Owners handing in the keys

baby_boomer

Independent - a "cry for help" not seen since the early 1990s

"In scenes reminiscent of the dark days of the last recession, mortgage lenders and debt charities are seeing desperate owners offering their homes for repossession. Four of the UK's biggest mortgage lenders have said that people are simply posting them the keys and walking away from the properties rather than face court action....."

But it's not a magic bullet as the house can still take months to sell and the auction prices are a better reflection of where the market is heading - as we've seen on these boards.

And the mortgage holders are still liable.

"....Legally, mortgage lenders have 12 years after last contact to chase up a shortfall. However, under a voluntary agreement between the Council of Mortgage Lenders and its members, anyone who has not been contacted by their lender within six years from the date of sale will not have to cover any shortfall. Often what happens, though, is that mortgage lenders sell on bad debts to a third party who then pursue the debtor to the legal time limit."

FT

"....Voluntary repossessions involve the bank selling the property at auction but this will not show up in official figures as a repossession because there has been no court order...."

Pobby

I knew a few who were forced to hand back the keys in the early 90s. I only know of one person who paid the 20 something k shortfall. As for the others, one paid a tiny fraction of what was owed and that didn`t stop him from buying again. Another, not wishing to buy, has just ignored the debt.

mystic_trev

Sorry BB - Didn't see this and have started another thread - apologise! Great minds and all that!

mystic_trev

Let's face it if your stuffed with a large mortgage in negative equity, and are struggling to pay it, why not? Add to that all your credit card debt, you may as well go Bankrupt and have the 'slate wiped clean' in a year, by which time you'll probably be able to rent cheaper than your previous mortgage payment.

97trophy

We know 3 people who handed the keys back in during the early 1990s. 2 paid back nothing further to the bank, the third paid 20% back and was given 10 years to do so.

Trev - I think you make a good point. Perhaps this is what is going to happen next.

baby_boomer

If so, banks and building societies will have far with more bad debt than in the 1990s, obviously compounded by the bigger house price falls and more 100% mortgages.

It's not surprising that the banks are trying to hang onto a large share of those interest rate cuts as they desperately seek to replenish capital.

WTF?_2

mystic_trev wrote: »

Let's face it if your stuffed with a large mortgage in negative equity, and are struggling to pay it, why not? Add to that all your credit card debt, you may as well go Bankrupt and have the 'slate wiped clean' in a year, by which time you'll probably be able to rent cheaper than your previous mortgage payment.

If you're in negative equity, still have a job and have demonstrated a good payment record on the mortgage you might even be able to keep the house should you go bankrupt. It's not in the lender's interest to repossess on a bankrupt if they know the house will make a loss when sold, as they will lose that money and since there's no equity in it the Official Receiver has no interest in taking it. Plus paying the mortgage will be easier to do when all the unsecured debts are wiped.


I think that a lot of people are going to be taking the bankruptcy route and that it will as a consequence be made considerably harder to do so and/or have more repercussions on the individual. As in, no credit of any kind for a decade. That sort of thing.

Gorgeous_George

mystic_trev wrote: »

Let's face it if your stuffed with a large mortgage in negative equity, and are struggling to pay it, why not?

Self respect?

GG

hethmar

Yes, this happened in our street in the early 90s BUT have to say at that point the interest rate was 15% and the people just couldnt manage to pay their mortgages. Surely at the moment people dont have that burden of high interest so I cant understand why they would have to do it?

baby_boomer

It's a good comparison.

Interestingly mortgage rates came down from 15% at the start of 1990, to 6% at the start of 1993 - but the housing slump continued for a while afterwards.

hethmar

Well baby boomer, Im pretty sure ours did. I also remember buying NSI baby bonds at that time with 12% interest, tax free.:)