Wednesday, Jul 29, 2009
Greed backfires
Guardian: Mortgage holiday request denied
Last week I asked my mortgage company for a repayment holiday. They said no. It was the grounds for the refusal that was the most galling part. We bought the house five years ago with a 5% deposit, which we did not feel was a particularly risky strategy. But now our loan-to value is 103%, and the bank does not offer payment holidays above 90%. We didn't plan on being in negative equity. Three years ago after business problems we took out an IVA. We could have gone bankrupt, but we would have had to surrender the equity that had accrued in the two years since buying, and at that stage we still had some. That seemed worth protecting even though it meant renting out three bedrooms. Now we have three lodgers, no equity nest egg, and are struggling to meet the repayments.
23 Comments
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1. little professor said...
They did not wish to go bankrupt as their house's equity would have gone to pay off their creditors - they wanted to hang on to their 'nest egg.' But now they expect to be bailed out by the same banks they were trying to squirm out of repaying. Screw 'em.
2. ketha said...
I'm amazed that articles so misleading can be printed. The papers need to educate people about financial products, and risk... a 'payment holiday' has never been there if you are unable to pay and is subject to status..
it is, in effect, a further loan... if your mortgage is £600 a month (low, possibly, on average) a six month payment holiday is a loan of £3600...
If you went to your lender and asked for a loan if you were in negative equity, a loan, no less to pay a mortgage you can't afford, i'm not sure you'd feel so hard done by when the show you the door...
not guilty, this time
3. Bearinthewoods said...
I guess this comedian wants to ramp up his LTV to 120% before he goes bust? Never mind, Gordo will pick up the tab with with our hard earned tax £'s. I'm with LP on this one...."Screw 'em"
4. Hev said...
3 lodgers? That is sub letting, probably not in the terms of their mortgage agreement and they must have a huge house
5. mark wadsworth said...
Serves her right.
"We bought the house five years ago with a 5% deposit ... according to the bank our loan-to-value (the proportion of the house with a mortgage secured against it) has now risen to 103%"
Firstly she was in an IVA = risky borrower.
Secondly, assuming she bought a house not a new build flat, it probably will be worth at least as much now as five years ago, so where di that extra 8% come from? (95% LTV as against 103% LTV). A crafty bit of MEWing, perchance?
6. 51ck-6-51x said...
They plumped for an IVA because they had equity, now they have none, how about bankruptcy?
7. uncle tom said...
It is possible that her house is now worth 8% less than they paid in 2004, but a bit of MEWing does look likely..
..the Guardian is good at producing pieces like this - written from the perspective that everything that goes wrong must be someone else's fault..
8. icarus said...
"Being in negative equity was not part of our plan". Apart from the housing crash the problems included companies and tenants failing to pay blogger Ivy A (pronouced IVA) what she was owed. Instead of seeing herself as a bastion of financial prudence in a sea of struggling debtors she should see herself as just one of the links in the debt daisy chain. Why should her mortgage lender be the backstop for all this?
9. mrflibble said...
Anyone seen my violin?
10. gone-to-colombia said...
Those who use the rising market as a free ride to wealth should not complain of the reverse journey.
Frankly, people like this represent the reservoir of overvalued auction property that will be the vanguard of a real crash.
Make them pay the price of their stupidity and open the floodgates so the crash might truly begin.
11. Hermy said...
Why are people who reply all so BITTER. Sometimes things happen that are beyond everyones control, no-one is immune no matter how SMUG some of the posters here think they are.
You have to admire the above person for fighting for their home and not giviing it up and possibly living on welfare and drawing money from the tax's which people 'that work' pay. I personally respect the individual concerned at firstly buying a home, secondly starting a business and thirdly for carrying on when people like some of the fellow posters birate them.
I wonder out of curiosity how many of the above posters have ever started a business, i would imagine none if any probably dont have the guts, determination or backbone that is required, maybe it is best that some of the posters retreat under there little shells and hide only to come out and have a blast at someone elses misfortune.
SHAME ON YOU.
PS Who carries the risk for these dodgy loans the banks gave out, Thats right the tax-payers, thats me and you 'if u work that is' doesnt do any harm reminding people of that sometimes. That means any loss U are responsible as a citizen of GB. and a fellow tax payer.
12. This comment has been removed as it was found to be in breach of our Blog Policies.
13. drewster said...
She sounds like a joy to live with. I wonder how long the average lodger stays in that house....
14. little professor said...
7. mrflibble said...
Anyone seen my violin?
15. Russell said...
@hermy
You're almost right about the bitterness, but mostly for the details you put in your PS. The bitterness is because some people, like this lady, priced risk incorrectly (risk of falling house prices, risk of business failures, etc...) and now the people who did price risk correctly find out that they are going to have to bear the cost of the losses of the group who got the risk pricing wrong. I don't think there is any shame in this, it's quite a natural response.
16. devo said...
11. Hermy said... Why are people who reply all so BITTER.
My dear ingénue!
17. gone-to-colombia said...
Why should I be bitter, I have run my own business, saved, been prudent, spent what I could have afforded, not run up huge debts.
Why should I be bitter, I'm not sure I am, but it seems to me that prudent savers are being expected to pay the price of the reckless stupidity and greed of others.
Could that be enough of a reason for you?
And, when my money, in reduced savings returns, is propping up these idiots I have a right to say it how it is.
18. sovietuk said...
Sounds like a really great life - living with a never ending stream of people renting out rooms in your house, leaving wash up, not cleaning the baths, girlfriends and boyfriends bonking/snoring/smoking/drinking. The punishment for buying something you can't afford.
19. lenny said...
@17. Sovietuk
I bought my first house during last recession (1992), that was a 4 bed and I started off with one friend as a lodger whose rent made things a little easier. Eventually took in a second girl lodger and life was fine...... they even cooked my dinner a couple of times a week and were dab hands at redecorating, so having lodgers ain't all bad if you take time to choose the right ones.
The house was 30 minutes drive from work and was still affordable without them (just meant less nights out).
20. andrew said...
Isn't it nice how everything that turns to kak these days is referred to as "challenging", "we relish the challenge", "we will take on the challenge", blah .. denial at it's optimistic best.
21. 51ck-6-51x said...
Well said GTC.
Hermy...
- Even though I agree that starting a successful business is a good thing I personally do not 'admire' those who fail but I do not despise them either - I don't think many here would.
The disgust is with the fact that she expects to be given a break by lenders she has been screwing over and/or indirectly by tax payers and savers.
I agree that the IVA itself was not a decision to despise, but rather the most recent attempt to break her shackles - once someone is in IVA they should not be able to take on more debt, which is what happens when you get a payment holiday.
Furthermore the lender will have factored in a recovery rate and a likelihood for such failed loans, so no it's not just the taxpayer who carries the risk, otherwise any idiot could go and start a business that is doomed to failure as the lender would be getting a free lunch.
In my opinion she needs to think rather than blogging about she feels unfairly treated. When she does she'll either hunker down and pay what she owes or declare bankruptcy.
22. bleakhouse said...
Greedy. Stupid. Whinging. No acknowledgement of the huge error of judgement.
The bankruptcy laws are far too lenient. Debtors prison is the answer.
.
23. Hermy said...
Quoting Russell above
"Russell said...@hermy
You're almost right about the bitterness, but mostly for the details you put in your PS. The bitterness is because some people, like this lady, priced risk incorrectly (risk of falling house prices, risk of business failures, etc...) and now the people who did price risk correctly find out that they are going to have to bear the cost of the losses of the group who got the risk pricing wrong. I don't think there is any shame in this, it's quite a natural response"
In response, I believe its is completely the banks and the entire financial system, the government for lack of governance and foresight, the sub prime lending (infact any lending since 2005), the worldwide policy makers and regulators that allowed banks to behave as irresponsible as they did.
I believe that the anger should be directed at them after all, no-one wants to pay too much for their home, no-one wants to fail in business, no one wants to be exploited, no one wants to lose their jobs, no-one wants to lose their home, no-one wants to receive minimal interest on savings, no one wants their savings depleted by inflation. Yet this is what happens.
I believe ANGER is being directed at the wrong people, ULTIMATELY THE BANKS AND REGULATORS ARE RESPONSIBLE.
Unfortunately life is like as you describe as tax payers we are substituting those who wont work so really we are always going to carry the losses for those who act irresponsible its only how people perceive this is what differs.
We heard about MP's expenses, what we havent heard of is social welfare payments for non existent furniture, for alcohol dependency, for paying a deposit for Irresponsible renters the list goes on. OUR BANKS AND GOVERNMENT ARE PEOPLE THAT PEOPLES ANGER SHOULD BE DIRECTED AT.