Wednesday, Mar 28, 2007
Lenders reporting shortfalls after repossession
Firstrung: Nearly half of lenders have reported an increase in shortfalls after sale of property
Up to half of lenders have reported an increase in shortfalls after sales of property, a survey by litigation specialists Moore & Blatch reveals. These shortfalls become apparent when Lenders sell property, usually at auction, having had to repossess due to client payment difficulties.
Posted by converted lurker @ 10:35 AM (187 views) Add Comment
22 Comments
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1. dohousescrashinthewoods said...
"Up to half"?!
Does that mean between zero and 50%?
"litigation specialists" sounds very VI.
2. royston said...
What happens if your property is repossessed and the sell it for less than the outstanding loan?
Can the lender sue you for the remainder?
I really hope not. Justice demands that these b*&#~@ds suffer some loss for perpetrating this boom-bust on this country.
3. pedagog said...
But then other borrowers will wind up paying for the irresponsible borrowing of others.
If you borrow too much from my lender and you can't repay why should I have to cover the deficit?
4. sovietuk said...
Repossessed and then bankrupted. Nice. The Lender can chase after the shortfall.
5. Scott said...
Perhaps the UK will end up like Russia where your neighbours go missing and all of a sudden you have new neighbours who own the property. Capitalism at its darkest. After all, the supposed going rate for a "contract" in the capital is 25k. Would these same people do it for a 200k house. Maybe.
6. royston said...
pedagog,
Maybe you think the rest of us should keep bidding up the price of houses so that you always stay in positive equity. It's a tangled web, whatever way you look at it. There are certainly people who are overstretched. In a rising interest rate and inflation environment, some will go under.
However, the language you chose to use places full responsibility on borrowers for choosing how much they borrow. What about the lenders, the regulators and the sellers? Most house buyers would happily pay as little as possible for the houses they want to live in.
7. converted lurker said...
Guys please see this press release for what it is, it's not, as you are fond of saying, 'VI bull5hit', it's an excellent indication of what's happening at the other side of the coal face, the slag heap of human misery tucked away in the corner that very few get to see. Already losses at auction are occuring, we'll be able to see more once the latest CCCS (or others) figures are out, but it appears to me that the 5% rate threshold, once breached, was too much for many. Also you have to realise that if losses are happening now, (generally it takes 12 months to repossess>sell) then there has been a systemic lending problem for some time.
8. dohousescrashinthewoods said...
I think it's Brown and his Monetary Stooge Committee who squarely carry the can. They set the environment and business, like an instinctive animal exploited the evironment to ensure survival. That's not to say there aren't sharks as well as sheepdogs out there.
I do try to attribute intelligence to people as I believe expecting people to be stupid will make them stupid (enter Blair) but pragmatically I know that we are often emotionally motivated and we don't necessarily have the character to withstand pressure. In an environment where you feel poorer and poorer and yet all you see is more and more wealth around the neighbourhood, no wonder you feel driven to borrow.
My wife and I have had to be pretty tough on ourselves to live within our means and pay off our debts. Feels like we haven't had a lot of fun these last 3-4 years, but we're quietly proud of the fact we have managed to slowly clean up our finances.
Ignoring Mr. Brown's assertions, I think we must be in a recession, because pretty much everyone I know, including some here, feels really quite hard up despite being supposedly a comfortably-above-average salary.
9. mrmickey said...
There will be a lot of whaling and gnashing of teeth when people realise how far they are in debt to the banks and how little they have to show for it. It never ceases to amaze me the junk people buy with the money they borrow, horrible looking clothing, rubbish holidays, cars that fall to bits from a slight bump, modern art it goes on and on.
10. Cyril said...
during the last property crash a lot of people handed their keys back to the mortgage company, hoping that would be the end of it. But of course this was a stupid thing to do because they were still liable for the debt they owed after the mortgage company had sold it off. These were mostly just ordinary folks who were not very financially astute so it was all very sad seeing people losing their jobs, becoming homeless and broke all at the same time. Hard to imagine looking back on it, but things can change pretty quickly.
11. taffee said...
certainly show people mortgaged to the hilt with credit cards and loans they nwill simply hand the keys back.....did last time and this time they KNOW they will probably get away with it.
12. pedagog said...
"There will be a lot of whaling and gnashing of teeth"
Those poor whales, best to get Greenpeace involved.
Seriously though I think there is blame to be laid all round. I come from a working class background and have been brought up to be very debt averse. So it is easy for me to say let the greedy consumers carry the can. But you are all right to point out the greed of the banks and building societies in this.
However there is the issue of personal responsibility. If I get fat from eating Big Macs who is to blame? If I buy a Ferrari and drive at 200mph is that my fault or the car makers for making it able to go that fast?
Of course the banks are greedy money makers, but that's what they are supposed to be. If you borrow 2 squillion pounds off them it is only reasonable to expect that the 2 squillion pounds (+interest) is paid back. If you don't pay it back and they are unable to get it back then they will still get it back through increasing prices for the other customers. If you are one of those other customers then this isn't 'fair'.
13. royston said...
pedagog,
Your argument is basically the American NRA argument "Guns don't kill people, people kill people" argument for resisting gun control.
I have a bit of a problem with that and I think we should expect a little more responsibility from our governments than that.
As for the Big Mac comparison, if no other food was available to me, then I think I would have good case for complaining about it making me fat. It is a long time since buyers has a 'low price' option for a half-way decent place to live in this country.
14. monty said...
pedagog - How do you figure that? Your lender doesn't increase rates to cover defaults do they? As a shareholder you may end up paying but I don't see how as a customer.
Most lenders are going to have insured the loans anyway. The defaulter's house gets sold at auction and the insurance makes up the shortfall. The insurance company then makes it their life's mission to pursue the defaulter for the debt. AFAIK there is no statute of limitations and they will chase to the ends of the earth. Handing the keys over to the bank walking away with no obligation is the stuff of fantasy.
royston - We're all grown-ups now and even illiterates can have someone read the fineprint for them. It's not like these are doorstep lenders and the risks are very, very clear. If borrowers fall into the trap of over-extending themselves to keep up with the Joneses then it is their own fault, not the banks, not the MPC and not the government. Caveat emptor. You don't have to be a rocket scientist to believe in HPC and the evidence on this forum backs that up. :-)
mrmickey - the only whaling going on is by the Japanese and it's got nothing to do with their housing market.
15. Deano said...
If there is a shortfall the lender can claim from the indemnity insurers but only up to the proportion insured say 10% of the total lent. If there is further to recover thay can chase the borrower for 12 years not 6 as with an unsecured loan. The situation does not stop there however, once the indemnity insurer has paid out they can chase you as well. Its absolute f****** murder init.
16. Cstanhope707 said...
I am sure if the Bank sells the property for less than it was purchased then the customer still owes the remaining amount like any other loan, unless they become bankrupt, but I really do not have much pitty if people are silly enough to borrow too much with no contingency then that is there fault. The Banks are not in the business of buying and selling property they want to liquidate the assets ASAP. But I am sure if you become unemployed the Insurance Company will pay the mortgage for up to 1 year. Trust me I am not a defender of the banks but I think this is more about facts of life!
17. taffee said...
they can chase all they like......won't get a penny imho.......most people haven't got anything!
see nick leeson still 'owes' £100 million.
18. inbreda said...
I used to work for a mortgage company and it was well known that repossessions were more profitable than customers that did not default. The house gets sold and any shortfall is still owed by the customer. There are also massive default charges and repo charges that are added onto the total, and then interest is charged on all of this. Many lenders will INCREASE the interest rate you are charged on your debts if you get into trouble. So you go from a 3.5% discount to an 8% emergency unauthorised borrowing default rate.
19. Pedagog said...
Sounds good to me inbreda.
It is irresponsible borrowing and lending which has made house unaffordable.
If people have been irresponsible in their borrowing driving up prices for us all then they deserve the pain which is coming their way.
20. pedagog said...
Sounds good to me inbreda.
It is irresponsible borrowing and lending which has made house unaffordable.
If people have been irresponsible in their borrowing driving up prices for us all then they deserve the pain which is coming their way.
21. lvmreader said...
Credit Contagion - don't you just love it!
Welcome to hell, greedy wannabe property mogul.
22. The Haunted said...
If people are too stupid to know what they are getting themselves into that is their own fault. I'm sick to death of this 'Nanny state' attitude that is prevalent in this country today. I could go out and get a 5 x Mortgage and buy a house tomorrow, but I will not because I am aware of the consequences if things go wrong. Its called responsibility and its about time other people took some!
In fact, if it does all go tits up I will be the first to gloat how I just bought a 5 bed-roomed detached house for 3 times my salary while every other @rsehole who has been gloating about their property for the last three years (and how wrong I am and how I am soooooo stupid for not buying a house right now) is struggles to keep a roof over their head.
More to the point I shall be reminding them of their words by chanting the mantra "property never goes down" at every given opportunity.