Jump to content
House Price Crash Forum

Recommended Posts

This type of headline will bring back some memories for the "old codgers" that frequent this board:

Can't sell, so owners give bank the homes

"STERLING HEIGHTS -- Alan and Alyson Wirgau live in a cute ranch on a quiet suburban street next to an award-winning school. There's a new roof above their heads, a new deck in back and a For Sale By Owner sign in front.

Instead of weighing offers, the family is weighing an option that seemed unthinkable a year ago: If they don't sell their home soon, they may turn down the heat, load their possessions in a U-Haul and drive away.

With a job in Indianapolis and dim prospects for selling their home, the Wirgaus are considering handing the keys back to the bank and walking away from their home."

Ruddy hell, it's the early 1990's all over again folks.

I must start dusting down my old Atari 520STFM and find that M1 Platoon game that nearly cost me my marriage in those days!

http://www.detnews.com/apps/pbcs.dll/artic...270375/1001/BIZ

Link to post
Share on other sites

http://www.usatoday.com/money/markets/us/2...oney.com/RENEWS

Worst risk to market? Subprime mortgages

Updated 2/27/2007 3:45 PM ET

By Sue Kirchhoff, USA TODAY

WASHINGTON — Growing trouble in the subprime mortgage industry poses the greatest risk to financial markets right now, according to a survey of business economists to be released Monday.
The forecast by the National Association of Business Economics (NABE), which polled 47 top economists, called the subprime sector a more serious concern than hedge funds, which came in second.
GREENSPAN SPEAKS: Calls recession 'possible'
Subprime mortgage lenders provide higher-priced loans to consumers with impaired credit. Defaults and delinquencies among subprime borrowers have jumped since late 2006, and a number of lenders have shut down or scaled back their operations.
On Wednesday, for example, shares of subprime lender NovaStar Financial plummeted more than 42% to $10.10 after it announced a fourth-quarter loss of $14.4 million. CEO Scott Hartman said in a conference call Tuesday that the company expects to recognize little, if any, taxable income through 2011.
While the NABE finding illustrates concern about escalating problems in the subprime sector, it doesn't mean economists expect the difficulties to spark broader financial stress. Overall, they expect steady economic growth in 2007.
"The outlook for consumer spending, which is the one that might be hit the highest by mortgage delinquencies and defaults, was actually revised upward," says Carl Tannenbaum, NABE president and an economist at LaSalle Bank.
The economists predict that the U.S. economy will expand at a 2.5% to 2.6% annual rate in the first half before accelerating to around 3% later this year. Growth is expected to average 2.8% for the year, in line with earlier NABE reports.
Housing will continue to be the biggest drag on growth. After five years of a boom market, housing starts have plunged in the past year.
The jobless rate, now 4.6%, is expected to inch up to 4.7%, the NABE says. Corporate profits, which rose by an estimated 19% last year after taxes, are projected to rise by a far more modest 5% in 2007.

Our market is also heavily loaded with subprime and other forms of risky loans. IO has been rampant as FTBs became desperate.

Link to post
Share on other sites
Instead of weighing offers, the family is weighing an option that seemed unthinkable a year ago: If they don't sell their home soon, they may turn down the heat, load their possessions in a U-Haul and drive away.

With a job in Indianapolis and dim prospects for selling their home, the Wirgaus are considering handing the keys back to the bank and walking away from their home."

Ruddy hell, it's the early 1990's all over again folks.

http://www.detnews.com/apps/pbcs.dll/artic...270375/1001/BIZ

I remember hearing about this happening in the UK in 1992 - 1995 but I do not know anyone who actually did just "hand back their keys" so can anyone tell me what actually happens when a mortgagee actually does this?

Does the bank try to chase them down and have them arrested? Do the banks just put them on a credit black list. What happens if you just go abroad, change their name and never come back?

I am just wondering what would happen if banks really clamped down on IVAs and tightened credit (as they appear to be doing) to such an extent that people reacted by just walking away from their debts and started getting on with their lives. It used to be called the 'moonlight flit' in my parent's day when tenants did a runner and I suppose a mortgagee is ultimately in the same position except renting from a bank via a mortgage contract.

Edited by Wad
Link to post
Share on other sites

I remember it well - and it's all rather sad.

It's called 'jingle mail'.

As I recollect, technically (in the US), it depends upon your loan structure. If it's a 'recourse' jurisdiction the bank will chase you if it seems you've got the assets to cover any shortfall. If it's a 'non-recourse' jurisdiction you can walk away - if - you only have a first mortgage which you've not refinanced. If you've a 2nd mortgage, or have MEW'd you're on the hook. And, if you manage to walk, the bank will forward the shortfall info to the IRS and you'll get a tax bill for the 'forgiven' amount. And the IRS won't walk away.

Either way, it's a bad situation.

Edited by haggis
Link to post
Share on other sites
I remember it well - and it's all rather sad.

It's called 'jingle mail'.

As I recollect, technically (in the US), it depends upon your loan structure. If it's a 'recourse' jurisdiction the bank will chase you if it seems you've got the assets to cover any shortfall. If it's a 'non-recourse' jurisdiction you can walk away - if - you only have a first mortgage which you've not refinanced. If you've a 2nd mortgage, or have MEW'd you're on the hook. And, if you manage to walk, the bank will forward the shortfall info to the IRS and you'll get a tax bill for the 'forgiven' amount. And the IRS won't walk away.

Either way, it's a bad situation.

I didn't realise that there were such things as non recourse jurisdictions in the US but I suppose that is not the case in the UK. I notice a lot of adverts encouraging people to reschedule their debt by taking on another loan secured against their property here in the UK. I guess that means once a debt has been incurred on say a credit card the banks (in both the UK and US) must be very keen to get people to pay it off by taking out an extra mortgage for which they will always be on the hook for.

Link to post
Share on other sites

I have a friend who "handed back the keys" in 1992 or thereabouts. In theory they can chase you, in practise they don't. He had one phone call along the lines would you like to make some payments and he said f*ck off and they never called again.

In the UK it seems they don't come at you for the loan "forgiven" amount, presumably because it's never legally forgiven, it's just not actively pursued. (But please don't give the Revenue ideas!!)

Link to post
Share on other sites

Wad,

To be clear, my previous post is a laypersons (perhaps bad) paraphrase of the principles governing US mortgages.

I'm really not sure how it works in the UK nor where I am now, Hong Kong. I've owned properties in both places (and others) but I'm pretty conservative so I've never really looked into the minutiae from the perspective of a distressed property owner. Though I have had the delightful experience of having my mortgage ratchet up to 16% about 15+ years ago (thank you Paul Volcker for wiping out my savings to curtail inflation which I personally didn't cause - but, I admit you did the right thing). And during that time I saw a fair number of friends and colleagues who's eyes were bigger than their stomachs when they were signing the mortgage papers during that particular boom. And they 'jingle keyed'!!

I think anyone in that situation now really needs to speak with a lawyer about their options.

Cheers

Link to post
Share on other sites
Always assumed they'd sell the house at auction, then come after you for the outstanding amount on the mortgage if the auction price didn't cover it.

Some people here have said that the lenders did keep chasing at least some people who 'gave the keys back'.

Link to post
Share on other sites

Lenders can and do continue to chase debtors. I think once proceedings have started, they have upto 12 years to try and get their money back. Do not believe that one can simply handback the keys to 'your' home and walk away debt free. It just doesn't work like that and years later the lenders will pop up to demand their money once you have got back on your feet.

Link to post
Share on other sites

Lenders can and do continue to chase debtors. I think once proceedings have started, they have upto 12 years to try and get their money back. Do not believe that one can simply handback the keys to 'your' home and walk away debt free. It just doesn't work like that and years later the lenders will pop up to demand their money once you have got back on your feet. Why would they let one walk away if one owes 100k and the property sells for 60k? There is still have a shortfall of 40k.

Link to post
Share on other sites
I have a friend who "handed back the keys" in 1992 or thereabouts. In theory they can chase you, in practise they don't. He had one phone call along the lines would you like to make some payments and he said f*ck off and they never called again.

In the UK it seems they don't come at you for the loan "forgiven" amount, presumably because it's never legally forgiven, it's just not actively pursued. (But please don't give the Revenue ideas!!)

Had freinds who lost their flat/house this way back in about 92, 2 couples, both becasue of unemployment, anyway they had to rent for ever more cause if they ever had anything looking like money, the banks came right back after them, one of them ultimatly chose bankruptsy and the other stuck it out with the bank letting them off after about 14 years, in both cases this was to recover the difference beteween what they had borrowed and what the banks sold it for at auction, and belive me, the banks dont give a sh*t how low it sells for. Overall though, the couple who went for bankruptsy were clear from that within maybe 5 years and have done ok since, the other couple will be poor for ever more.

Link to post
Share on other sites
Well it's now happening in the US

This is very interesting even my wife has noticed that! I was in the kitchen having my breakfast this morning so I couldn't read sky news screen you know the text going on there 24/7 and my wife pointed out "US & Recession in a text" followed with a comment " We always follow them whatever happens there happens here" I was so surprised & happy to hear that as she is more intelligent than I think she is :P

You know being a lady they either talk about boring Eastanders or wanna go to shopping in the middle of men watching footy :P never expected that sort of comment from her if she is talking about US & recession something must be happening!

Sorry ladies and no I won't tell her what I have posted here :P

Link to post
Share on other sites
Lenders can and do continue to chase debtors. I think once proceedings have started, they have upto 12 years to try and get their money back. Do not believe that one can simply handback the keys to 'your' home and walk away debt free. It just doesn't work like that and years later the lenders will pop up to demand their money once you have got back on your feet. Why would they let one walk away if one owes 100k and the property sells for 60k? There is still have a shortfall of 40k.

And what's worse is that the 100K owing was funny money created out of thin air by the banks..... :blink: And peoples lives turn to debt slavery, the rich get richer and the poor get ****ed.

It was ever thus.

Frank

Link to post
Share on other sites
Lenders can and do continue to chase debtors. I think once proceedings have started, they have upto 12 years to try and get their money back. Do not believe that one can simply handback the keys to 'your' home and walk away debt free. It just doesn't work like that and years later the lenders will pop up to demand their money once you have got back on your feet.

Correct, basically most mortgages with LTVs of more than 75%/80% were sold with Mortgage Indemnity Guarantee (MIG) (which the mortgagees paid for!) which meant that the mortgagees insured the lender against the circumstance where if the property was reposessed and sold for less than the mortgage amount, the insurance company paid the lender the difference.

Most of those who handed back the keys thought it was the best way to get out of this dismal situation (running away) but did not read the small print which allows the insurance company to track down the mortgagees and demand the difference. I am aware of someone who was tracked down 10 years later and had to negotiate with the insurers as to what they were willing to accept as settlement.

Link to post
Share on other sites
This is very interesting even my wife has noticed that! I was in the kitchen having my breakfast this morning so I couldn't read sky news screen you know the text going on there 24/7 and my wife pointed out "US & Recession in a text" followed with a comment " We always follow them whatever happens there happens here" I was so surprised & happy to hear that as she is more intelligent than I think she is :P

You know being a lady they either talk about boring Eastanders or wanna go to shopping in the middle of men watching footy :P never expected that sort of comment from her if she is talking about US & recession something must be happening!

Sorry ladies and no I won't tell her what I have posted here :PExcuse me I am a woman!!

Are you sure she wasn't just repeating what she heard on Eastenders :) ? :lol::lol:
And what's worse is that the 100K owing was funny money created out of thin air by the banks..... :blink: And peoples lives turn to debt slavery, the rich get richer and the poor get ****ed.

It was ever thus. And will all sit back and allow this fraud to contiune

Frank

Edited by Buffer Bear
Link to post
Share on other sites
This is very interesting even my wife has noticed that! I was in the kitchen having my breakfast this morning so I couldn't read sky news screen you know the text going on there 24/7 and my wife pointed out "US & Recession in a text" followed with a comment " We always follow them whatever happens there happens here" I was so surprised & happy to hear that as she is more intelligent than I think she is :P

You know being a lady they either talk about boring Eastanders or wanna go to shopping in the middle of men watching footy :P never expected that sort of comment from her if she is talking about US & recession something must be happening!

Sorry ladies and no I won't tell her what I have posted here :PExcuse me I am a woman!!

Are you sure she wasn't just repeating what she heard on Eastenders :) ? :lol::lol:
And what's worse is that the 100K owing was funny money created out of thin air by the banks..... :blink: And peoples lives turn to debt slavery, the rich get richer and the poor get ****ed.

It was ever thus. And will all sit back and allow this fraud to contiune

Frank

Link to post
Share on other sites
Are you sure she wasn't just repeating what she heard on Eastenders :) ?

No I am not sure that’s why I’ll have to question in actual fact interrogate her tonight to find out how she came up with her comment I am speechless :P

Excuse me I am a woman!!

That's why I said sorry but "Sorry" would not save my back yard if she was reading this post :P

We don't usually talk about finance news well why should we? I am earning the money she is nicely wasting it so nothing to talk about! I am really asking for trouble aren't I? :P

Link to post
Share on other sites

I think it would do an awful lot of people an awful lot of good to read this thread who are planning to take out a mortgage. Especially young people.

I bet most people simply have no idea just how hard it really is to free yourself of a debt that you have no realistic means of repaying. So many people seem to think "I will do a quick IVA and that it".

A "mortgage" does literally seem to mean "death pledge".

I give thanks that I am a renter and never had a debt in my life apart from a student loan that the bank actually paid me to take on.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 440 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.