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Chickens Roosting - Barratt "dream Homes" Scheme Screwed Up My Life

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Not completely convinced this isn't a troll post, but the MN collective are normally pretty quick to out them, and nobody's called it in 5 pages of replies yet, so maybe the OP is well known:

http://www.mumsnet.com/Talk/am_i_being_unreasonable/2363777-to-take-legal-action-over-barrat-homes-dream-home-scheme-that-has-screwed-up-my-life?pg=1

Back in 2007 we really needed to get a secure house after several very bad rented experiences. We didn't have a deposit so we opted for a scheme with barrat homes where they lent 25% and we got a normal mortgage for 75%/from the Halifax.

We knew at the time that after 10 years we would need to pay back the 25% but were assured by several people that it would increase in value and so could just remortgage with the equity to pay this off.

Fast forward 8 years and the house is now worth 80k less than we paid and we have no equity in the property.

Now where this gets dodgy is barret homes legal stuff say we either have to pay back the original sum borrowed or 25% of the current value, whatever is higher! So they win either way if it goes up or down.

Aibu to think this is very shady practice and I should take legal advice?

And...

Well I can understand paying back the 25% fine, but the clause that if it increases in value I have to pay that back seems very unfair as there is no reverse clause for if it falls in value.

The thing I find most striking is, this means it's nearly 10 years since I tried to talk someone else out of doing exactly the same thing. I think there's a lot of chickens about to come home to roost, and plenty more to come as other props schemes mature over the next few years.

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LOOOOOOOOOOOOOOOOOOL. She should have taken some advice before taking out the mortgage/agreeing to the deal.

That said, the second quote is a fair point. Is it an unfair contract term that they have to pay whatever is higher? I think it would be better if the most they had to pay back is what they borrowed.

This, of course, is the problem with equity loans and isn't it the problem with HTB1 (if that's the right part)?

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What's the worst that can happen?

Aibu to think this is very shady practice and I should take legal advice?

In 2007, yep.

Edited by R K

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I have some sympathy for the OP, simply because I knew someone in the same boat at the same time, and I remember the immense pressure on people to buy - not just from builders, but from the entire industry, not to mention property obsessed friends, family, and work colleagues*. But the deal was hardly difficult to understand, and it seems that she feels it was unethical only now it is clear that she is the one who will lose out.

The comments on the MN thread are an eye opener - definitely a sea change in sentiment going on here.

* Note to Venger, that I do not think people in this situation should be excused from the position that they ultimately put themselves in.

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The OP comes back later in the thread

Don't need to sell, but need to pay the 25% back in 18ish months and I have no equity in the house and no savings in the bank.

Oh dear, her house ATM isn't working!

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The OP comes back later in the thread

Oh dear, her house ATM isn't working!

"Don't need to sell, but need to pay the 25% back in 18ish months and I have no equity in the house and no savings in the bank." I'm only a simple dirty renter but if I was a 'home owner' in that situation I'd be thinking I might just have to sell.

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I have some sympathy for the OP, simply because I knew someone in the same boat at the same time, and I remember the immense pressure on people to buy - not just from builders, but from the entire industry, not to mention property obsessed friends, family, and work colleagues*. But the deal was hardly difficult to understand, and it seems that she feels it was unethical only now it is clear that she is the one who will lose out.

The comments on the MN thread are an eye opener - definitely a sea change in sentiment going on here.

* Note to Venger, that I do not think people in this situation should be excused from the position that they ultimately put themselves in.

Let's flag this early. Sometimes, but not always, it plays like this:

  • Someone flags an interesting thread on MN
  • Someone who posts here trolls the MN thread
  • A MN poster posts a link to the hpc thread about the MN thread
  • In the meanwhile on the hpc thread there has been an accumulation of bitter sounding posts, some with misogynistic overtones
  • On the MN thread MN posters agree that we hpc posters are a grim lot of bitter, misogynistic losers (even the female hpc posters, one assumes)

Let's bear in mind that not everybody has a hobby tracking the minutiae of UK mortgage financing and house building and that many people believe that they can trust the banks and the big builders. I post here because I am appalled by how the banks and builders are able to grift off wage earners and exploit the national housing stock against us. I want banks and builders which which are essentially dull utility companies, providing boring safe loans and building adequate housing where it is needed, sold at prices which are a safe, conservative multiple of local median earnings.

If we really are right about the UK property market as a giant Ponzi scheme, then we need to pay attention to the PR a little. It's a battle for people's imaginations. Hearts and minds, etc. The Ponzi fails when enough people realise that it is a Ponzi scheme.

As the stock of people who can't buy is added to by bonkers prices and as owner-occupiers required to pay with repayment mortgages are outbid by buy-to-let 'investors' financing with interest-only loans, the chance to build a like minded political constituency is presented. We can all choose to play our small part in a big war.

Edited by bland unsight

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LOOOOOOOOOOOOOOOOOOL. She should have taken some advice before taking out the mortgage/agreeing to the deal.

That said, the second quote is a fair point. Is it an unfair contract term that they have to pay whatever is higher? I think it would be better if the most they had to pay back is what they borrowed.

This, of course, is the problem with equity loans and isn't it the problem with HTB1 (if that's the right part)?

That is the deal, if 25% of the current value is less than the amount borrowed at the time of purchase they pay back the amount that was borrowed

So shes moaning now as the 25% is worth less than she borrowed i`m pretty sure she would be crowing from the roof tops if the 25% was worth double what she had originally borrowed i see this as a very fair contract as they dont pay interest on the 25% IIRC ?

She gamble on HPI with borrowed money and all she has to do is pay back the stake she borrowed now she has lost

This is just the tip of the iceberg wait until the HTB chickens come home to roost

Edited by long time lurking

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"Don't need to sell, but need to pay the 25% back in 18ish months and I have no equity in the house and no savings in the bank." I'm only a simple dirty renter but if I was a 'home owner' in that situation I'd be thinking I might just have to sell.

She'll still owe them the 25% and anything owing on the mortgage too.

She may as well stop paying the mortgage and see what happens.

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Let's flag this early. Sometimes, but not always, it plays like this:

  • Someone flags an interesting thread on MN
  • Someone who posts here trolls the MN thread
  • A MN poster posts a link to this the hpc thread about the MN thread
  • In the meanwhile on the hpc thread there has been an accumulation of bitter sounding posts, some with misogynistic overtones
  • On the MN thread MN posters agree that we hpc posters are a grim lot of bitter, misogynistic losers (even the female hpc posters, one assumes)

Let's bear in mind that not everybody has a hobby tracking the minutiae of UK mortgage financing and house building and that many people believe that they can trust the banks and the big builders. I post here because I am appalled by how the banks and builders are able to grift off wage earners and exploit the national housing stock against us. I want banks and builders which which are essentially dull utility companies, providing boring safe loans and building adequate housing where it is needed, sold at prices which are a safe, conservative multiple of local median earnings.

If we really are right about the UK property market as a giant Ponzi scheme, then we need to pay attention to the PR a little. It's a battle for people's imaginations. Hearts and minds, etc. The Ponzi fails when enough people realise that it is a Ponzi scheme.

As the stock of people who can't buy is added to by bonkers prices and as owner-occupiers required to pay with repayment mortgages are outbid by buy-to-let 'investors' financing with interest-only loans, the chance to build a like minded political constituency is presented. We can all choose to play our small part in a big war.

Don't worry I thought the brother in law posted this story in Anecdotal, a month ago.

:lol:

Barret "sleepwalk" homes might be better nomenclature.

Edited by 25 year mortgage 8itch

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"Don't need to sell, but need to pay the 25% back in 18ish months and I have no equity in the house and no savings in the bank." I'm only a simple dirty renter but if I was a 'home owner' in that situation I'd be thinking I might just have to sell.

Damned if she does, damned if she doesn't

If she sold she'd still owe the shortfall on the principle mortgage, and owe 25% of the original purchase price to the builders.

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Why shouldn't she take responsibility for her actions?

And the bank and the builder too?

Everyone needs to lose or the moral hazard will not be slayed.

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Damned if she does, damned if she doesn't

If she sold she'd still owe the shortfall on the principle mortgage, and owe 25% of the original purchase price to the builders.

Yep - her only course of action is to negotiate with Barratt to see if they will extend the loan. There is no point in them enforcing as the mortgage lender (with the first charge) will scoop the entire value of the house. As a result she has a reasonable chance of getting to some sort of deal.

Otherwise it looks to me like she is going to be bankrupt in 18 months time and lose her house....

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Let's flag this early. Sometimes, but not always, it plays like this:

  • Someone flags an interesting thread on MN
  • Someone who posts here trolls the MN thread
  • A MN poster posts a link to the hpc thread about the MN thread
  • In the meanwhile on the hpc thread there has been an accumulation of bitter sounding posts, some with misogynistic overtones
  • On the MN thread MN posters agree that we hpc posters are a grim lot of bitter, misogynistic losers (even the female hpc posters, one assumes)

Yes, I was well aware of the potential risk of posting a link to it. However, I think it's worth posting for discussion in the same way that I would have posted a newspaper article titled "Share Equity House Buyers Find that Buck Stops with Them".

If people here want to be dick heads that's up to them, although I hope it doesn't degenerate into that, since I feel that HPC and Mumsnet have become much more closely aligned in their assessment of the housing situation, particularly of late.

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She'll still owe them the 25% and anything owing on the mortgage too.

She may as well stop paying the mortgage and see what happens.

They'd repossess and charge fees and interest on the missed mortgage payments, and then pursue the debt until it's done or she's made bankrupt.

She's got two options

1) take on more debt to pay off the builders

2) take a one way ticket to Tijuana

Might be better to take voluntary repossession I'd have thought. Though she'd be better off selling and renting then paying off the mortgage and loan. If she's repossessed the bank will (whilst they want to maximise their asset return) undoubtedly take a lower price than she would in order to shift it off their books.

I bought a repo a couple of years ago and ended up making the same offer to the bank that I first made to the vendor (about 60% of her asking price) and the bank accepted. Had the vendor accepted my first offer, they would have avoided more fees and interest on their debt.

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And the bank and the builder too?

Everyone needs to lose or the moral hazard will not be slayed.

Agreed. Maybe she should contact the builder and the bank then between them work out how to move forward. If they play nasty she just declares bankruptcy. What I have a problem with is the bury head in sand and play victim that is so prevalent in modern society.

In 2007 I had no money for a London deposit. I played honestly and lost big time on the housing game. What I probably should have done is just lied but what I didn't do is play victim. I can't afford a house wah wah wah... Instead what I did is looked at all the options, built a plan B, backed myself and then got on with it.

She backed housing but then failed to take any responsibility for what she had done. Now the chickens are coming home she starts on the victim card. I'm bored with it.

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Yep - her only course of action is to negotiate with Barratt to see if they will extend the loan. There is no point in them enforcing as the mortgage lender (with the first charge) will scoop the entire value of the house. As a result she has a reasonable chance of getting to some sort of deal.

Otherwise it looks to me like she is going to be bankrupt in 18 months time and lose her house....

Especially if it's someone like NRAM, who's principle interest is to clear bad debt as quickly as possible (even if it's way below market value). Barratt would presumably negotiate, as you say it's in their best interest in the long term.

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Agreed. Maybe she should contact the builder and the bank then between them work out how to move forward. If they play nasty she just declares bankruptcy. What I have a problem with is the bury head in sand and play victim that is so prevalent in modern society.

In 2007 I had no money for a London deposit. I played honestly and lost big time on the housing game. What I probably should have done is just lied but what I didn't do is play victim. I can't afford a house wah wah wah... Instead what I did is looked at all the options, built a plan B, backed myself and then got on with it.

She backed housing but then failed to take any responsibility for what she had done. Now the chickens are coming home she starts on the victim card. I'm bored with it.

she's no victim and she should suffer if she walks away but it's still her right to do that.

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Yes, I was well aware of the potential risk of posting a link to it. However, I think it's worth posting for discussion in the same way that I would have posted a newspaper article titled "Share Equity House Buyers Find that Buck Stops with Them".

If people here want to be dick heads that's up to them, although I hope it doesn't degenerate into that, since I feel that HPC and Mumsnet have become much more closely aligned in their assessment of the housing situation, particularly of late.

Agree 100% and thank you for posting the thread.

Good shout from DownWithThisTypeOfThing on page 4:

OP I've just had a quick Google.

A couple of years ago Barratt unsuccessfully tried to sell their shared equity book which indicates they knew something was brewing.

Looks like it was November 2011, as per this Inside Housing piece, Barratt ditches shared equity sell off plans.

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Agree 100% and thank you for posting the thread.

Good shout from DownWithThisTypeOfThing on page 4:

Looks like it was November 2011, as per this Inside Housing piece, Barratt ditches shared equity sell off plans.

Ooh, interesting.

Valuations certainly would have been significantly lower in 2011, looks like they realised then what a bind they'd put themselves in and backed off. Good job the tax payer came along and backstopped a bunch of schemes to help lift the value of their portfolio.

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This post is interesting:

So you borrowed 25% while banking on it being free money. YABVU. Houses are not bloody money trees. You own your own home, and have had 10 year's use and benefit of someone else's money, and now you need to pay it back. Of course you can't take legal action against paying back a loan you agreed.

Seeing as money is created when banks make loans and 70% of all UK lending is residential mortgage lending, the whole point is that houses are money trees. It's just that you don't always get to harvest the crop, just because you took out the loan to buy your house.

Further, you are not using "someone else's money"

Barratt allocate a price to the house and sell it to you at that price.

All you can really afford is £75,000, but at that price they can't book the profit they'd like to book. Hence they make a loan and sell at £100,000. They book the cash they receive for 75% and they book a loan for the other 25%, and at this point they create credit money. To clarify this claim, if they sell at £100,000 and offer a 25% loan, then you owe £25,000. They could have decided that it should sell at £150,000 and offered you a 50% loan. They get to decide how much credit money to create. They are not providing anybody with the benefit of anything by making the loan - they didn't have to take £25,000 out of a drawer and give it to somebody else.

Their ability to gull the borrower into signing up for the loan rested on their economic control of the land which could be developed. They secured that economic control (at least in part) by borrowing money and using the loan to buy the land, so even at the beginning of the story, they weren't using their money. They were using new credit money conjured into existence when the Barratt's banks made the loan to Barratt to buy the land. Housing-banking Ponzi scheme. Same as it ever was.

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