BBC News: America's house price time bomb

brit1234

MyOpinion wrote: »

This situation is less likely to happen here as UK banks are in a much stronger position to chase outstanding debts for much longer (at least 10 years, longer if they can keep in contact with you). Why don't the Americans change to laws to make it harder to walk away, this will then help stableise the market by reducing the supply of repossessed property.

However the banks here may be better at chasing but they are more exposed to risk. Where the US housing market had a large housing bubble it is well recognised that the British housing market was far more overvalued as states the likes of the IMF.

Where the US had a big subprime problem the UK has a bigger problem in terms of the buy to let sector (interest only morts.), fraudulent self cert morts. as well as equity release. Its going to get really bad here and remember the USA is 18 months ahead of us in this downturn. Our market is down turning faster than theirs so just imagine what it will be like when we get to the same stage 18 months down the line.

dudleyboy

"The losses for the financial system from people walking away could be of the order of one trillion dollars when the entire capital of the US banking system is only $1.3 trillion.

RichardDJ wrote: »

Ouch..that's an insane claim, insane in terms of the impacts could be unimaginable.

I've just had this vision that some day, about 5-10 years from now, there will be millions of US citizens heading south, under the cover of night, trying to cross the Mexican border illegally in the hope of a better future.

Just as long as they don't come here, taking what few jobs we have and trying to get their liposuction on the NHS, what, what. I can see the Daily Mail headlines now...

ManAtHome

The IMF forecast $1.2 trillion around 6 months ago, most US economists were forecasting $600-800 from sub-prime (IMF were probably ahead of the curve on the "prime" walk-aways). BoE declared the crunch over in March after $320 billion write-offs.

Wonder who's going to win the sweep...?

BobProperty

Both the situation with recourse and non-recourse loans vary from state to state, as do bankruptcy laws. One blogger I follow is going bankrupt and that state allows you to keep your house in some circumstances. (It also allows you to keep your best cow and one firearm valued less than $500 provided you need it for business. It's not just us who have old laws.)

mewbie_2

BobProperty wrote: »

..allows you to keep your best cow and one firearm..

That's the weekend sorted then...

harryhound

Congratulations to the posters who originally highlighted this threat to the banking system.
Hidden in the repetitive banter here on the MSE forum, there are factual gems of more information.
The debate continues over in USA:

http://blogs.wsj.com/developments/2008/02/29/new-attitude-its-ok-to-walkaway-from-a-mortgage/

Pobby

Over here in the Uk. I know of one person who paid back the difference between purchase and forced sale after his place was repossesed after the last crash. The rest either paid back a tiny percentage of what they owed or just stuck 2 fingers up.

Looking back, I was shocked that by 2002 my house had gone up by over 100% in three years, certainly further shocked that in 2007 it had risen by 400% (wish my pension fund had done the same). It was in 2002 that I heard alarm bells ringing. I like to think that if I was in charge of some mortgage advisory what`s it I might have been concerned that we were lending to a highly speculative market.

The fact remains that a lot of people are and will walk away from these mortgage debts by either going bankrupt or indeed going into rented accomodation and not honouring the outstanding debt to the lenders.Sure credit ratings will be shot but that`s it. If ya ain`t got the cash, ya can`t pay back.

All the carp lenders are going to take a bath on this. What really p-sses me off is that one way or another I will end up paying for it.

mewbie_2

Pobby wrote: »

Looking back, I was shocked that by 2002 my house had gone up by over 100% in three years

Had you put in laminate flooring?

lynzpower

mewbie wrote: »

Had you put in laminate flooring?

:rotfl: if not pobs, you missed the boat you could have doubled it yet again :D:D

Dithering_Dad

mewbie wrote: »

Had you put in laminate flooring?

It was those magnolia walls and well placed accessories so beloved of the House Doctor.