Sunday, March 30, 2008

Great stuff, well worth a listen

Return of the Debt (mp3)

How would you feel if you suddenly found out that you owe tens of thousands of pounds for a debt that you didn't know you had? The 5 Live Report has learned that people whose homes were repossessed over a decade ago are now being pursued by lenders who say they didn't recover enough money from the sale of their property. Reporter Penny Haslam speaks to people who have rebuilt their lives, with new families and new homes, who are now facing court action for debts that have come back to haunt them more than 10 years on.

Posted by little professor @ 11:11 PM (17703 views)
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17 thoughts on “Great stuff, well worth a listen

  • it_is_going_with_a_bang says:

    OMG – Who lent these people money? ( the council lot at the start )
    “We didn’t know about mortgages when we started”
    “We thought we would be debt free”
    It should be illegal to lend money to people who are quite clearly stupid.

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  • you can’t recover a 10 year old debt, i think the limit is 6 years from last point of contact or reference. It’s the same for any debt really – and in this case it is their loss.

    i dont know the exact circumstances, but i read it on http://www.consumeractiongroup.co.uk

    if people are going to court because of this then they are willingly (knowing or otherwise) accepting this new debt, and i feel sorry for them.

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  • little professor says:

    OMG – Who lent these people money?

    This was back before the early 90s crash.
    Things will be even worse this time round – they have been chucking money at anyone with a pulse.

    I liked this summary of the show from MSE:

    [Snark mode on]
    Midlands family “we didn’t know about mortgages” – but you were happy to sign one or two.

    Geordie girl didn’t sort out mortgage when she split. Also never checked that the repo sale covered what was owed.
    “I don’t have a clue why I’ve been contacted and he hasn’t….” Er, because you have a house and a job and he’s not working and renting, maybe?

    “Mike” had property for sale at £72k but it was sold for £53k by the bank. Is in denial about owing money of £16k shortfall and £13k interest. Represents himself in court as he has no money. “you feel like a criminal being sat in front of judge” I don’t. I’ve been in county courts in front of judges on numerous occasions and I’ve never felt “like a criminal”. Guilty conscience maybe? He’s claiming that the 12 year limit has been exceeded but the case is on hold while the lender finds the paperwork.

    Mentions code of practice reducing 12 year reclaim period to 6 years. Only she obviously didn’t read the details as (IIRC) it only applies to debts incurred since about 2000.

    Burton on Trent “John and Bev” “Assumed it would be automatically cleared”. B&B used private detective agencies – again, er, wow, so what’s new? They wait until he buys a house as previously he was on benefit. Jeez, how f***ing amazing! Wonder why they did that? He then defaults on the agreement to pay off the arrears and whinges that he’s now having to pay more on his mortgage for longer.

    The debt consultant, or whatever he is, then comes out with this classic: “the whole point of the process of repossession is that you are moving house and you may be hard to track down”

    [/Snark mode off]

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  • planning4acrash says:

    OMG2, this is terrible. A lady in the same Council house since 11yrs old, buys the house 2yrs ago, then repossessed and in a flippin hostel with debts. Scandal.

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  • planning4acrash says:

    This is why 2.5-3x salary is appropriate.

    And OMG, basically, the property gets sold, the lender gets cash for that bit (selling it at a loss), then they let you get a job and new capital. All the while, the shortfall is sitting quiet and gaining interest. Then they can pursue you for that money for twelve years.

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  • Its simple its because house is a colatteral not a limited liability.
    So in that case the perils of current bust will last for a few years reason being
    1) Banks will chase these people who will declare themselves as bankrupt.
    2) These guys will then suffer from poor credit for next 5-6 years
    3) Banks making so much loss will not make that much profit and will slow down.

    Vicious circle continues..

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  • little proffessor says “great stuff”
    why is this great? barely numerate people that have become victims of irresponsible lending , I just think it is sad stuff and that the responsibility is somehow shared with the lenders. Its going to be so much worse this next time around and not just greedy and stupid people are going to be affected. It is going to cause severve upset and financial ruin for so many ordinary nice people

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  • little professor says:

    I don’t see what the basic problem is. You take out the debt, you have to pay it back. Simple.

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  • @little professor

    ‘You take out the debt, you have to pay it back. Simple.’

    I can’t disagree with that but it would be better if the legal aspects were properly explained. For various reasons, there will always be people who get repossessed – sometimes for reasons that could not be forseen and sometimes due to financial incompetence. I do not recall the legal aspects of mortgage debt recovery ever being mentioned to me when I had an interview for a mortgage with an estate agent many years ago.

    A simple warning like would be a good idea:

    “If your house is repossessed, you will be legally liable for any unpaid part of the mortgage when the house is sold. After the sale of your repossessed property, you will be pursued by the mortgage lender for repayment of the outstanding mortgage and interest for the next 12 years.”

    Of course, a bank employee who is looking for a commission on the sale of the mortgage probably doesn’t want to scare people saying things like that!

    Off topic:

    To see how differently our laws work in comparison with the US, have a look at this amazing article – banks pay people foreclosed not to destroy their houses before leaving:
    http://online.wsj.com/article/SB120665586676569881.html?mod=hpp_us_pageone

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  • stillthinking says:

    er.. We already tried full debt recovery in the UK. Debtors prisons and a chronically unfair society, and an indentured population.

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  • Same problems exist with chasing unsecured debt. Americans call old unrecovered mortgages and loans ‘zombie debt’.

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  • japanese uncle says:

    Making it illegal to provide any other types of mortgage loans but those on non-recourse basis, should be one solution. Let the lender to share the risk, then they will realize the problem will be theirs

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  • The solution is to reign in lending practice, and, as JU suggests, require the lender to shoulder the burden (or at least part of it) should the property be sold for less than the amount outstanding.

    A statutory limit on lending multiples is also long overdue – 2.5 x first income + 1 x second was the norm 25 years ago.

    Chasing people so far down the line is a bit off, unless of course, they have been playing hide and seek..

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  • “require the lender to shoulder the burden (or at least part of it) should the property be sold for less than the amount outstanding”

    As far as I can see this is something that would be very easy to formalise legally, and would go one hell of a long way to stopping future booms and busts. The politicians would have to be incredibly stupid not to have thought of it.

    Or complicit

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  • “The politicians would have to be incredibly stupid not to have thought of it.”

    Politicians… stupid… Ha ha ha!

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  • Passing your 11+ in ‘sums’ should be made a precondition of qualifying for a mortgage.
    I think it is a sad reflection on our education system that so many sheeple are released into the big bad world with no understanding whatsoever of even the most basic finances.

    Notwithstanding this, I am with little professor on this one. Even the most uneducated thicko knows that if you borrow, you have to pay it back. The current attitude of ‘some other sucker can pay’ has grown in popularity, be it relating to benefits & handouts or breeding multiple illegitimate brats with several women.

    The alternative to lenders trying to recover debts from those who borrowed it is higher costs for those that do pay it back, in much the same way that shop prices factor in a certain amount of goods being stolen.

    I don’t want to subsidise these types thank you.

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  • planning4acrash says:

    JU, there is also the issue of the broker, who has no incentive but commission. They should be outlawed. I can agree with comparison sites. But individuals should sit down with the bank manager before taking a loan, and yes, there should be a limit of, say, 6yrs to chase debts, if somebody is bankrupt, that should be the end of it. There should also be a code of conduct, and banks wholly responsible for the debt if they do not follow the code if default occurs. Afterall, this is money printed from thin air by the bank. Its not cash that they aquired from somewhere, its cash that they generated!! Maybe the debtor should be held to the 0.01 capital ratio held by the banks, but more than that? Its legalised extortion and slavery.

    Just remember that banks ramp up prices in the first place by the money they lend.

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