Lender forbearance becoming “a sick joke”

homelessskilledworker

ILW wrote: »

So moral hazard should not apply to homebuyers then?

It seems as if being a homeowner in todays UK is the Usain Bolt in moral hazard avoidance.
If you can't pay your mortgage, no worries the Government will pay it for you. Interest rates were too high, again no worries we will reduce them to a level where they will help those that probably borrowed far too much, and stuff the sensible savers. They should have been far more financially savvy and worked out that DEBT is the new black this summer.
And even with all this help and you STILL cannot pay the mortgage, again no worries we will force the Banks/lenders not to reposses until you are on the straight and narrow or(what the hell) in even more debt.

However if you live within your means, save and take responsibility for your life then you are constantly dismissed as unclean in the UK today. Or to put it another way, if you do not play the victim in todays Britain you are a victim

work it out!!

If you are a reckless debtor with a massive mortgage then you are deemed deserving of as much state intervention as the property porfollio owning government can throw at you.

ruggedtoast

homelessskilledworker wrote: »

It seems as if being a homeowner in todays UK is the Usain Bolt in moral hazard avoidance.
If you can't pay your mortgage, no worries the Government will pay it for you. Interest rates were too high, again no worries we will reduce them to a level where they will help those that probably borrowed far too much, and stuff the sensible savers. They should have been far more financially savvy and worked out that DEBT is the new black this summer.
And even with all this help and you STILL cannot pay the mortgage, again no worries we will force the Banks/lenders not to reposses until you are on the straight and narrow or(what the hell) in even more debt.

However if you live within your means, save and take responsibility for your life then you are constantly dismissed as unclean in the UK today. Or to put it another way, if you do not play the victim in todays Britain you are a victim

work it out!!

If you are a reckless debtor with a massive mortgage then you are deemed deserving of as much state intervention as the property porfollio owning government can throw at you.

U mad bro?

Graham_Devon

StevieJ wrote: »

I am confused here, if a mortgager loses their job and can't afford to pay the mortgage, does kicking them (and their family) out of the property save the govt (i.e. me and you) cash or do we have to pay rent instead on some other property?

Really? Again? Do we have to go over it again?

Howcome the bullish appear to believe no one has a penny when it comes to suggesting they will always need homing via taxpayers?

Yet if any discussion about house prices and people coping in the recession, the very same people pretend everyones just got cash sloshing around, ready to consume and make the most of every opportunity.

The hypocrisy is absolutely staggering.

HAMISH_MCTAVISH

Graham_Devon wrote: »

The hypocrisy is absolutely staggering.

No Graham, what's staggering is your continued attempts to muddle the issue.

Of course the people who lost their jobs and are behind in their mortgages will not have "cash sloshing around". And nobody has ever claimed they would.

A million extra people lost jobs in this recession Graham, and yes, most of the few hundred thousand currently in arrears with mortgages or getting forbearance will be in this position. So for most of them, the state would have to pay a more expensive rent if they were repossessed and evicted.

We've already seen the figures that SMI is far cheaper on average per household than housing benefit. You seem to be saying we should pay more to house the same family, just because you think it might lower prices. But it wouldn't even do that, because there will be no change to the housing stock.

For every 100K families you evict from O/O and put into rental, some investors will have to provide 100K rental houses to put them in by transferring them from O/O. After all, there is a shortage of rental stock, just like there is a shortage of housing.

You're effectively playing a giant game of housing merry-go-round at huge cost to the taxpayer. Which would just be completely counter productive.

Generali

HAMISH_MCTAVISH wrote: »

You're effectively playing a giant game of housing merry-go-round at huge cost to the taxpayer. Which would just be completely counter productive.

That's not true though. Many people in forbearance have plenty of equity in their house: if they are forced to sell through repossession or the threat of repossession then they will not qualify for state aid for housing. You might also find that people that are threatened with repossession suddenly find some extra money.

Also, the system as it stands is at risk of creating another group of people that can't afford to work as they can't afford to lose their benefits. Also, this is exactly what was done in Japan and all that happened was the banks suffered for decades as they propped up insolvent borrowers.

If you can't afford to own your house you should sell it to repay your debts and move on. Some state aid should be available for a while, perhaps a few months or a year but people should not be subsidised to hold an asset for years that they can't afford to own themselves. After all, the taxpayer doesn't meet margin call payments for investors in shares that can't afford to meet them themselves.

It must be pretty galling for a lot of people that their taxes are effectively being used to prop up house prices while they can't afford to buy!

HAMISH_MCTAVISH

Generali wrote: »

That's not true though. Many people in forbearance have plenty of equity in their house: if they are forced to sell through repossession or the threat of repossession then they will not qualify for state aid for housing. !

Perhaps.

But those people with plenty of equity will also likely be at a stage in life where if they are forced to sell and burn through it before becoming eligible for state aid then chances are they won't be able to recover before retirement.

So having burned through their equity, and being unable to buy again thanks to the credit rating hit they'll have taken falling into arrears, they'll then have to be housed by the state for perhaps 30-40 years of retirement instead of living in their own home at no cost to the taxpayer.

Which would again be extremely short sighted versus a few years of temporary support now until they can get back on their feet.

Generali

HAMISH_MCTAVISH wrote: »

Perhaps.

But those people with plenty of equity will also likely be at a stage in life where if they are forced to sell and burn through it before becoming eligible for state aid then chances are they won't be able to recover before retirement.

So having burned through their equity, and being unable to buy again thanks to the credit rating hit they'll have taken falling into arrears, they'll then have to be housed by the state for perhaps 30-40 years of retirement instead of living in their own home at no cost to the taxpayer.

Which would again be extremely short sighted versus a few years of temporary support now until they can get back on their feet.

A few years isn't temporary support. A few months is temporary support.

If you're being supported for a few years, the chances are you'll be supported forever.

Of course if a person has plenty of equity in their home they could do something sensible like sell and buy a place that they can afford.

HAMISH_MCTAVISH

Generali wrote: »

A few years isn't temporary support. A few months is temporary support..

In normal times I would agree with you.

But in the deepest and longest recession in over a century, it's inevitable that some people will struggle for years before getting their life and finances back on track.

And for many of them, stepping off the housing ladder now and being forced to burn through their equity before receiving state aid would be a one way ticket to a retirement of dependency on the state for housing.

Which is in nobody's best interests. Not the taxpayer, not the banks, not society, and not the people concerned.

Generali

HAMISH_MCTAVISH wrote: »

In normal times I would agree with you.

But in the deepest and longest recession in over a century, it's inevitable that some people will struggle for years before getting their life and finances back on track.

And for many of them, stepping off the housing ladder now and being forced to burn through their equity before receiving state aid would be a one way ticket to a retirement of dependency on the state for housing.

Which is in nobody's best interests. Not the taxpayer, not the banks, not society, and not the people concerned.

I agree with what you say with a single caveat: What if keeping people in their homes is part of the problem rather than part of the solution? Maybe if people lost their homes they could rebuild their lives rather than rely on the state to prop them up.

You also paint a pretty bleak picture of life for renters. I pay my rent every fortnight without fail and without Government help and I've had my share of financial misfortune.

ILW

I suppose it depends on whether you believe policy should try to influence behaviour.

I would like to see a situation where homebuyers take more responsibility for themselves, primarily by ensuring they have savings and/or insurance to cover a down period. Forebearance and MIL seem to positively discourage this type of behaviour.