Extending a hand to ‘debt forgiveness’ clients – Jonathan Sealey

This is when a lender writes off some or all of a balance that is due from the borrower. In other words, it is when a bank will settle for some funds back from a borrower in a tight timescale, and that could be for a number of reasons.

For example, the borrower might be in default or they could have agreed a debt forgiveness figure, with their bank, due to the mis-selling of financial products in the past. Therefore, the key objective of debt forgiveness is to help the borrower in debt to restructure so that they can pay off the remaining part of the loan.

If the borrower is in default with the bank then it isn’t always an ideal loan opportunity for us, although we will always consider it. However, we have seen a steady increase in the number of cases of mis-selling of financial products by banks, such as PPI. In fact, we recently offered a debt forgiveness deal on a large mixed-use investment property in Lancashire, in these circumstances, and it benefitted all parties involved.

When the loan was called in, the borrower was subject to a debt forgiveness package deal with a high street lender. The borrower was then given two weeks to pay off the high street lender’s loan. As a result, the lender wiped £750,000 from the £1.5m debt.

However, it was soon evident that the borrower required a bridging facility as they were unable to remortgage in such a short space of time.
Hope Capital facilitated a short-term facility that gave the borrower enough time to source a long-term lender. By taking advantage of the debt forgiveness deal, the borrower was able to wipe £750,000 from their debt and, as a result, was able to keep the property in their portfolio.

Thanks to debt forgiveness, borrowers can write away their existing debts with the banks and move on to secure long-term finance options. In turn, we can grow our offering further which reinforces our proposition in the bridging market and, due to a number of successful debt forgiveness deals, we will always look at each case on its individual merits. It’s a win-win situation.