Standard & Poor's warns of wave of house repossessions

MissMoneypenny

treliac wrote: »

The alternative is that rented accommodation will have to be found, a move funded and the new rent payments funded. All the upheaval where children are involved. They're not going to be put out on the street.

I'm not disagreeing with you but there don't seem to be any easy answers. The best answer is for people to be in work but how realistic is that for everyone at the moment?

It's not just the mortgage payments they get, but all the other benefits they claim too, which will add up. Children can move areas without too much upheaval: thousands do it.

Agree that jobs would be better, but some find they are better off claiming certain benefits and getting their mortgage paid as they will often have more disposable cash on benefits. They will also feel safer on benefits rather than working, as they know the government will keep paying their mortgage if they continue to claim: whereas a time limit for all claiments on SMI, would stop that.

There is a thread on the benefits board now where someone has turned down a job because she wants to continue to have her mortgage paid by the government (who have been paying it for 10 years). https://forums.moneysavingexpert.com/discussion/2718217

HAMISH_MCTAVISH

LydiaJ wrote: »

Thanks NDG. I didn't know that.

It would be interesting to know how the sub-prime crash has played out in states with different rules about this, and whether there's a correlation. I've no idea where to look for that kind of information, though.

From various websites:

Here is the list of non-recourse, and/or non-judicial foreclosure states.

In these states, generally, when lenders foreclose on you, they cannot pursue you for their financial losses.

Many, such as California, do in theory allow a lender to choose judicial foreclosure but in those cases the lenders only do so if a borrower has significant other assets.

This is the "one action" rule that lets the lender either pursue non-judicial foreclosure, at lower cost and less time, or judicial foreclosure that costs more money and takes more time but lets them pursue the defaulter for their financial losses.

Alaska
Arizona
Arkansas
California
Colorado
District of Columbia (Washington DC)
Georgia
Hawaii
Idaho
Mississippi
Missouri
Montana (as long as non-judicial foreclosure is used)
Nevada - note that the lender CAN get a deficiency judgment (See below)
New Hampshire
Oregon
Tennessee
Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
Virginia
Washington
West Virginia

These are states that also allow non-judicial foreclosure, and/or where non-judicial foreclosure is more common and deficiency judgments can be obtained more easily:

Michigan
Minnesota
North Carolina
Rhode Island
South Dakota
Utah
Wyoming

So a majority of states are non-recourse and/or allow non-judicial foreclosure, but not all. There are other reasons of course why America had a much bigger crash than we did.

1. Far more sub prime mortgages as a percentage of the mortgage market
2. Much worse terms and more mis-selling of sub-prime loans
3. Very poor or fragmented regulation of mortgage lenders and sales of mortgages.
4. Bankruptcy being less socially stigmatising
5. A significant oversupply of houses versus a significant shortage of houses here

etc....

Generali

There is another twist now in the US housing market vis-a-vis repossessions.

To repossess you have to prove that there is a debt. If you have sold the debt on via an Residential Mortgage Backed Security and then that has been packaged into a CDO and that CDO has been repackaged and so on then that may not be straight forward. Some legal firms in the US now apparently offer a subscription package to put off foreclosure (sorry NDG) possibly indefinitely for a few hundred bucks a year. In some cases banks are really struggling to prove they are owed money.

GDB2222

That's extraordinary. After all, whoever drew up the CDO documentation ought to have thought about this issue. Someone's been negligent?

Generali

GDB2222 wrote: »

That's extraordinary. After all, whoever drew up the CDO documentation ought to have thought about this issue. Someone's been negligent?

Yes they have.

To be fair, it's very easy to declare that a new business model is negligent after the fact. Before things have been tested in court it's harder to say.

You are right though. It is very, very poor.

GDB2222

To be fair, the banks just wanted to shift this stuff off balance sheet and book their profits. Did they care about the quality of what they were selling? Not as long as it was still selling.

I don't know whether the ratings agencies have some obligation to take account of the documentation? It seems daft if they don't. Still, they were obviously wrong with their ratings, so it would be no surprise if they slipped up with the docs. Or turned a blind eye.

tomterm8

Generali wrote: »

There is another twist now in the US housing market vis-a-vis repossessions.

To repossess you have to prove that there is a debt. If you have sold the debt on via an Residential Mortgage Backed Security and then that has been packaged into a CDO and that CDO has been repackaged and so on then that may not be straight forward. Some legal firms in the US now apparently offer a subscription package to put off foreclosure (sorry NDG) possibly indefinitely for a few hundred bucks a year. In some cases banks are really struggling to prove they are owed money.

Goes beyond that, Generali, in a lot of US states there is a legal requirement to hold the deed to a mortgage. Even if you can prove that you own the mortgage, without a properly notorised deed you can't reposess. A decade ago, most US banks moved over to electronic systems along with CDO's... and it turns out, in order to save money, they didn't store the deeds correctly.

Once people found out that (a) banks didn't find the deeds and (b) banks can't reposess without the deeds they came to the conclusion (c) screw them.

There have been a few cases where banks came to the conclusion (d) lets forge a mortgage deed.