Novel model to prevent repossessions with banks showing their moral standing

davilown

Ok, before anyone starts, I have no idea what I'm talking about but here goes:

Is this a possibility for the current financial situation in order to prevent excessive repossessions?

Flat bought 2007, £100K.
Mortgage £600 pm
Owner loses overtime/shift allowance meaning he can now only afford to pay £400.
Tries to sell, Flat valued Jan 2008 at £75k
Defaults on six months so bank goes to court for a repossession order.

Two options arise:

1. The bank repossesses and sells the flat for £50k at auction. Owner declares bankruptcy, therefore bank are -£50k plus fees.

2. Owner renegotiates mortgage to £73k and the bank takes on shared ownership in the flat (33.3%r). Therefore bank are potentially £27k and not £50k+ down

Or should be homeowners who cannot afford their homes anymore be kicked out and the banks potentially lose a lot more?

As I said before, this is just my idea and will probably show my naivety to the banks but I believe this would redeem the banks ever so slightly to the general public/

treliac

There'd have to be a way of ensuring that the agreed mortgage payments were made and that any freed up money was not frittered away on life's unessential fripperies.

louiser123

sounds good to me but i like you am not au fait with complex financials however watch this space wouldnt it be funny if old gordie actually brought this in!!

Cleaver

louiser123 wrote: »

sounds good to me but i like you am not au fait with complex financials

Neither are the banks.

treliac

Cleaver wrote: »

Neither are the banks.

They can run rings round the govt though. :rolleyes:

poppy10_2

davilown wrote: »

O
2. Owner renegotiates mortgage to £73k and the bank takes on shared ownership in the flat (33.3%r). Therefore bank are potentially £27k and not £50k+ down

And what happens a year later when the flat is valued at 50k?

treliac

poppy10 wrote: »

And what happens a year later when the flat is valued at 50k?

Spoilsport !!!

chopperharris

davilown wrote: »

Ok, before anyone starts, I have no idea what I'm talking about but here goes:

Is this a possibility for the current financial situation in order to prevent excessive repossessions?

Flat bought 2007, £100K.
Mortgage £600 pm
Owner loses overtime/shift allowance meaning he can now only afford to pay £400.
Tries to sell, Flat valued Jan 2008 at £75k
Defaults on six months so bank goes to court for a repossession order.

Two options arise:

1. The bank repossesses and sells the flat for £50k at auction. Owner declares bankruptcy, therefore bank are -£50k plus fees.

2. Owner renegotiates mortgage to £73k and the bank takes on shared ownership in the flat (33.3%r). Therefore bank are potentially £27k and not £50k+ down

Or should be homeowners who cannot afford their homes anymore be kicked out and the banks potentially lose a lot more?

As I said before, this is just my idea and will probably show my naivety to the banks but I believe this would redeem the banks ever so slightly to the general public/

quite frankly its a commonsense statement , however there is other situations to add.I doubt any bank would offer a shared ownership mortgage ever....but given the climate never say no.http://www.godirect.co.uk/mortgages/shared-ownership-mortgage.php

The bank got loaned the money from else where , ie third party usually other banks , they need their payment for its loan too as its a domino debt.The best course of action is purely based on the personal side of each of them , the bank needs money and has assets (the house)that are of a part of its debt....so sells the house to reduce its loan book and writes down the rest.The poor guy , whom only ever owns debt not the house itself , is now getting a loan for a cardboard box....from micky the chin.

I agree that on the face of it it would be better for the bank to take a 25k hit , it looks like the better maths , but theres more to it than either/or in lending.The loan was 100k , its actually gonna lose upto half of that maximum , ie 50k....more if theres little interest at auction.

There is however another option , remortgage , but with layoffs and less offers for mortgages then that would be difficult.

How about the bank sells property for what ever it gets , splits the difference with the debtor and rather than declaring himself bankrupt HE actually pays it off.Bank writes its loss off , next bank that gave them thier loan does the same....credit crunch domino effect is lessened....more mortgages become available and the house prices stop falling.

The bank extending the mortgage for longer terms , and at a better term rate that works for the three of them (including the two banks), is perhaps the best option.But thats not on your list.

BAnkruptcy law will probably get some serious changes in the next year ,time to pay will end up the same as an iva , and I reckon we wil be looking at longer terms of the loss of cheap credit facilities afterwards.When it comes to mortgages then insurance premiums will sky rocket for perhaps a decade or more , and really big deposits needed for any declared bankruptcy/iva etc for a mortgage for up to a decade afterwards.

its not a property ladder now , its property snakes and ladders.

treliac

chopperharris wrote: »

BAnkruptcy law will probably get some serious changes in the next year ,time to pay will end up the same as an iva , and I reckon we wil be looking at longer terms of the loss of cheap credit facilities afterwards.When it comes to mortgages then insurance premiums will sky rocket for perhaps a decade or more , and really big deposits needed for any declared bankruptcy/iva etc for a mortgage for up to a decade afterwards.

its not a property ladder now , its property snakes and ladders.

Like it !!!

davilown

chopperharris wrote: »

quite frankly its a commonsense statement , however there is other situations to add.I doubt any bank would offer a shared ownership mortgage ever....but given the climate never say no.http://www.godirect.co.uk/mortgages/shared-ownership-mortgage.php

There is however another option , remortgage , but with layoffs and less offers for mortgages then that would be difficult.

How about the bank sells property for what ever it gets , splits the difference with the debtor and rather than declaring himself bankrupt HE actually pays it off.Bank writes its loss off , next bank that gave them thier loan does the same....credit crunch domino effect is lessened....more mortgages become available and the house prices stop falling.

The bank extending the mortgage for longer terms , and at a better term rate that works for the three of them (including the two banks), is perhaps the best option.But thats not on your list.

.

Thanks for that, do you mind if I add it to the first post?
:beer:

purch

Ok, before anyone starts, I have no idea what I'm talking about but here goes:

There should be a Forum Rule that makes everyone start their posts with that line !!!!