Article on FT - Who is probable to default more even in the Subprime category

Romani_Ite_Domum

lostinrates wrote: »

Yes, I understand...vaguely:o , the indirect effect, but I notice that lotsof threads on the main property board are talking about 'handing back the keys' and 'voluntary reposession' recently....which IIRC -and I might not- are NOT options here??

No, not an option here. Imagine if it was!

The idea, that in the US, people with good credit scores and under no financial strain are making a financial decision to hand back the keys must have bankers twitching thier rings all over the world!

Forget subprime, this is the next phase!

harbinger13

lostinrates wrote: »

Yes, I understand...vaguely:o , the indirect effect, but I notice that lotsof threads on the main property board are talking about 'handing back the keys' and 'voluntary reposession' recently....which IIRC -and I might not- are NOT options here??

Depends on the thinking of the borrowers - essentially people tend to take the easy way out (general evolution) - we all try to do things in a easier way if we can. So if most borrowers are immigrants who 'invested' in the house for quick money - might just cut losses by throwing the keys 'jingle mail'; finish their tenure here and return.

For long-terms they have no choice other than to pay up for a falling equity asset.

WTF?_2

Romani_Ite_Domum wrote: »

No, not an option here. Imagine if it was!

The idea, that in the US, people with good credit scores and under no financial strain are making a financial decision to hand back the keys must have bankers twitching thier rings all over the world!

Forget subprime, this is the next phase!

I really can't see this happening - why would anyone living in a house they were happy with and able to comfortably meet the repayments simply jack it all in and hand the keys to the bank just because their house was worth less than the outstanding mortgage?

They'd be trashing their credit rating and facing upheaval for what, exactly? They wouldn't get a mortgage for another (cheaper) house handily and assuming they were subject to credit checks prior to renting, wouldn't find it easy to rent either.

Handing back the keys is a measure of last resort, or very close to last resort. If they were running a deficit in spending and facing a choice of 'what essential bills can I afford to pay?" then I could understand it but people living inside their means? No way.

dopester

!!!!!!? wrote: »

I really can't see this happening - why would anyone living in a house they were happy with and able to comfortably meet the repayments simply jack it all in and hand the keys to the bank just because their house was worth less than the outstanding mortgage?

They'd be trashing their credit rating and facing upheaval for what, exactly? They wouldn't get a mortgage for another (cheaper) house handily and assuming they were subject to credit checks prior to renting, wouldn't find it easy to rent either.

Handing back the keys is a measure of last resort, or very close to last resort. If they were running a deficit in spending and facing a choice of 'what essential bills can I afford to pay?" then I could understand it but people living inside their means? No way.

I've closed the FT article now but I think it indicated that after 8 months you'd be in the clear after handing keys back (like you I presumed it will affect credit rating).

However it could still be a compelling reason to jingle-mail the keys back if you're in negative equity by $30K, $50K, $100K and unlikely to see it return to peaks in your lifetime (say 25 years). [I know you expect some few years rapid return to house prices recovering but I doubt it]

If your still in employment, (and even better if you have separate savings with another financial institution) you could rent, or wait the 8 months out and let the wife buy a new house at lower market values in her name - thus freeing you of potential negative equity debt for the future (assuming banks will still give new mortgages in 8 months). After all, why not take advantage of jingle mail now, if the laws could be changed in the future.

neverdespairgirl

lostinrates wrote: »

Yes, I understand...vaguely:o , the indirect effect, but I notice that lotsof threads on the main property board are talking about 'handing back the keys' and 'voluntary reposession' recently....which IIRC -and I might not- are NOT options here??

It is an option to hand back the keys, but here if the place is sold by the bank for less than the outstanding mortgage, they can come after you for the rest for at least 12 years.

lostinrates

neverdespairgirl wrote: »

It is an option to hand back the keys, but here if the place is sold by the bank for less than the outstanding mortgage, they can come after you for the rest for at least 12 years.

Thank you for the explanation.

Jonbvn

I think it is very important to draw a distinction between the US & the UK regarding handing back the keys. In the US, they are able to handover the keys and they are in the clear (apparently this law was introduced during the great despression). In the UK you would not be in the clear, as detailed in NDG's post above.

Generali

Jonbvn wrote: »

I think it is very important to draw a distinction between the US & the UK regarding handing back the keys. In the US, they are able to handover the keys and they are in the clear (apparently this law was introduced during the great despression). In the UK you would not be in the clear, as detailed in NDG's post above.

I think it varies state-by-state.

WTF?_2

Generali wrote: »

I think it varies state-by-state.

Yes - there are states where mortgages are 'recourse' loans also other 'non-recourse' states.

If you're in a state where mortgages are 'recourse' loans then you are more or less in the same situation as a UK borrower would be in.

I think most are 'non-recourse' when it comes to mortgages though.

http://en.wikipedia.org/wiki/Nonrecourse_debt