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Forbearance and Foreclosures: Is UK ready for it?


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I was thinking of a scenario

  1. Joe bought an apartment (ApartA) at £600k in 2018 in London and took £560K in mortgage from HighFi_Bank
  2. Joe lost his job as part of Coivd19
  3.  Covid19 made working from home as norm and no need to have home in London anymore
  4. Joe cannot pay his mortgage and have paid ONLY £10K till now. Mortgage remaining £550K
  5. Joe is happy for the HighFi_Bank to reposses the house and happy to move out to the north of England.
  6. HighFi_Bank pushed out Joe from ApartA. Joe ONLY paid in total £40K + £10K + £someinterest. So HighFi_Bank now takes the risk of remaining £450K
  7. HighFi_Bank put the house for auction and seems that its gonna fetch lower than expected price of £450K.
  8. Suddently another 10K Joe's did the same. HighFi_Bank was little worried. Share prices of HighFi_Bank crashed and capital got low. Still HighFi_Bank didn't bother and started repossessing
  9. Seems house prices have lowered again and similar ApartA starts to get £350K with loss of about £200K per Apartments !!
  10. Processing of auction and other expenses  causes further drain of £25K for HighFi_Bank
  11. HighFi_Bank cannot afford £25K and ask Joe20K if he wants to buy his own house for £300K (i.e 50% cheap for Joe20K)


My queries to the legal experts out there

(a) Would Joe'xx be penalised on individual basis on this scenario like bad history forever? Though he did default but the house repossession is all the Bank can do?

(b) In case of the bank pushing out Joe, will a second valuation happens so Joe an receive anything from the £60K he paid?

(c) Does UK have similar forbearance/foreclosure process or companies who could do this for the banks?

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7 minutes ago, Bluestone59 said:

I think you'll find its 20 years max.

I seem to have had this argument before. Maybe it is. All sorts of pitfalls on the way. If you acknowledge the debt it looks like it can be indefinite.

Edited by Si1
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1 minute ago, Si1 said:

I seem to have had this argument before. Maybe it is. All sorts of pitfalls on the way.

In practice if you are still paying a tiddly amount after 20 years the bank or whoever the loan was sold to (more likely) will let you carry on paying I'm sure.

Otherwise it's likely that some kind of settlement will be reached long before.

I received a demand for £28k and offered £800. They accepted £1k. One year after I was evicted, all wrapped up.

I hadn't paid a penny for 15 months and didn't have anything (ahem) that they could levy on, it never got to legal.

Interestingly they broke the law during the process and the amount claimed was in part fraudulent, despite them being a big name firm (allegedly) of solicitors.

If HMG can't afford to "nationalise" unsaleable homes or support their occupants to remain in them then it could be a whole lot worse this time than in 1996. 

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Just now, Bluestone59 said:

In practice if you are still paying a tiddly amount after 20 years the bank or whoever the loan was sold to (more likely) will let you carry on paying I'm sure.

Otherwise it's likely that some kind of settlement will be reached long before.

I received a demand for £28k and offered £800. They accepted £1k. One year after I was evicted, all wrapped up.

I hadn't paid a penny for 15 months and didn't have anything (ahem) that they could levy on, it never got to legal.

Interestingly they broke the law during the process and the amount claimed was in part fraudulent, despite them being a big name firm (allegedly) of solicitors.

If HMG can't afford to "nationalise" unsaleable homes or support their occupants to remain in them then it could be a whole lot worse this time than in 1996. 

I'm certain lots just get ignored by the lender.

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31 minutes ago, Saving For a Space Ship said:

I thought it was 12 yrs & 6 yrs for non mortgage debt ?

When did it change from 12 to  20 yrs ?

It's 20 years statute barred in Scotland. 

12 Years capital 6 years interest everywhere else. 

All provided the debt isn't acknowledged. Get a CCJ, with action to enforce and the limits are out the window. 

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29 minutes ago, Saving For a Space Ship said:

I thought it was 12 yrs & 6 yrs for non mortgage debt ?

When did it change from 12 to  20 yrs ?

In the 90s I used to review contracts for a developer. The client would seek to get the developer's liability to last for 20 years from completion.

We would strike that out and say it had to be 12 because our insurance would not extend further. The clients' line was that 20 years was some sort of standard limitation for land and property transactions. We would then say don't bank on us having any money when the insurance runs out.

When I had occasion subsequently to consult an insolvency man I recall him also saying 20 years. He would have been referring to the unpaid mortgage. However he didn't impress me in the slightest so you've made me wonder if he even knew. I did the job myself but the timescale never became an issue.

One way would be to look at some mortgage Ts & Cs presumably.

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Joe can't afford to pay the mortgage.

Bank attempts to repo home.

Joe askes bank for evidence of the credit and debit side of their ledger to prove the loss.

Joe keeps insisiting on this.

Bank caves in as they can only show the debit side and Joe signs an NDA and keeps the home for free...

That's how it's done folks. I wish I knew that before I paid up the mortgage!

 

 

 

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4 hours ago, Fishfinger said:

Joe can't afford to pay the mortgage.

Bank attempts to repo home.

Joe askes bank for evidence of the credit and debit side of their ledger to prove the loss.

Joe keeps insisiting on this.

Bank caves in as they can only show the debit side and Joe signs an NDA and keeps the home for free...

That's how it's done folks. I wish I knew that before I paid up the mortgage!

Bank takes Joe to court, Joe tries to pull some freeman on the land stuff about the name Joe being a legal fiction under maritime law, judge unsurprisingly unimpressed at being told he has no jurisdiction and grants possession order, bailiffs evict Joe, bank auctions house, bank chases Joe for any shortfall.

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I believe that the banks will be much more willing to offer forbearance this time, like they did in Ireland in 2008.

Extend your 25year mortgage to 35 years? 6 month payment holiday? Remortgage onto a 200% mortgage?

That's assuming your bank doesn't sell your mortgage at a loss to someone else to get it off the balance sheet, or your bank doesn't go bust. I believe there are still people with Northern Rock mortgages who haven't repaid a penny in capital and whose mortgages have been sold onto vulture debt buyers like cerebrus. If a house is worth half the mortgage value the banks get penalised under Basel rules and have to hold more capital, they won't hang about they will want the mortgage, not the house, off the balance sheet asap and they will sell at a steep loss to do that. 

https://events.debtwire.com/no-consent-no-sale-political-tensions-rise-as-irish-banks-sell-npl-mortgages

Incidentally in Ireland in 2008 bankruptcy was extremely difficult and time consuming. People used to move to the UK to become bankrupt. I believe its easier in eire now. 

Edit-I've read the op a few times but I'm confused. Are Joe and joe20k the same person. So Joe at step 11 is the original owner from step 1 who loses a house at 600k then gets an 'under the counter offer' to buy it back for 300k?

 

Edited by regprentice
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On 09/05/2020 at 09:45, Si1 said:

If his house is repossessed then he owes any losses on that. For life. We don't have jingle mail in the UK.

Is there a good link/details of this into detail? (Let's say 12 or 20 year or lifetime). What you are saying is Bank is NOT happy even after reposessing house? My belief was that the "risk" was taken by bank in giving the mortgage based on the surveyor appointed by the "bank itself".  So if the house price when bought was $600K, but the house value now is £400K, that difference of £200K is on the bank?

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22 hours ago, regprentice said:

I believe that the banks will be much more willing to offer forbearance this time, like they did in Ireland in 2008.

Extend your 25year mortgage to 35 years? 6 month payment holiday? Remortgage onto a 200% mortgage?

That's assuming your bank doesn't sell your mortgage at a loss to someone else to get it off the balance sheet, or your bank doesn't go bust. I believe there are still people with Northern Rock mortgages who haven't repaid a penny in capital and whose mortgages have been sold onto vulture debt buyers like cerebrus. If a house is worth half the mortgage value the banks get penalised under Basel rules and have to hold more capital, they won't hang about they will want the mortgage, not the house, off the balance sheet asap and they will sell at a steep loss to do that. 

https://events.debtwire.com/no-consent-no-sale-political-tensions-rise-as-irish-banks-sell-npl-mortgages

Incidentally in Ireland in 2008 bankruptcy was extremely difficult and time consuming. People used to move to the UK to become bankrupt. I believe its easier in eire now. 

Edit-I've read the op a few times but I'm confused. Are Joe and joe20k the same person. So Joe at step 11 is the original owner from step 1 who loses a house at 600k then gets an 'under the counter offer' to buy it back for 300k?

 

sorry must have clarified.  Joe20K is  20000th person of the same type. Just extrapolating the case to larger number of users

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55 minutes ago, getknk said:

Is there a good link/details of this into detail? (Let's say 12 or 20 year or lifetime). What you are saying is Bank is NOT happy even after reposessing house? My belief was that the "risk" was taken by bank in giving the mortgage based on the surveyor appointed by the "bank itself".  So if the house price when bought was $600K, but the house value now is £400K, that difference of £200K is on the bank?

It's not about the bank being happy or otherwise, the shortfall debt remains in the mortgagee's name, that's the law in the UK.

https://www.cml.org.uk/consumers/payment-difficulties/what-to-do-if-repossession-occur/

I think it's also articulated in UK mortgage agreements' shall print.

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Spotted this today, and this is only up to end of March, expect it only got worse since then.  Not sure what forbearance they are referring to at the banks, payment holidays I expect. 

The number of mortgages in arrears crept up during the first three months of 2020, in what appears to be early signs of the impact Covid-19 is having on personal finances.

The PA Media news agency reports that 72,380 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance in the first quarter of 2020, up from 70,880 in the fourth quarter of 2019.

The figures from a UK Finance report show there were 4,420 mortgages in arrears in the buy-to-let sector, up slightly from 4,390 the previous quarter.

Mortgage arrears levels for both homeowners and landlords were lower when compared with the first quarter of 2019, and they remain low by long-term comparisons.

The report said:

The relatively small increase in arrears compared to quarter four 2019 is likely due to the early effects of Covid-19, and the industry has since introduced multiple forbearance measures to reduce financial difficulties for borrowers who are in need of support.

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On 10/05/2020 at 21:01, Dorkins said:

Bank takes Joe to court, Joe tries to pull some freeman on the land stuff about the name Joe being a legal fiction under maritime law, judge unsurprisingly unimpressed at being told he has no jurisdiction and grants possession order, bailiffs evict Joe, bank auctions house, bank chases Joe for any shortfall.

I wouldn't bother with that - just insist on seeing both sides of the banks ledger. There isn't because 97% of the money magically appeared when computer says yes. Oh and add the totally fictitious interest on top of the non existant debt.. Feel free to look up fractional reserve banking, you really can fool everyone all the time!

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On 18/05/2020 at 17:53, Fishfinger said:

I wouldn't bother with that - just insist on seeing both sides of the banks ledger. There isn't because 97% of the money magically appeared when computer says yes. Oh and add the totally fictitious interest on top of the non existant debt.. Feel free to look up fractional reserve banking, you really can fool everyone all the time!

Insist all you like, the bank and the judge won't care and they have the power to take the house without your consent.

Edited by Dorkins
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  • 418 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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