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Banks 'shun' Shared Ownership Bids

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Banks 'shun' shared ownership bids

http://www.google.com/hostednews/ukpress/a...6LZthrZROIPr34g

Banks are turning down more than £1 billion of mortgage business because they are prejudiced against people buying through low-cost homeownership schemes, it has been claimed.

The National Housing Federation said many banks were refusing to lend to first-time buyers and key workers because they mistakenly viewed shared ownership schemes as being sub-prime.

It estimates that banks turned down £500 million worth of mortgage business on shared ownership schemes during 2008/2009, and it expects a similar level to be rejected this year.

The group, which represents England's housing associations, said problems obtaining a mortgage had contributed to 9,000 low cost homes remaining unsold, even though 90,000 households had expressed an interest in them.

It added that despite demand for shared ownership homes soaring, banks were being increasingly cautious in their lending strategy, with many taking the view that because the schemes were designed for people on moderate incomes, they were more risky than other types of lending.

But it said in reality, people buying a home through one of the schemes were no more likely to default on their mortgage than other borrowers.

The group is calling on the Government to ensure the nationalised and partially nationalised banks make lending to people buying through shared ownership schemes a key priority.

David Orr, chief executive of the Federation, said: "The excessive risk-taking of the banking sector, that heralded the downturn, has been replaced by excessive caution.

"Lenders are now reluctant to provide mortgages for shared ownership, because of a prejudiced assumption that its buyers - people on low and moderate incomes - are more likely to default on their mortgages.

"As a result, thousands of lower income households, with a good credit rating, are being denied the opportunity to part-buy decent homes."

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jeeez...

shared ownership is b*llocks...

1) the housing assoc has a veto on (a) subletting and (B) (I think) who it's sold to - or similar restrictions - OF COURSE IT'S SUB-PRIME WITH THESE CONSIDERATIONS as it's a much much less liquid asset. these do-gooding socially-manipulating housing officers wouldn't know an efficient free market if it rogered them with a snooker cue

2) the kind of people who actually fall for the spiel of buying into a shared ownership deal, being a bit lower than average brightness (or they wouldn't have done it), kind of mark themselves out as a higher risk due to lack of financial acumen

3) (this is an 'if' and may be wrong...) the above 2 will, in my opinion, show up in greater delinquency rates in mortgages - which the mortgage companies are entirely at their liberty to use as concrete indication - irrespective of other arguments - to flag this kind of mortgage as sub prime

4) housing associations have no right to say what's a good credit score and what isn't - THAT'S THE LENDER'S BUSINESS!!!! the lenders will have their own criteria they apply to the data received from credit agencies, they are in a (passably) competitive market and will do as they see fit to lend to good credit risks and avoid the bad. Otherwise they would turn into NR, B&B, LTSB-HBOS etc

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Surely a "shared ownership" scheme is sub-prime by definition? :(

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I can't disagree with the comments above. Shared ownership is a 'derivative' created to help people buy into high house prices -- therefore a political motivation.

The right thing to do is to put in place one or both of these options in a world of high house prices:

  • they should either build more government-owned, and therefore market-resistant to price changes, social accommodation. I'm a firm believer that we have gone far, far too far in the direction of the private sector doing everything;
  • or they should change the planning laws to force house builders to have a much higher percentage of lower-cost homes, to help market demand.

But yes, shared ownership -- boll*cks!

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I think your all quite misled by your assumptions, shared ownership is an affordable method for good earners to buy into property who otherwise couldnt afford 100% most likely now through lack of deposit since you need at least 10% down. This is not always possible.

If your paying out 800 per month on rented property how ... just HOW do you manage to save a deposit??

To be able to pay 800 worth of housing suggests they net a reasonable salary, so are not 'being a bit lower than average brightness' since I applied myself (although I passed on the opportunity in the end, for various reasons) and in my profession, there is no higher level of education to what I have done.

I'll just correct you, the financial acumen is not at question, for certain classes of people they have to invest in themselves to acheive goals. Some kids with far less financial acumen get bailed out by family, parents etc. Others are less fortunate.

Does borrowing off parents mean that its not shared ownership? or its not a government led initiative of shared ownership?

The ONE and ONLY problem with shared ownership, is the control the housing associations have over the property. They make a normal sale almost impossible (since it will never be normal) with applications etc, etc, etc. The rent is always fair, the scheme works for what it is designed for, but should a mortgage company take control of the property when payments are defaulted and repossession happens they CANNOT just send it to auction. Therefore the liquidity of the property is VERY BAD, hence SUB PRIME.

THIS IS WHY they see it as sub prime. The credit checks are intense to qualify...and housing associations do the credit checks to avoid wasting their time, they also expect a monthly rent, so affordability is important.

However, im sure the housing association would normally buy it back off banks in the event of repossession. But hey ho...

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Take a look at any shared ownership scheme and the prices are overinflated. In addition you will find yourself being part owner of a property that is surrounded by social housing, indeed in some blocks of flats the social housing neighbours are next door on the same floor. So you could be the only owner occupier in the block.

Essentially if you want social housing apply for it, if you ownership then look to the private sector and own alongside other owners without restriction.

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Guest X-QUORK

The only advantage to shared ownership is spreading the loss on a massively deflating asset.

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Say I want to sell you a car.

Its engine is seized up, and its a total death trap. It real value is probably only £500.

But I put it up for sale at £10,000

You say, "although I really need a car, I can't afford £10,000"

I reply, "No problem, I'll sell you half the car for £5000, and you can rent the other half of me!"

Now you can afford it. But it doesn't change the fact that you're buying an overvalued asset!!

Shared ownership is a total scam! and those encouraging young people to go into it should be thoroughly ashamed of themselves.

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The only advantage to shared ownership is spreading the loss on a massively deflating asset.

Thats a significant advantage. You get to buy more %age exactly when it suits you, these schemes can be quite cheap with the rent portion, so allowing you to buy at the point where prices start rising.

As for having social housing neighbours, I prefer mine to the short term renting tramps who can come and go after causing all sorts of troubles. Cause any sort of problem in my HA and you will lose your home. I know all my neighbours and they haven't changed for 8 years.

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Well, I have to state that I disagree with the majority here (mainly because I recently bought a 50% share of a house with share ownership ;) )

So let me state my point of view, referring to some of the statements here:

Take a look at any shared ownership scheme and the prices are overinflated. In addition you will find yourself being part owner of a property that is surrounded by social housing, indeed in some blocks of flats the social housing neighbours are next door on the same floor. So you could be the only owner occupier in the block.

It is a detached property (bungalow). The neighboring houses are partly owner occupied (owned outright), some are let and I guess some are shared ownership as well. But anyway, it is a detached property so your issue is not an issue.

Several people stating that it is overpriced.

It is a resale, the previous owner passed away. The house was on the open market and the price was reasonable (similar properties sold for about double the price I paid for my 50% share)

Is the mortgage a sub-prime mortgage?

In my opinion surely yes, as it was stated above the bank can not sell it easily if I default. But I do not consider the scheme itself bad.

The main reason for buying it was because my wife and I loved the place. We intend to live there for years to go, so we have not bought it as 'first step' or as an 'investment'

We payed about 1.6 times our joint salary, the mortgage is about 1.3 times the joint salary. The total monthly payment (mortgage + rent) is about 75 pounds less than what we payed before as rent (although the rented property was a bit bigger) which means that we put this 75 pounds in our 'maintenance' account to address minor repairs that might come.

Nobody knows what the future may bring, but assuming that we both stay in work we can buy the other half of the property in about 5-6 years time if the price will not fall more that another 30% (otherwise the LTV would be too high) and get the freehold of the property.

And to be completely honest - the best case scenario for us is a further fall of about 25% so the second half is as cheap as possible.

And about the brightness of people doing such schemes... well, it is up to you to make the judgment, but I do not consider a masters degree to be massively under educated.

So, and now slaughter me :D

Regards

Frank

Edited by FrankL

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I think your all quite misled by your assumptions, shared ownership is an affordable method for good earners to buy into property who otherwise couldnt afford 100% most likely now through lack of deposit since you need at least 10% down. This is not always possible.

If your paying out 800 per month on rented property how ... just HOW do you manage to save a deposit??

To be able to pay 800 worth of housing suggests they net a reasonable salary, so are not 'being a bit lower than average brightness' since I applied myself (although I passed on the opportunity in the end, for various reasons) and in my profession, there is no higher level of education to what I have done.

I'll just correct you, the financial acumen is not at question, for certain classes of people they have to invest in themselves to acheive goals. Some kids with far less financial acumen get bailed out by family, parents etc. Others are less fortunate.

Does borrowing off parents mean that its not shared ownership? or its not a government led initiative of shared ownership?

The ONE and ONLY problem with shared ownership, is the control the housing associations have over the property. They make a normal sale almost impossible (since it will never be normal) with applications etc, etc, etc. The rent is always fair, the scheme works for what it is designed for, but should a mortgage company take control of the property when payments are defaulted and repossession happens they CANNOT just send it to auction. Therefore the liquidity of the property is VERY BAD, hence SUB PRIME.

THIS IS WHY they see it as sub prime. The credit checks are intense to qualify...and housing associations do the credit checks to avoid wasting their time, they also expect a monthly rent, so affordability is important.

However, im sure the housing association would normally buy it back off banks in the event of repossession. But hey ho...

I looked at a shared purchase flat once - and snapped up a 100% rented housing assoc one up the road from it for much lower overall costs

and there is no such thing as 'the credit checks' - as in only one credit check in existence. the lender will do their own and weigh them up themselves. we do not live in such a fluffy simple world.

soince many housing assocs are close to being in trouble with their own finances then we can hardly take it as fact that they understand financial responsibility either wrt tennants affording the costs.

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I don't think that it's just a question of banks not wanting to lend for shared ownership, banks don't want to lend to HAs either. HAs have a business model that relies on hpi, large annual increases in rent (mostly paid for by Housing Benefit.The government will surely cap this soon?) and continuous and exspanding debt based on the aforementioned 2.

NHF is just the mouthpiece of HAs.

....and in other news, stinkin' fish seller claims that his fish don't stink.

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It is a detached property (bungalow). The neighboring houses are partly owner occupied (owned outright), some are let and I guess some are shared ownership as well. But anyway, it is a detached property so your issue is not an issue.

that's an illogical answer 'because my property is detached then it's not an issue that some of them are flats'

some of them ARE flats in social housing areas - all of the ones I've seen.

edit: honestly, well done on getting a nice one that suits you for a good price

The main reason for buying it was because my wife and I loved the place. We intend to live there for years to go, so we have not bought it as 'first step' or as an 'investment'

We payed about 1.6 times our joint salary, the mortgage is about 1.3 times the joint salary. The total monthly payment (mortgage + rent) is about 75 pounds less than what we payed before as rest (although the rented property was a bit bigger) which means that we put this 75 pounds in our 'maintenance' account to address minor repairs that might come.

that's nice for you - congratulations - doesn't ring with my experience of them where they have all been overinflated

Nobody knows what the future may bring, but assuming that we both stay in work we can buy the other half of the property in about 5-6 years time if the price will not fall more that another 30% (otherwise the LTV would be too high) and get the freehold of the property.

And to be completely honest - the best case scenario for us is a further fall of about 25% so the second half is as cheap as possible.

And about the brightness of people doing such schemes... well, it is up to you to make the judgment, but I do not consider a masters degree to be massively under educated.

there are many people who also have higher degrees on this board - using it as a basis of your argument is hardly stunning - comngratulations for being middle class and having an IQ over about 110, I guess...

Edited by Si1

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that's an illogical answer

You are right, reading about it again it was a bit confusing. I wanted to point out that not _all_ shared ownership properties are apartments in shabby blocks with a lot of social neighbors around. Kind of saying that it should not be generalized.

there are many people who also have higher degrees on this board - using it as a basis of your argument is hardly stunning - comngratulations for being middle class and having an IQ over about 110, I guess...

Well, the previous post sounded like all people going for shared ownership are school leavers without much education. And middle class is OK for me right now ;)

Regards

Frank

Edited by FrankL

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You are right, reading about it again it was a bit confusing. I wanted to point out that not _all_ shared ownership properties are apartments in shabby blocks with a lot of social neighbors around.

Well, the previous post sounded like all people going for shared ownership are school leavers without much education. And middle class is OK for me right now ;)

Regards

Frank

OK. good luck.

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Guest X-QUORK
Thats a significant advantage.

Not nearly as significant as not owning any part of a massively deflating asset.

the short term renting tramps

Please tell me you don't seriously hold that view about renters, you seem quite reasonable otherwise.

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The only time that Shared Ownership makes any sense is when you 'own' 0.01% of the property and rent 99.99% of it. Which is effectively renting it but you'd still be liable for boiler repairs etc thinking about it.

So basically, on reflection, it actually doesn't make any sense.

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If true, probably the kindest thing the banksters have done for people on low and middle incomes in recorded history.

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I have (good) experience of a shared ownership scheme but can relate entirely to the banks issues here. Even when I joined a scheme way back in 2005 and HPI was still on the up, many banks wouldn't get involved.

I think now with them being more risk averse (not exactly tricky!) the idea of granting a mortgage on a property with a floating charge on it is likely to terrify them, and for good reasons.

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