Saturday, Oct 25, 2008
Repossessions must form part of our climb out of the recession.
Telegraph: Property market: Word on the street
Though repossession is a harsh sentence, it is one most frequently handed down to those who have overextended themselves. Supporting them would only encourage people to borrow more in the future. Better instead to improve the support we give those who have lost their homes.
Repossenssion is the best thing can ever happen to people who refuse to learn their financial reality through any other rational means.
Posted by peter_2008 @ 10:39 AM (662 views) Add Comment
11 Comments
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1. bystander said...
............especially now that the government have decided to downgrade bankruptcy to save those involved the stigma and mental harm it can do, even though in many case their bankruptcy has been caused by poor decision making and over extending themselves. Q)When will people take responsibility for their decisions?....A)When the government allow them to do so.
2. renting2 said...
Arguably any debt is over extending, because you can't actually afford what you are buying.
bystander asks "Q)When will people take responsibility for their decisions?"
My answer is - when politicians, senior civil servants and bankers are seen so to do.
3. planning4acrash said...
There are interesting points of natural justice here. Being bankrupt, a person in arrears doesn't really own the house anyway. Having printed fiat money, the lender got the house by fraud, and they get the keys and can hold the reposessed liable for the difference up to 12yrs after the repo, they can track them with a private detective agency all that time, waiting till the repo'd individual gets a new job, house, etc. then they slap the previously undisclosed money due on the doorstep.
We need a new system of natural justice to deal with the fraud and human suffering here.
4. str 2007 said...
renting2
A very valid point and one I have just been pondering in the shower (dull I know). But here's my example and it is for an industrial premises. It's price 1-2 years ago would have been £1m + and based on future projections of what a business could make in profit over the next 10-15 years if they had that premises now.
The business currently in it will also be for sale soon (due to retirement). Once again the value of that business would have been £1-2m based on future potential.
However, and this is where I get round to your point. The true value today of both is IMO about £250k each.
The reason, the premises needs future spending, the business needs future investment and I doubt banks will lend any money based on future projections at present.
It could be that if the down turn is as bad as we here expect (and we've been more accurate than most to date) then the business would go bust (worth very little if anything) and the price for the premises would fall even further.
So to summarise I agree the value of alot of things will be based on what people, businesses can withdraw from the bank, not what the bank will lend them.
5. str 2007 said...
P4AC
What you are suggesting seems to me to be like the US system where the Banks are responsible for their own lending.
In some ways I like the sound of that but equally shouldn't individuals be responsible for their own actions. Agreed the high prices are down to banks making money available. But most went with it and considered themselves 'so clever' because their houses went up further.
Some of us here refused to be sucked in but had to endure the 'economic gurus' at every barberque for the last few years blabbing on about how much their house was worth and how clever they were.
I'm normally more humane than than this but today I'm not having it.
Gordon Brown is the biggest culprit for this mess, followed by the banks, followed by the reckless borrowers. Unfortunately they'll go down in the reverse order to that but lifes tough and it's been tough for me over the last few years and now my patients is hopefully about to reward me with a sensibly priced house.
Shouldn't be too much to ask for really.
6. quiet guy said...
@str2007
I think the American system of non-recourse loans is part of the problem. Too many solvent homeowners are walking away because they can. That said, the UK system is pretty nasty, as noted by P4AC.
The American system used to rely upon social pressures to ensure that people took their debts seriously. A mortgage would typically be owned by the local bank and the borrower would have a personal relationship with their bank manager. Walking away from a contract in that situation carried real stigma and pain.
Maybe shortening the recovery window down to (say) 5 years, after which the bank must take the loss would make the bankers think twice about 100+% mortgages for clueless people.
7. stillthinking said...
The whole point of the non-recourse loans, which I support, is that they discourage the banks from excessive lending, because they are taking all the risk. That it hasn't worked is because the shareholders of the banks were asleep at the wheel, and allowed the employees to run the banks into the ground.
All that we need is to allow banks to fail, then there would be much more concern from both depositors and shareholders (who are the same in some ways). Given that reasonably enough it appears that our banks are too big to fail, then we need lots of smaller banks which can. At the moment we are going towards a single national bank.
A bigger part of the problem was the perception that houses were in short supply because of affordability, which would be easy to fix, just absorb housing benefit into a single benefit payment and let those in receipt of social benefits find their own accomodation. The idea that Westminster needs to house the unemployed in an area where very few can afford to live is insane.
8. Peeps said...
Wow, a sensible article in the mainstream media!
9. Stevie Dee said...
"especially now that the government have decided to downgrade bankruptcy to save those involved the stigma and mental harm it can do" I fail to see how such an enormous event is not going to damage many people, it really does not matter whether the laws of bankruptcy have been relaxed. I will give you an example, my grandmother, she was born the year the titanic went down (1912). When the Wall Street Crash occured in 1929, that would have made my grandmother 17 years of age. My grandmother, who I love dearly, is & always has been extremely frugal, astute, recycling everything, saving pennies, etc. Whose phrase was: "look after your pennies and the pounds will after themselves". My Grandmother even use to re-distribute presents to other family members simply to save money for that "rainy day". A remarkable woman whose behaviour has been lost on the "baby boomer" or the "privileged" of today, who merely mock in ignorance. So, despite the mocking of her kin, she is an illustration of how bad things can be, as her attitude & behaviour stayed with her, her whole life.
Her actions in terms of frugality & prudence, was not a Scots thing by the way (as she is Celts), it was merely a way of life that had been thrust upon her, and how she, and many of her generation dealt with the issues of the terrible recession of her time. As Nancy Pelosi said on voting for the $700bn bailout, "there was nothing Great about the Great Depression" to which we will find out shortly.
In short, it will scar a lot of people, thank yourself lucky that you did not succumb to the b0ll0cks!!
10. d'oh said...
quiet guy and still thinking - what went wrong with non-recourse loans was that the banks were selling on the loans and hence the risk. I think non-recourse loans are what is needed to stop this sort of thing happening again BUT it must be in conjunction with these institutions not being able to sell on the risk. Loans must stay on the banks books...so they pay for any bad ones they make. This is how it used to work...when you had to go and prove how suitable you were to the manager for a loan...because if it went bad he got shafted. Now, cost of mistakes has been far removed from the individuals who originate the loans and their incentives...of course the whole thing was going to go t*ts up.
11. renting2 said...
Good point d'oh. But the banks would probably, rightly or wrongly, demand to have life, illness and redundancy insurance in place (and assigned) therefore adding to the cost.