Wednesday, Jul 30, 2008
Sir James circumspect about bail out for lenders
Telegraph: Homeowners face call to act responsibly
"Sir James Crosby, the former HBOS chief executive who is leading a review into wholesale mortgage finance for the Treasury, may propose a regime of "tough love" for Britain's cash-strapped homeowners."
Posted by letthemfall @ 10:19 AM (1192 views) Add Comment
19 Comments
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1. harold said...
If you want to understand the true scale of the bailout currently underway, check out the graph in this article by James Turk. The term "unprecedented" doesn't even begin to describe what is going on:
http://goldmoney.com/en/commentary.php
2. renting2 said...
This is not what GB / AD want to hear.
3. growler said...
What Sir James he is saying is "don't meddle, let prices fall". Vince Cable is saying don't let the taxpayer pay for poor lending decisions. Common sense - and the good news is the Government are well and truly in a corner. They would never get away with supporting the market - which, in truth, is what they want "independent" sources to say.
4. japanese uncle said...
A banker having pushed cheap credit to the ignorant millions like opium, preaching men on the street to act responsibly!??
A drunk pissing on the pavement telling other pedestrians to behave themselves.
5. wdbeast said...
"There is still good availability of finance for those borrowers who offer significant security (i.e. have reliable earnings and seek to borrow 75pc or less of the value of their property),"
For mortgage purposes, the mortgage valuer decides on the value of the house.
I spoke to a friend yesterday who is selling his mother’s house after she went into a home.
The house was valued in January at between 600k and 650k, so he decided that in the current market they would sell at 590k.
Despite 45 viewings he has had no offers, until 3 weeks ago he was offered 450k cash, which he decided to accept.
Following surveys, the buyer has now decided to raise 100k mortgage as the property needs some renovation and the mortgage company have just value the house at 415k, so back to the negotiating table/ouch!
So as it is the mortgage companies that are determining house “values”, how much do we think they are now devaluing houses by versus last year?
Based on this story it would appear to be at least 30%, so how many people are really in negative equity?
6. mark wadsworth said...
Growler, 'tis better that one sinner repenteth, and all that ...
Wdbeast, good anecdotal, may I refer you to my 'Negative-equity-o-meter'?
7. mark said...
once houseprices drop and the fear of further drops has gone, then money will be fairly easy to borrow again.... as they wont be lending 10 times salary again either...
8. angonamo said...
Echoing Bank Governor Mervyn King, he states: "A transfer of risk to the Government might distort incentives and create moral hazard, rather than help investors and issuers price that risk more accurately."
Never thought I would have read that from a banker.
9. icarus said...
JU - why has he changed his tune? - he's been reading HPC blogs.
10. icarus said...
He reports that banks want "temporary government guarantees on the pricipal and interest on high-quality mortgage-backed securities". If they're high quality why do they need...........?
11. Whostolemyendowment said...
I'm sick and tired of reading about 'homeowners' - they are not home owners - if you 'own' your home you have finished paying for it (or inherited it, or paid cash, or live in a wigwam....) ......it should be 'debtowners'!
12. wdbeast said...
Whostolemyendowment@10
It is an interesting point that in the UK a person with a mortgage does in fact own his house, the mortgage or loan is guaranteed against the value of the house.
If the house is repossessed due to non payment, the lender can still pursue the borrower for outstanding debt.
In the USA it is different and the person cannot be pursued for outstanding debt.
Hence the term “jingle mail” as householders return (negative equity) house keys to the mortgage company.
My point is that in the UK householders are considerably worse off “owning” their house in a negative equity environment.
13. growler said...
@ Mark Wadsworth
In a manner of speaking. I think this report is more about the Government (who are broke) saying publicly "we can't and shouldn't do anything - see here". I think our rulers have been grossly incompetent not to manage the lenders effectively through the FSA. This report legitimises them to do nothing. It's perfect. It would have been a disaster for the Government if Sir James came out with a load of credible measures to reflate. All of those would have required taxpayer support. This way the Government can shrug their shoulders. Result: CERTAIN major house price correction as the hitherto hapless lenders hopes for help are scuttled.
14. Stevie Dee said...
Sing us song "Bing", you little f**king drummer boy!!!
15. Whostolemyendowment said...
Mr wdbeast...thanx for follow up comment.
I was listening to the BBC World Service the other morning on my shiney DAB radio (as you do)...and there was an article about housing, and those that lost out the last time around. They interviewed this guy (UK) who was still be chased and paying what he could afford following a repossesion in the early 90's. This had had a detremental economic strain on his family and family life for many years....
16. inbreda said...
@15
6 years was the determined maximum that someone could be chased for, from what I remember (I used to work for a mortgage company in the late 90s, and it was an issue then.)
17. icarus said...
@16 - I thought it was a bit longer than 6 years (maybe 10?) but I don't think there's a time limit if the person they're chasing is deliberately hiding from them or if he rowed out to sea in a canoe and faked his own death.
18. icarus said...
make that 'rode' since I don't think you row a canoe.
19. micasasucasa said...
Apparently they have 12 years for mortgage debt