Handing House Keys Back to Lender...
Discussion
You hear about people doing this, but surely the lender then sells the house for peanuts and the person then owes real money instead of a theoretical debt? Why would you do this (apart from being unable to make any payments)? I'm sure I'm being dim... please explain, somebody who knows?
The problem is that in America many home loans are non-recursive meaning that you can hand the keys to the lender and walk away owing nothing even if the loan is more than the value of the property. However in the UK it doesn't work that way, you are liable for the full value of the loan plus interest regardless.
siscar said:
The problem is that in America many home loans are non-recursive meaning that you can hand the keys to the lender and walk away owing nothing even if the loan is more than the value of the property. However in the UK it doesn't work that way, you are liable for the full value of the loan plus interest regardless.
Exactly. This is why the bad debt are being written off so quickly by the banks. They get the keys back, the person walks away. The banks lose the original money lent, plus have a house on their books that has almost zero worth because theres no one buying houses right now. Do you really think the banks would be losing billions if this issue was just a few hundered thousand 'sub primers'? If it were happaneing in this country the banks would be getting around 75% of their money back. In the USA they get virtually nothing.
Makes the decsion to walk away much much easier if they cant tie you to a debt for the rest of your life too. Which is the real problem. US sub-primers will pay their credit card debt before their mortgage arrears.
Lenders do have a responsibility to ensure that they get fair value for the property if they sell it though. They cannot simply sell it for £50,000 and then come after you.
They don't have to achieve open market price, but a market price given the fire-sale scenario.
It's for this reason that repo'd properties are normally auctioned, as this shows that market price has been achieved after a marketing period.
They don't have to achieve open market price, but a market price given the fire-sale scenario.
It's for this reason that repo'd properties are normally auctioned, as this shows that market price has been achieved after a marketing period.
briSk said:
Hedders said:
So buying property in the states is a 100% risk free investment?
thing is..most of the ones who bought recently had more in common with Forest or more likely Bubba than Trump..!Why would anyone rent, ever?
ETA: now that i think about it, when i lived over there neither of my bosses owned their houses!
Edited by Hedders on Friday 15th August 09:02
mickken said:
Most people are too f
king stupid to realise that the Lender will still chase them for the money if there is still outstanding monies owing when they've sold it at a piss take price.
"You've got your house back, we're done".....errrr, no you're not you fking retard.
It doesn't sound wise to me, why would the lender seek to make a loss and rely on an financial muppet to repay the difference?king stupid to realise that the Lender will still chase them for the money if there is still outstanding monies owing when they've sold it at a piss take price."You've got your house back, we're done".....errrr, no you're not you f
king retard.Edited by mickken on Thursday 14th August 23:48
I have a friend who is still being pursued by a lender 15 years or so after defaulting on his mortgage. This was during the last recession in the 90's. He thought he could just throw the keys back at the bank. The debt has held him back ever since, he was only recently able to obtain another mortgage and has rented and lived hand to mouth for years.
BTW he is a bit of a cock!
BTW he is a bit of a cock!
You wait, this will be the latest "whining" story on SKY News.
"Oh, I borrowed 110% and now they've reposessed me. And not only that, they sold the house at auction and now they're chasing me for another £100,000 on top. It's just not fai ror right. Greedy banks."
Why does no one EVER read what they sign?
Pricks.
"Oh, I borrowed 110% and now they've reposessed me. And not only that, they sold the house at auction and now they're chasing me for another £100,000 on top. It's just not fai ror right. Greedy banks."
Why does no one EVER read what they sign?
Pricks.
cjs said:
I have a friend who is still being pursued by a lender 15 years or so after defaulting on his mortgage. This was during the last recession in the 90's. He thought he could just throw the keys back at the bank. The debt has held him back ever since, he was only recently able to obtain another mortgage and has rented and lived hand to mouth for years.
BTW he is a bit of a cock!
I know someone in the same situation , he deliberatly defaulted after the breakup of his marriage , ended up owning more than the original mortgage had cost by the time all the charges added up. BTW he is a bit of a cock!
Things have change a bit from the last housing slump.
Back then, there were no laws regarding how repossessions were to take place. Often, when the building society took possession, they would then just ask round the office to see if anyone wanted it, or ask round estate agent mates. They were sold at 'mate rates' and left the former ownr with a 'gap' debt hugely magnified from the original negative equity.
Things have changed now and the properties have to, at the very least, be put into public auctions, so the sale is a matter of public record. Some might be remarketed; it would depend on how valuable the property was but, quite rightly, the lender usually just wants to realise some liquidity ASAP.
This is all well and good until you hit a time like now, when it's the borrowing of cash that's hard. That means that there are less private buyers at auctions. You just have a lot of property traders who are looking to pay rock bottom. Prices achieved will be low.
In summary, handing keys back isn't the 'bend over' situation it was 15+ years ago, but now, in a difficult market for both property and finance, isn't a great time to do it either.
Back then, there were no laws regarding how repossessions were to take place. Often, when the building society took possession, they would then just ask round the office to see if anyone wanted it, or ask round estate agent mates. They were sold at 'mate rates' and left the former ownr with a 'gap' debt hugely magnified from the original negative equity.
Things have changed now and the properties have to, at the very least, be put into public auctions, so the sale is a matter of public record. Some might be remarketed; it would depend on how valuable the property was but, quite rightly, the lender usually just wants to realise some liquidity ASAP.
This is all well and good until you hit a time like now, when it's the borrowing of cash that's hard. That means that there are less private buyers at auctions. You just have a lot of property traders who are looking to pay rock bottom. Prices achieved will be low.
In summary, handing keys back isn't the 'bend over' situation it was 15+ years ago, but now, in a difficult market for both property and finance, isn't a great time to do it either.
Edited by V8mate on Friday 15th August 09:24
siscar said:
The problem is that in America many home loans are non-recursive meaning that you can hand the keys to the lender and walk away owing nothing even if the loan is more than the value of the property. However in the UK it doesn't work that way, you are liable for the full value of the loan plus interest regardless.
My understanding is that while that it totally correct of US mortgages, they do still have credit ratings which are used by landlords - so you may be able to throw the keys back, but you won't then be able to rent anywhere OR buy anywhere.Usually if the mortgage is with a reputable bank or building society it is possible to negotiate a reasonable settlement of the debt. They have after all written off the debt on their books. This is why the banks are declaring losses as they are putting in big provisions for defaulting loans. The people who will hound people to the end of the earth are the debt consolidation finance companies.
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