can you see a day when people can walk away from a mortgage!?

de1amo

İ was reading with interest about the situation İreland and the state of its property market--it is 'estimated' that there will be so many repossessions that lenders will no longer pursue the defaulters which is what goes on in the USA--the basis of the premise is that if someone has no assets how can you chase them for the debt.--When İreland folds and if the financial malaise crosses the İrish sea which isnt beyond the imagination with all that is happening--what is the future??
İs it time to jump ship and jetison my mostly owned home?--i own about 66pc at current prices!

silvercar

More likely lenders won't repossess but wait for house prices to increase so that the properties can be sold without the negative equity.

de1amo

from my experience of what went on in the late 80s-banks dont like becoming landlords and they reposses as a matter of duty to its shareholders and other clients!

CLAPTON

US is a different story as their system allows, in certain situations, people to walk away from a mortgage and become debt free.
I don't see that happening here.

In Ireland the amount of building was completely mad; whereas in the UK there is still a storage of housing; the problem here was the asset price bubble and the current shortgage of mortgages

tomterm8

CLAPTON wrote: »

US is a different story as their system allows, in certain situations, people to walk away from a mortgage and become debt free.
I don't see that happening here.

In Ireland the amount of building was completely mad; whereas in the UK there is still a storage of housing; the problem here was the asset price bubble and the current shortgage of mortgages

It's not that different, the bulk of the crises is in states like Florida or California which are generally recourse.

The reality is that people do walk away from mortgages, even in the UK, and if you know the system you can generally do a deal and get away with it. The bank will pass it on to a debt collection company, and the debt collection company will want to do a deal rather than getting paid £5 a month for years.

At the end of the day, by the time you have been reposessed, there is generally very little the mortgage company can do to you. Your credit rating is already messed up, so you would lose nothing by declaring bankruptcy; after a year, you are debt free. Or they can do a deal for a few pence in the pound.

lemonjelly

de1amo wrote: »

İ was reading with interest about the situation İreland and the state of its property market--it is 'estimated' that there will be so many repossessions that lenders will no longer pursue the defaulters which is what goes on in the USA--the basis of the premise is that if someone has no assets how can you chase them for the debt.--When İreland folds and if the financial malaise crosses the İrish sea which isnt beyond the imagination with all that is happening--what is the future??
İs it time to jump ship and jetison my mostly owned home?--i own about 66pc at current prices!

The thing is, chasing any debt incurs a cost. What you have to decide, is whether you are likely to recover any/all of the outstanding money, or alternatively whether you are simply throwing good money after bad. If it is going to cost you more than you are likely to recover, any business will have to decide whether it is worth pursuing?

I previously worked for a HA, & although we kept a record of former tenants arrears, there were a hell of a lot we would be told to treat as written off, & in reality would only seek to recover when the person re-applied for housing, as it just didn't make sense to be expending a lot of time/cost/effort to recover proportionately very little.

You can also walk away now, & provided that the lender can't trace you for 6 or 12 years, the debt will become statute barred. This may impact on your credit rating though.;)

lemonjelly

tomterm8 wrote: »

It's not that different, the bulk of the crises is in states like Florida or California which are generally recourse.

The reality is that people do walk away from mortgages, even in the UK, and if you know the system you can generally do a deal and get away with it. The bank will pass it on to a debt collection company, and the debt collection company will want to do a deal rather than getting paid £5 a month for years.

At the end of the day, by the time you have been reposessed, there is generally very little the mortgage company can do to you. Your credit rating is already messed up, so you would lose nothing by declaring bankruptcy; after a year, you are debt free.

If you're going bankrupt, to be honest the simple plan, is stop paying the mortgage. Your home is an asset that the official reciever will have to deal with, & ultimately will be sold to pay off creditors. No point spending money on a house you're never going to own, as you won't be discharged still owning it.

The OR, whilst dealing with your affairs will select a time to sell the property. I can honestly say I've seen cases where this has taken 2-3 years (a colleague has a case at the mo where we are suprised that the OR still hasn't sold the property 3 years after the bankruptcy order). To be honest, may as well live rent free for that time & use your funds to clear other creditors.

de1amo

if İreland goes under i can see it exporting people as they have done in history- thus leaving under population-i dont think its beyond the imagination of it happening in the uk as well--the poles etc have abandoned these shores(thus leaving further stretching of the purse strings by lowering the tax revenue they paid)--they were suspose to stay and help lower the average age and pay for the aging population--we have got older and the social engineering has failed--the government is also engineering lowering the rental revenues by its housing benefit changes--the home ownership model seems to be under attack from every direction--as landlords see no profit in renting they will pull out leaving another downward pressure on the prices-as i see its a receipe for a massive correction that will last my lifetime!!-i cant see prices ever coming back to previous levels and rents going the same way!

Thanks for ther replies--i am not in debt--i live abroad and my home in the uk is a second home --my wife insists i keep it as security but i am worried about how the property market will 'go'--i have seen crisis before back in the 1980s but this seems a perfect storm of a western world magnitude! the portents of which eminates from the USA housing market and the toxic debt--i see a day soon when the US gov will stop printing money and the losses will come home to roost --the defaulter's losses!

Generali

Ok, worst case scenario (assuming people don't get really carried away) is total default. That is the monetary system falls over because nobody can repay their debts because nobody else can.

Who starves? The farms still produce corn and carrots. Doctors still have their skills and hospitals haven't disappeared. Teachers teach in the old schools.

Standards of living drop because you can only buy to the same value of what you've sold. You're probably only looking at a return to the 1980s or 1970s though. Even then you have C21st technology.

de1amo

i accept we have 21st century technology but so does our competitors!--in the 70s we got out of the 'hole' because of assets---oil and a newly formed financial service industry--i find it hard to see where the next 'saviour' will come from!
İ do agree that the standard of living will drop along with the correction in all 'equitable assets'--what worries me about holding an asset there!--please brighten up my austere outlook for the uk!!!

Loughton_Monkey

Given that it takes, they say, at least 6 years to become discharged from bankruptcy, I thought it worth asking myself if there were any circumstances (in history since 1973) when the value of one's house would not show a gain within this 6 year period.

From Nationwide All Areas, I find a period of only about 2 years or so where this would have been the case. Those who bought in the period mid 1988 to mid-1990 could have found themselves - 6 years later - with a total reduction in value of some 17% to 18%. If you extend the period to a more realistic 8 years, then any reduction in value over that period is almost eliminated. In other words, take a reasonably "worst case" of someone buying at the 'peak' of Q3 1989 - who immediately gets made redundant and cannot afford the mortgage, having to decide whether to 'grin and bear it' - or to run away with unsatisfied debts. This person would almost certainly be regretting that decision some 6 years later when coming out of bankruptcy.

It is accepted, though, that some people have little choice.