it is very important for everybody to take into account what has happened to good, decent and normally sensibly acting people during the last eight years. To help this process, I print the following letter from a reader…

About a week ago, I was approached by a reader who had ‘stumbled upon’ one of my older articles about people with excessive mortgages or destabilizing residual debts on their houses and wrote the following comment upon it:

Hi Ernst We are in the same position as the lady with the mortgage. Did she get any help from the bank? After 4 1/2 years of keeping up with the payments (had a tenant for one year who destroyed the house, and being in the position that we could only charge half of the payment for rent - council rules), we could not keep up any longer. We made an appointment to see if the matter can be resolved for all parties and we wrote a letter to the CEO of the bank, with the only reply the acknowledgement of our letter. Eventually, they sold the house at auction for half of its worth.

We have proof of all the correspondence. They have now, after 7 years completed their admin and has now sued us for the outstanding amount! So, I would really like to know if the banks was of ANY help to the other lady? The document they provided does not have any of our signatures and we are now waiting for that to be sent to us.

Unfortunately, I could not help her with the required information about the current situation of the earlier commentator on that article, as I did not maintain a relation with that lady after our contact in 2012.  Besides that, I don’t keep track of my readers, of course.

Still, this reader, Nita van Wyk de Vries, sent me her story, accompanied with some physical evidence (i.e. correspondence between her husband and the CEO of the bank in question).

I can’t and don’t want to ‘name and shame’ the bank in question; I simply cannot afford to do so, as an independent freelance ICT consultant, who is very dependent upon assignments in the financial industry. 

For the same reason I was not able to ask for feedback from the bank in question, in order to hear their side of the story. 

What I can do, however, is administering the following warning to my readers:

The Dutch housing prices may rise again now, but people should not put themselves in jeopardy again… by becoming fully debt-laden, while running the risk of being stuck with a house that could be hard to sell in the future!!!

This is not just a futile warning on my behalf, but a serious request to all future houseowners to give their financial situation the fullest attention, before buying an expensive house in The Netherlands.

When push comes to shove, also in the future banks may play for keeps and enforce payments on outstanding mortgages-in-arrears. That is seldomly in the interest of the house/mortgage owner.

Here is Nita’s story:

Dear Ernst,

In short the issue is:
We lived in the Netherlands until 2008, before moving to the UK (England). When we moved we put our house for sale but it did not sell due the housing market collapse world wide.

We kept up the mortgage payments until 2012 when our funds in the Netherlands and my pension savings from South Africa ran out. The house was let out [for rent – EL] for one year, for less than half of the mortgage repayment.  The amount for which we could let the house, was prescribed by ‘the community’ [original text: die Gemeente – EL] .  Quite a lot of damage was done to the house by the tenants.

I contacted the bank well in advance to arrange plans to manage the debt, but they were not willing to help and insisted that "process should run its cause”, even after making appeals to the bank’s CEO. We went to see them in person also.

The house was sold on auction in 2013 but I did not get any correspondence from the bank about subsequent steps. We had our post redirected to Edinburgh and East Calder for a year after we moved house.  The Bank is in posession of my email address, the same address that I have been using for the past 15 years.

This week I received a letter from a solicitor in England who was approached by the bank, demanding full payment of the residual value of the mortgage. We have been living in Scotland since 2013.

And she sent some more detailed information – her husbands letter from 2012 to the CEO of the bank in question. I print the following long summary of this letter:

The reason for my letter is that I want to inform you of efforts I have made to appeal to “your bank” [as I stated before, I won’t disclose the name of the bank - EL ] on foreseeing possible future payment difficulties on my mortgage. To explain the situation I will supply a brief history:

Until June 2008 I was an employee of “your bank”at a Risk Management department. Due to “various reasons” [I cannot disclose the original text here – EL], I left the bank to work at Barclays Bank in the UK.

Knowing that I was going to leave the bank, we put our house in the for sale market in May 2008. Since  then we have changed our realtor as well as lowered the price twice from €695,000 to currently €599,000. We have also tried a number of promotions offering rewards and participated in "Open Huis dagen", without success. We could not foresee the current house market conditions at the time. The house is still for sale today and we have tenants renting the house since August 2010.

The rent we receive for our house is determined based on the point system determined in the "Leegstandswet" [the Dutch law regarding vacant houses]. This is currently €1,500 + €250 for renting furniture and appliances.  Of this we pay the letting agency €75 administration fee which leaves our rental income at €1,675.

Our monthly mortgage payment is €2,974.17 + €588.47 for the "other mortgage" [see my earlier remarks – EL]. This leaves me with a monthly deficit of €1,887.

Except for the mortgage payments we also have quarterly “watership taxes”, annual housing taxes as well as “special infrastructure maintenance taxes”, due the house being built on a dyke.

We were able to finance the payments on our house by using funds that we saved for pension and transferred from South Africa. These funds are now running out with only €16,000 remaining in my bank account at “your bank”. At the current rate of monthly deficit this would last us until the end of 2012, should the current tenant remain in the house.

It could not have been foreseen in 2008 that we would have to finance two houses for an extended period of time, least of all 4 years and more.  

Since February this year I tried to contact the bank to discuss possibilities of how to approach the problem as we do not have additional funds available to finance the house and find a solution where both parties have a satisfactory outcome. I initiated the contact based on an article in De Telegraaf which quoted: " that houseowners with foreseeable payment issues should contact their bank at the shortest possible notice, before acute payment problems emerge. In practice, a solution can often be found in negotiations with the bank” [translated text – EL]

It proved difficult to get an appointment to discuss my position with somebody and after a number telephone calls and e-mails to various people without success, I contacted “your employee”, the head of “consumer credit” at “a particular business unit” to assist. On 8 March my wife and I met with “your employee” of the “personal banking department”.

“Your employee” identified options which he promised to pursue. These amounted to changing our current mortgage to a full annuity mortgage where currently only 50% of the mortgage is annuity based. At the same time extending the mortgage run time to 30 years and using the current balance of the "other mortgage" to lower the overall mortgage balance.

This solution would potentially save the monthly instalment of €588.47 and reduce the current  mortgage instalment of  €2974,17 by a possible €400, reducing the overall monthly payments to around is €2,500. At the same time I would try to increase the monthly rent we receive from August when the current contract expires to further reduce the deficit. “Your employee”, was going to follow up on his proposals internally and revert back to us in a few weeks.

The solution proposed by “your employee” would stretch our current available funds well into the future giving the housing market a chance of recovery to help sell the house at a realistic price and thereby helping that both “your bank” and us don't suffer losses.


On 4 May I received a "non-reply" e-mail from “your mortgage team” that they will contact me.
On 14 May “another employee of yours” contacted me to discuss our situation. She made a few suggestions, amongst others:
  • To "actively" sell the house using  preferred realtors of your bank;
  • To reduce our price further;
  • Stating that we should drastically increase our monthly rental as "the "Leegstandswet" and point system has been changed", when in fact this did not happen;
  • That we should cut in our monthly expenses in UK to afford the house in the Netherlands as she thought we had exorbitant high expenses (without enquiring about our circumstances - my wife has fibromyalgia which requires high medical expenses on continuous basis);
  • Arrange a payment holiday on the "other mortgage";

From the discussion it became clear that the proposals which “your first employee”made were not communicated to “your mortgage team” and that these were in fact "unnegotiable", according to “the last mentioned employee” 

Once “the last mentioned employee” learned we still had funds in our bank account, she informed me that none of the solutions she proposed would be possible as I still had available funds. Only one these were exhausted, would the bank be willing to look at solutions. She sent me a follow up e-mail with her address detail to contact once our funds are exhausted.

The approach of “The last mentioned employee” surprised me as the purpose of my contact from February was to prevent the inevitable for both the bank and me, but her approach was that it should happen first and then a rescue plan, which would result in a forced sale and a loss is the only way forward. I found this contradictory to newspaper articles, general good practice and the approach taken by “your first employee”

At this stage I would like to bring the situation to your attention and the fact that conflicting messages are given leaving us in a despair. Banks in the UK use forbearance plans, regulated by the FSA, to assist customers through difficulties experienced during the current recession. This helps both banks and customers to survive during difficult times rather than to foreclose and further depleting economic activity.

It is hard to say whether this situation originated from miscommunication at the bank in question or from sheer indifference among the people at the mortgage department of this very bank. In reality, it does not matter much anymore unfortunately. 

The CEO of this bank did react as a matter of fact to Van de Vries' first letter, but he reacted like all CEO’s would do in such a situation: “I sympathize with you and I feel sorry for your desperate situation, but I can’t help you. You have to work things out with the mortgage department...” Of course, this did not help at all eventually…

As Nita van Wyk de Vries summarized in her letter to me, their Dutch house was auctioned in 2013 at a substantial loss, compared to the outstanding mortgage amount. She and her husband remained stuck with (undoubtedly) a huge residual debt, which they cannot afford to pay back now, but have to pay anyway, under mounting legal pressure.

This is very sad indeed and it should act as a warning for anybody who feels overly optimistic about the Dutch housing market and his future ability to pay back a high mortgage debt. What has happened between 2008 and 2015, could easily happen again in the future... 

For me it is a shame that the Dutch banking industry did not follow the FSA in its footsteps, by also adopting similar forbearance plans. This could have save many people a lot of pain and frustration.

In the meantime I can only thank Nita and her husband for their openness and their desire to share this story with me. I hope that I did her and her husband justice with printing her story, almost in full.

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