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BillyShears

Pent Up Repossessions

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There have been threads recently about the rise in possession orders not being matched by a rise in repossessions. This is, it appears, due to new rules where banks have to work with people who are in arrears rather than just repossess the properties. But, if possession orders exceed repossessions, then unless a lot of these people who got into trouble are able to get out of trouble, then the number of "bad" properties lenders have on their books will start to increase. Especially since repossession orders are very high.

Dumping large amounts of properties onto the market at once, especially at auction, could be the trigger that crashes the market. So the banks holding onto the properties may help maintain the value of the asset that the debt is secured on. But as the number of such properties increases, the risk the banks take goes up and up. If the market crashes for another reason, such as collapsing under its own weight, then they are left with a lot of bad debt, much of which can't be fully recovered by selling the house. But there isn't just one bank (or building society). Is it possible that there might be a "who blinks first" race to clear old debts before other banks/building societies do?

Billy Shears

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It may already be starting.

I have been monitoring the property Auction web site:

http://www.numberone4property.co.uk/auctio...County=Somerset

Over the last few weeks the number have increased markedly in Somerset. In Bath there are now 4 properties up for auction. Previously there were 0 for months. The change has been very sudden.

Anyone else noticed this in their area?

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Pocession orders are often taken out by a bank when the person is behind with their payments.

Normally this gets people to, cough up as they have large amounts of equity or they use other savings. The repocession order is then cancelled.

This is the reason why the large numbers of repo orders are not leading to large numbers of repos,

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There have been threads recently about the rise in possession orders not being matched by a rise in repossessions. This is, it appears, due to new rules where banks have to work with people who are in arrears rather than just repossess the properties. But, if possession orders exceed repossessions, then unless a lot of these people who got into trouble are able to get out of trouble, then the number of "bad" properties lenders have on their books will start to increase. Especially since repossession orders are very high.

Dumping large amounts of properties onto the market at once, especially at auction, could be the trigger that crashes the market. So the banks holding onto the properties may help maintain the value of the asset that the debt is secured on. But as the number of such properties increases, the risk the banks take goes up and up. If the market crashes for another reason, such as collapsing under its own weight, then they are left with a lot of bad debt, much of which can't be fully recovered by selling the house. But there isn't just one bank (or building society). Is it possible that there might be a "who blinks first" race to clear old debts before other banks/building societies do?

Billy Shears

interesting post. It would be good to see the figures and plot charts for Possession orders vs repos vs auction sales. As KON rightly points out a lot of possession orders must sort themselves out but perhaps not all. Are the figures available? It would be interesting to see the ratio of repos to possession orders.

Edited by Sisyphus

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interesting post. It would be good to see the figures and plot charts for Possession orders vs repos vs auction sales. As KON rightly points out a lot of possession orders must sort themselves out but perhaps not all. Are the figures available? It would be interesting to see the ratio of repos to possession orders.

Hi

From here. However there are other sorts of Repo, rather than just mortgage default. For example a Landlord trying to gain his flat back, a council trying to get a flat back, removal of squatter. Also they are taken out and or inforced repealed in diff times. But it look like about 60% are cancelled.

http://www.odpm.gov.uk/pub/144/Table546Exc...b_id1156144.xls

& Here

http://www.odpm.gov.uk/pub/143/Table545Exc...b_id1156143.xls

Entered 	Cancelled	Diff	Repo's1990	276,367	216,288	60,079	43,8901991	305,783	237,918	67,865	75,5401992	259,833	223,951	35,882	68,5401993	212,678	180,007	32,671	58,5401994	171,039	141,242	29,797	49,2101995	187,165	160,397	26,768	49,4101996	191,665	159,880	31,785	42,5601997	197,236	157,025	40,211	32,7701998	239,964	178,291	61,673	33,8701999	239,066	171,518	67,548	29,9902000	239,957	161,746	78,211	22,8702001	243,356	165,418	77,938	18,2802002	242,139	161,175	80,964	11,9702003	227,178	149,003	78,175	 7,8302004	232,133	149,862	82,271	 6,0302005	260,026	168,809	91,217	10,250		943,055	561,550

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Hi

From here. However there are other sorts of Repo, rather than just mortgage default. For example a Landlord trying to gain his flat back, a council trying to get a flat back, removal of squatter. Also they are taken out and or inforced repealed in diff times. But it look like about 60% are cancelled.

thanks KON - I'll have to take a look at these when I get back from the gym.

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Entered 	Cancelled	Diff	Repo's1990	276,367	216,288	60,079	43,8901991	305,783	237,918	67,865	75,5401992	259,833	223,951	35,882	68,5401993	212,678	180,007	32,671	58,5401994	171,039	141,242	29,797	49,2101995	187,165	160,397	26,768	49,4101996	191,665	159,880	31,785	42,5601997	197,236	157,025	40,211	32,7701998	239,964	178,291	61,673	33,8701999	239,066	171,518	67,548	29,9902000	239,957	161,746	78,211	22,8702001	243,356	165,418	77,938	18,2802002	242,139	161,175	80,964	11,9702003	227,178	149,003	78,175	 7,8302004	232,133	149,862	82,271	 6,0302005	260,026	168,809	91,217	10,250		943,055	561,550

Is it the case that a house enters "possession order land" by having an order made against it. It can leave possession order land by either having the order cancelled or by being repossessed. If that's the case, then there were more houses leaving possession order land than entering in the early 90s. But since 1997 that trend has reversed, and the number of such houses is building up. In recent years, the number has been building up at incredible speed.

I'm sure there's a lot more to this data than first appears. Can anyone explain these trends? Paging Dr Bubb?

Billy Shears

Billy Shears

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It may already be starting.

I have been monitoring the property Auction web site:

http://www.numberone4property.co.uk/auctio...County=Somerset

Over the last few weeks the number have increased markedly in Somerset. In Bath there are now 4 properties up for auction. Previously there were 0 for months. The change has been very sudden.

Anyone else noticed this in their area?

I live in a little town a few miles outside Bath and I've suddenly started to see houses up for auction here too! There's a couple I drive past every day that have been up for sale (in the regular way) for months ... and now suddenly they're up for "Sale by Auction"! Interesting... :ph34r:

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There have been threads recently about the rise in possession orders not being matched by a rise in repossessions. This is, it appears, due to new rules where banks have to work with people who are in arrears rather than just repossess the properties. But, if possession orders exceed repossessions, then unless a lot of these people who got into trouble are able to get out of trouble, then the number of "bad" properties lenders have on their books will start to increase. Especially since repossession orders are very high.

Dumping large amounts of properties onto the market at once, especially at auction, could be the trigger that crashes the market. So the banks holding onto the properties may help maintain the value of the asset that the debt is secured on. But as the number of such properties increases, the risk the banks take goes up and up. If the market crashes for another reason, such as collapsing under its own weight, then they are left with a lot of bad debt, much of which can't be fully recovered by selling the house. But there isn't just one bank (or building society). Is it possible that there might be a "who blinks first" race to clear old debts before other banks/building societies do?

Billy Shears

IF you owe the bank £5k you have a problem. If you owe the bank £5 million, its the bank that has the problem.

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IF you owe the bank £5k you have a problem. If you owe the bank £5 million, its the bank that has the problem.

But these are large numbers of people each of whom doesn't owe enough to threaten the bank individuallly.

Billy Shears

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These are the figures from the CML for the number of properties actually sold after being repossessed, starting from when records began:

........(Sales)............(repossessed from KON's post:)

1997..34,560............ 32,770

1998..33,230............ 33,870

1999..33,700............ 29,990

2000..25,830............ 22,870

2001..19,370............ 18,280

2002..14,620............ 11,970

2003....8,190...............7,830

2004....5,590...............6,030

2005....7,880.............10,250

Totals:182,970........173,860

Difference: 9,110

So it would seem that there is very little repossessed stock available on the market. However, the 2005 figure may be the start of an increase in in the trend as there were 71,000 odd repossession orders made in 2005 up from 46,000 the year before.

We shall have to wait and see. 2006 Q1 possession orders were 21,997 (http://www.dca.gov.uk/statistics/mpstats/2006/nat-q1.pdf) up from 14,041 from Q1 2005. Things are not looking good for some homeowners.

If these trends continue, we can expect to see loads of repossessed property coming on to the market 2007-8.

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But these are large numbers of people each of whom doesn't owe enough to threaten the bank individuallly.

Billy Shears

Yes but the point is, would the banks (by repossessing all these properties) want to cause a crash in the value of assets on which they are owed millions by people who have no way of paying the money back? Flooding the market with repos would certainly bring prices down but it wouldn't do the banks much good as they will be left holding the losses. I suppose the banks could always pick off a few at a time - that may well be happening now, but that isn't going to cause a repo lead crash is it? Not trying to be bullish btw just being pragmatic.

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I cannot see what alternative the banks may have.

The vast number of possession orders are suspended which allows the borrower to repay the mortgage and a proportion of the arrears. You would expect anyone under the threat of suspended possession to give up all luxuries and concentrate on their mortgage payments - no more Sky TV!

If these people cannot keep up the payments, do the banks wait until the borrower gets into negative equity, or do they sell as soon as they can, particularly while Haliwide are showing that the property market is going up?

Mortgage possessions are politically sensitive, and I am sure that mortgage companies are reluctant to take possession unless they absolutley have to. But, they are businesses after all, and I suspect that they would rather minimise their losses in the log run, rather than keep the politicians happy (who will probably be elected out of office in a few years time).

All IMHO, of course.

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Guest Guy_Montag

Yes but the point is, would the banks (by repossessing all these properties) want to cause a crash in the value of assets on which they are owed millions by people who have no way of paying the money back? Flooding the market with repos would certainly bring prices down but it wouldn't do the banks much good as they will be left holding the losses. I suppose the banks could always pick off a few at a time - that may well be happening now, but that isn't going to cause a repo lead crash is it? Not trying to be bullish btw just being pragmatic.

This works fine in a stagnant market, but as soon as things start dropping the banks will want what they can get as soon as possible, they won't want to lose out to another bank by sitting on a repo order.

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These are the figures from the CML for the number of properties actually sold after being repossessed, starting from when records began:

........(Sales)............(repossessed from KON's post:)

1997..34,560............ 32,770

1998..33,230............ 33,870

1999..33,700............ 29,990

2000..25,830............ 22,870

2001..19,370............ 18,280

2002..14,620............ 11,970

2003....8,190...............7,830

2004....5,590...............6,030

2005....7,880.............10,250

Totals:182,970........173,860

Difference: 9,110

So it would seem that there is very little repossessed stock available on the market. However, the 2005 figure may be the start of an increase in in the trend as there were 71,000 odd repossession orders made in 2005 up from 46,000 the year before.

Yes, but what about the houses with a possession order, but not yet repossessed. Given the figures there are an awful lot of these, and those numbers are growing. Those are the ones I think that the banks might suddenly decide to repossess if there's a rush for the exits. More information on what might happen to these houses would be very interesting.

I cannot see what alternative the banks may have.

The vast number of possession orders are suspended which allows the borrower to repay the mortgage and a proportion of the arrears. You would expect anyone under the threat of suspended possession to give up all luxuries and concentrate on their mortgage payments - no more Sky TV!

This assumes that people are logical and sensible. Or become so after the possession order. And that they can afford to catch up with the arrears. I'm not sure that I share your optimisim.

If these people cannot keep up the payments, do the banks wait until the borrower gets into negative equity, or do they sell as soon as they can, particularly while Haliwide are showing that the property market is going up?

Mortgage possessions are politically sensitive, and I am sure that mortgage companies are reluctant to take possession unless they absolutley have to. But, they are businesses after all, and I suspect that they would rather minimise their losses in the log run, rather than keep the politicians happy (who will probably be elected out of office in a few years time).

All IMHO, of course.

The banks may not act as one. If all the banks have large numbers of properties in default, then in a panic it's the bank that acts first that loses least. And a bank that holds while other banks dump loses most.

Billy Shears

Edited by BillyShears

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It's less of a of a choice of what the banks have to do now rather than what they have made and how they have made it. They are ahead of the system as they controil it.

They know what they're doing otherwise they wouldn't be doing it.

Boring bit over for now - :ph34r:

Edited by music man

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Yes but the point is, would the banks (by repossessing all these properties) want to cause a crash in the value of assets on which they are owed millions by people who have no way of paying the money back? Flooding the market with repos would certainly bring prices down but it wouldn't do the banks much good as they will be left holding the losses. I suppose the banks could always pick off a few at a time - that may well be happening now, but that isn't going to cause a repo lead crash is it? Not trying to be bullish btw just being pragmatic.

This assumes that the banks act as one. If any of the banks break ranks, then they get to sell their properties first and make the least loss, possibly none. As the number of default properties they hold rises, the risk in continuing to hold grows, and perhaps the motivation to break ranks will rise.

Billy Shears

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Yes but the point is, would the banks (by repossessing all these properties) want to cause a crash in the value of assets on which they are owed millions by people who have no way of paying the money back?

I don't think your logic works out. Can you imagine what would happen if news got out that banks don't actually repossess? Now, I know that we're all fine upstanding citizens here, but some people are not.

Mortgage possessions are politically sensitive,

Well, quite. Say no more.

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It's all down to the amount of exposure the lender has - and decisions will generally be made on hard fact ( I was Manager of a Mortgage Company for 10 years during the last crash)

If their is negative equity or no history of co-operation or intent from the mortgagee then the mortgagor will ask the Court to uphold the repossession order and go for possession ASAP

If there is equity and the motgagees are willing to make some form of payment then the mortgagor will allow the possesion order to be set aside on the understanding that an agreed schedule of repayment (possibly including arrears) or a pending sale be allowed - the fact that the order has been granted makes the whole process much quicker if the agreement is broken.

Mortgagors don't like to reposess for many reasons including Bad Press, potential loss, increased exposure (every person who attends an auction can spot the repos immediately)...

My thoughts FWIW there are many who are very much in arrears but have equity in their property, the Banks and Building Societies are seeking repo orders so that when HPC starts they will have a chance to bail out before the brown stuff hits the fan

CS

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Yes, but what about the houses with a possession order, but not yet repossessed. Given the figures there are an awful lot of these, and those numbers are growing. Those are the ones I think that the banks might suddenly decide to repossess if there's a rush for the exits. More information on what might happen to these houses would be very interesting.

This assumes that people are logical and sensible. Or become so after the possession order. And that they can afford to catch up with the arrears. I'm not sure that I share your optimisim.

The banks may not act as one. If all the banks have large numbers of properties in default, then in a panic it's the bank that acts first that loses least. And a bank that holds while other banks dump loses most. "

Well the figures for possession orders which have not been enforced were on the DCA link. I will summarise:

Year...Possession Actions Commenced..Orders Made (incl. suspended)...Properties Repo'd

2001...67,448......................................47829......................................18,280

2002...64148.......................................41,279.....................................11,970

2003...67,029......................................40,682.......................................7,700

2004...77,856......................................46,409.......................................6,030

2005..115,353.....................................70,844......................................10,250

2006Q1.33,442....................................21,997......................................Not yet available

The problem with these statistics is that the Properties repo'd figure comes from CML members who provide their statistics to the CML. There is potential there to understate the figures if they wanted to.

Furthermore, I doubt that these figures include possession orders sought by Trustees in Bankruptcy - I will email the DCA.

In response to your point Billy Shears, the mortgage companies cannot repossess the suspended orders unless the borrower defaults, and the Court is persuaded that there is no real prospect of them getting up to date with the arrears payments. The mortgage companies will, in my view, undoubtedly take possession where this is the case. However, the statistics suggest that this is not yet happening.

However, the stats are very worrying going forward as an increase in the number of overall possession orders must reflect an inability on the part of borrowers to keep up repayments. The effect of an interest rate rise can only exacerbate the problem, and it looks like more properties will be respossessed this year and they must come on to the market either this year or next.

Edited by nimmmm

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It may already be starting.

I have been monitoring the property Auction web site:

http://www.numberone4property.co.uk/auctio...County=Somerset

Over the last few weeks the number have increased markedly in Somerset. In Bath there are now 4 properties up for auction. Previously there were 0 for months. The change has been very sudden.

Anyone else noticed this in their area?

Yes.

A local EA also deals in Auctions.

For the last few years all they've had on their auction pages were commercial property and the very occassional reisdential wreck.

Now they seem to have 10+ residential auctions at any one time.

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For some reason, the website won't let me reply to this posting properly, and I've had to cut and paste.

In response to your point Billy Shears, the mortgage companies cannot repossess the suspended orders unless the borrower defaults, and the Court is persuaded that there is no real prospect of them getting up to date with the arrears payments. The mortgage companies will, in my view, undoubtedly take possession where this is the case. However, the statistics suggest that this is not yet happening.

The stats don't say how many are suspended. If we look at 2005, then 60,000 more properties had orders made than were repo'd. Are all 50,000 of these suspended? Is the number suspended a small or large proportion of these properties? I wonder if there are any stats whether people who end up in arrears frequently get out of trouble again, or whether the majority of people who get that far are only delaying the, if not inevitable then at least probable.

However, the stats are very worrying going forward as an increase in the number of overall possession orders must reflect an inability on the part of borrowers to keep up repayments. The effect of an interest rate rise can only exacerbate the problem, and it looks like more properties will be respossessed this year and they must come on to the market either this year or next.

I'm not surprised. Given that more and more people will have bought recently, either as FTB are as a stretched S(econd)TB, the number of people likely to get into trouble would be expected to increase. And if prices do stay high, close to where they are now in real terms, then as the market churns I'd expect the number of repos to keep on rising.

Wasn't there some talk late last year of some horrifying percentage of recent buyers in Norfolk, like 10% or so, getting into trouble?

Billy Shears

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  • 301 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?


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      • up 5%



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