People in thier 60's being forced to sell homes.

chewmylegoff

RenovationMan wrote: »

Thanks cmlo, most of what you put there was the point I was going to make. The bank has very low risk and instead of receiving the balance and that's the end of it, they will continue to receive years worth of extra interest and then have the balance paid off.

Rather than reposesses, the more likely scenario would have been that they received interest for years (how nice for the bank's profits) until the lady died and the house passed onto the children. The children would then have the option to sell the house or live in it themselves. Either way they would be expected to continue servicing the mortgage debt.

I fail to see what the problem here is. If the lady keeps the IO mortgage going for another 30 years via her pension, then the ramifications are that the bank makes a huge profit on the initital loan at very little risk and the lady gets to live in her home until she dies with very good security of tenure.

Who is actually losing out?

well, one way of looking at who is losing out is this:

there are certain members of this forum who like to go on and on about banks rationing mortgages and how this is creating a dysfunctional market.

of course, there is only a limited amount of capital, and banks are limited through regulatory rules as to the number of times leverage they can apply to that capital.

so if 1.5 million people on IO mortgages don't pay off their capital at the end of their term, and the bank agrees to just let them keep paying the interest, that is capital that cannot be recycled through the system and lent to someone else.

so basically anyone who wants to buy a house in the future may be somewhat affected through the lack of availability of mortgage finance.

therefore it seems to me that all homeowners (through the lack of financed buyers) and all aspiring homeowners (through the lack of finance) may potentially be affected by the impact that this capital hogging (as i have just decided to pejoritavely name it in order to ensure someone goes schitz at my post) might have on the housing market as a whole.

although obviously it would take more than one woman sitting on £140,000 of capital to have an impact, the stats talk about 1.5 mortgages "worth" (so presumably capital value) £120 billion. i think that's something to think about for anyone who thinks the housing market is dysfunctional and wants a return to "normal lending".

(NB/ the total of all UK mortgage debt is approx £1,242 billion, so if banks do not enforce the repayment of capital at the end of IO mortgages, we are looking at 10% of the capital being sat on and not recycled which i think is likely to have a significant effect on everyone involved in the housing market).

Another point is that if the bank doesn't call in the mortgage and then use the money to make a new mortgage to another person, it cannot charge them £1k+ arrangement fee and a stupid valuation charge of £500+.

PS. I didn't put that angry smiley there, MSE forum appears to be going a bit mad.

RenovationMan

Graham_Devon wrote: »

What have the changed their mind on?

It's an IO mortgage. Balance payable at maturity. They are asking for the balance to be paid (we assume, at maturity, but OP won't fill us in any longer).

Do you ever read other people's posts Graham? It's all detailed in my post, indeed in several of my posts.

It's tiresome explaining stuff to you countless times. Either you are too dense to understand these things (and if so then you should post about tampons on discussion time) or you are deliberately pretending to be thick in order to muddle up the thread.

Just to help you try and understand....

Do you think that when this lady first got her mortgage that her provider arranged it so that the maturity would occur in her 71st year?

RenovationMan

Jimmy_31 wrote: »

Oh are you getting tired of all the lies again, better log off and let this thread slip back a few pages then hadnt you.

You should log in with one of your other sockies. This one is a bit lame. :rotfl:

shortchanged_2

wotsthat wrote: »

If the little old lady has equity of £360,000, a solid repayment history, and the means to keep up the repayments then Santander could consider keeping the mortgage going.

A solid repayment of what. Interest.

She has taken out a loan for a period of time and times up so she needs to settle the balance. What is so complicated about that?

Graham_Devon

RenovationMan wrote: »

Do you ever read other people's posts Graham? It's all detailed in my post, indeed in several of my posts.

It's tiresome explaining stuff to you countless times. Either you are too dense to understand these things (and if so then you should post about tampons on discussion time) or you are deliberately pretending to be thick in order to muddle up the thread.

Just to help you try and understand....

Do you think that when this lady first got her mortgage that her provider arranged it so that the maturity would occur in her 71st year?

If she stated she had a repayment product, or suggested she did, thay would cover the balance at 71, why not? Do investments stop and dissapear at 60/65?

I'm still confused as to what they have changed their mind on, but if all I am going to get is insults everytime I ask a question then I really cannot be bothered conversing further.

Emy1501

RenovationMan wrote: »

I would have thought though that as a group, pensioners are quite a good risk. They have a guaranteed income, they have a lot of equity built up in their homes, they have strong ethics where meeting their obligations are concerned, they have pretty basic financial requirements. Certainly a lower risk than say lending to a young couple with a large mortgage, little or no equity, an expensive lifestyle and the possibility of splitting up and leaving a mortgage neither can afford to service on their own (as we see of often on these boards).

While it's not the ideal to have mortgages than run in perpetuity, sh*t happens sometimes and as long as the bank continues to make a profit and has little or no risk of making a loss then I don't see an issue in helping someone out in this scenario.

I feel that the bank should have asked about the possible shortfall when the lady retired (aged 60?) and put something in place where the balance of the shortfall was paid off a bit at a time over the next 10 years or whatever. To allow the mortgage to run for what, 11 years after her retirement and then turn around and act all surprised and go "Oh, we've just realised that you owe us £100k, can we have it back please" is a pretty poor show.

I suspect the bank will say its down to the borrower to make sure that they have the finances at term. If in future it is put down to the lender to do this then I suspect costs of mortgages will get evn higher to cover this.

I have no idea about the risk over covering thoses over 60 but as no lender seems interested i suspect the risks in general are pretty high.

With 150K IO mortgages coming to term per year over the next 10 years and the FSA suggesting 80% of these have no obvious repayment vehicles i suspect there will be a market though for a lender who believe these people represents a risk worth taking.

shortchanged_2

chewmylegoff wrote: »

well, one way of looking at who is losing out is this:

there are certain members of this forum who like to go on and on about banks rationing mortgages and how this is creating a dysfunctional market.

of course, there is only a limited amount of capital, and banks are limited through regulatory rules as to the number of times leverage they can apply to that capital.

so if 1.5 million people on IO mortgages don't pay off their capital at the end of their term, and the bank agrees to just let them keep paying the interest, that is capital that cannot be recycled through the system and lent to someone else.

so basically anyone who wants to buy a house in the future may be somewhat affected through the lack of availability of mortgage finance.

therefore it seems to me that all homeowners (through the lack of financed buyers) and all aspiring homeowners (through the lack of finance) may potentially be affected by the impact that this capital hogging (as i have just decided to pejoritavely name it in order to ensure someone goes schitz at my post) might have on the housing market as a whole.

although obviously it would take more than one woman sitting on £140,000 of capital to have an impact, the stats talk about 1.5 mortgages "worth" (so presumably capital value) £120 billion. i think that's something to think about for anyone who thinks the housing market is dysfunctional and wants a return to "normal lending".

This is exactly the point. But then Renoman can only see the little old ladies example and he can't apply it to the rest of the market.

Jimmy_31

RenovationMan wrote: »

You should log in with one of your other sockies. This one is a bit lame. :rotfl:

I havent got one.

I think this is what annoys you.

silvercar

If the lender refused to extend the term of the mortgage and the little old lady was not in a position to repay the loan, the lender has 2 options:

1. to continue to take payments
2. to apply to court to repossess the property.

A judge then may or may not grant repossession, a judge may instruct the little old lady to place her house on the market, a judge could order a suspended repossession order ont he condition that the little old lady continued repayments.

The little old lady could make a complaint to the lender, and ultimately the FOS at the way she has been treated. Assuming the lender has signed up to Treat Customers Fairly the ombudsman could rule on whether the lender had behaved reasonably or not.

RenovationMan

Graham_Devon wrote: »

If she stated she had a repayment product, or suggested she did, thay would cover the balance at 71, why not?

I'm still confused as to what they have changed their mind on, but if all I am going to get is insults everytime I ask a question then I really cannot be bothered conversing further.

Oh your poor hurt feelings Graham. I guess you like to dish out insults but not take them?

I'll try again for the millionth time to explain what they have changed their minds on. If you dont get it this time then you're clearly an idiot or just trolling. Fair enough?

This old lady is not just retiring, she retired 10 years ago. Her mortgage product, like everyone else's would have had an end date of before or on her retirement date (my own mortgage term was reduced from the standard 25 years because I hit retirement age before then).

When the little old lady's original mortgage hit term, the bank will have said "OK, your mortgage is up, can we have our money back please". The little old lady will have then said "I can't pay off £100odd thousand because my endowment had a shortfall (or whatever), what can I do?" The bank will then have said "We will set up a new mortgage product where you continue to pay the mortgage on an IO basis".

They must have done this in order for the little old lady to be in her 70s and still have an IO mortgage.

Now they turn around and say "We've had a CHANGE OF MIND and would like our money back please".

So let's recap for you.
1. The bank extended the lady's mortgage past the normal mortgage term and into her retirement years.
2. The bank knew that the lady had no repayment vehicle, because if she had then they would not have had to do step 1.
3. The bank COULD have insisted that a portion of the extended mortgage was repayment so they could reduce the debt and reduce their risk. They clearly didn't.
4. Years later, the bank changes the arrangement and now asks for their money back.

Do you understand now?