Thursday, December 15, 2011

Portable Negative Equity

Rescue plan for 'mortgage prisoners': Banks told to help thousands caught in negative equity

Banks are to be told to rescue ‘mortgage prisoners’ by loosening lending restrictions to allow loans worth more than 100 per cent of a property's value for those trapped in negative equity. Because of falls in the value of their home, hundreds of thousands of hard-working people are unable to move to a new home. Businesses are struggling to recruit managers from other regions and the housing market is stagnant. But new mortgage application rules – to be announced next week by the Financial Services Authority – will give banks the green light to approve loans to trapped homeowners. This will apply to those whose loans amount to a very high proportion of their home’s value – and even those in negative equity.

Posted by general congreve @ 02:57 PM (4071 views)
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16 thoughts on “Portable Negative Equity

  • general congreve says:

    Before anyone blows a blood vessel, this idea is probably the best thing to happen since sliced bread.

    It allows homeowners to sell at a loss while keeping their debt to the banks on the books. Result? Falling house prices!

    Talk about own goal. HAHA!

    BTW – Techie, our previous and very interesting conversation has been cruelly deleted after 30-odd comments. A nod and a ‘touche’ to the mods. I should have known better.

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  • general congreve says:

    @1 – Meant to say Techie and Bellwether. Really is annoying when your article gets deleted. Sorry about that.

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  • general congreve says:

    Actually this could well turn out to be some terrible form of financial repression for UK home owners in negative equity. It was probably dreamt up by the banks in the first place.

    Could it be that they will use this to prevent people from defaulting on their loans, the loan sticks with you for life and follows you around forever, your liability, not the banks, so it is always booked as an asset on their balance sheet.

    Win for the banks, win for HPCers, total no-way-out-loss for over-leveraged peak buying suckers. I’m actually starting to feel a bit of sympathy for them.

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  • general congreve says:

    It’ll be a bit like creating a multitude of portable debtor’s prisons to house these newly created debt slaves in, until they’ve made good on their debts, and it wont costs a penny to construct them either. Clever, very clever.

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  • GC – just so you know, a similar article was posted earlier today so joing that debate might be more interesting for you than talking to yourself here… just a thought.

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  • LOL timmy t @5

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  • “hundreds of thousands of hard-working people are unable to move to a new home”

    You know it’s serious when it involves hard-working people…

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  • how is this good for HPC? the prices wont fall as people can just borrow the shortfall. it seems to me just more air for the baloon.

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  • mark wadsworth says:

    RNR, as you very well know, home owners are always either “hard pressed” or “hard working”. It’s the tenants and young people who just loll about all day long expecting everything to fall into their lap, when I were a lad, we were up at six o’clock sweeping streets etc.

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  • general congreve says:

    @5 – You’re a card!

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  • GC – sorry didn’t mean to come across quite so sarcastically! For what it’s worth I completely agree with you anyway – you can’t expect a market to fall without activity. Hopefully this would enable a lot more people to sell for what they can get, knowing they can move their negative equity, put in a lower offer which makes up for their loss and they are in the same situation just with a different address. The vendors they buy from are then forced to lower their offer on the place they are buying etc etc… HPC here we come.

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  • general congreve says:

    @10 – Apology accepted, I wasn’t mortally wounded! Forward to an HPC debt slavery for those who took out liar loans and those who overstretched themselves my friend!

    In many ways, for those that like Schadenfreude, this is better than debt forgiveness/default on the loans. I have always said debt forgiveness wouldn’t be all bad, because it least it would take people out of nequity and allow them to sell at lower prices, hence an HPC. But this way they can still sell at a lower price and cause an HPC, but they’ll be stuck with their irresponsible HPI-causing debts, HAHA!!!

    Obviously it’s a wheeze for the banks too, but you can’t have everything.

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  • What this article doesn’t appear to comment on is what sort of interest levels these ‘nequity’ buyers will be forced into paying for their 100 per cent-plus loans, even if they have a good credit record. I would imagine the rates would be on the bit penal side. And, if as likely house prices have further to fall, they could find themselves severely in hock to the banks/building societies should they look to make another ‘nequity’ move in a few years’ time. Or am I misunderstanding something?

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  • general congreve says:

    @12 – You are right, they plan in putting those in nequity in a form of permanent debt servitude. Debt slaves until death. I expect by then they will have legislated for these debts to be intergenerational.

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  • Deadmoneywalking says:

    This is also about switching mortgage deals, move or not. One of the real risks to buying in the bubble IMO – if surveyors and lenders were a bit more honest.

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  • Wonder if one of the conditions for getting a new loan when in nequity is that you buy a cheaper house? Of course these HWFs could always rent like a lot of HPCers do.

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