General comment about mortgage arrears

[scoobydoo]

I have been very annoyed to hear about the various secret deals that are being considered if Banks get themselves into trouble through their own mishandling of funds and irresponsible lending.

And yet for the humble man on the street if he gets into trouble due to ill health/ redundancy divorce etc then it seems he is out on the street very quickly. This will be happening even more it is reported- due to the expected financial conditions this year.

It seems to me that the banks never have to take responibility for their bad decisions but we have to bear the brunt of situations that may not even be our fault.

I would in an ideal world like to see the following.

Some sort of mortgage protection policy should be compulsory - however it should be a standard policy available to all in PIL at a standard percentage of the mortgage payment. The fact that everyone should have cover would bring the cost down.

Also all mortgage holders should have at least one chance to have all payments interest frozen once in the term of the mortgage in the case of extreme change in circumstances. A breathing space rescue package ( sound familiar?) I dont think this would be over generous form the banking industry as in some cases if they take the property back to soon -they may loose money anyway - if the mortgage holder can not re-pay and there is negative equity.

Lastly we mut have better money management classes in schools ( personally i will be giving Martin Lewis new book to all teenagers I know)
and make mortgages simpler and easier to understand.



If you do get into problems - always try not to miss whle payments - pay what you can - get advice quickly and ensure you know your rights- then ask on here




Jan

[Vortex]

Re: General comment about mortgage arrears

I am sure you have heard of Government speak? With this government they promise a lot and deliver very little in terms of substance, so Government speak of we are telling you something which hopefully will go away.

[TUTTSI]

Re: General comment about mortgage arrears

I have been very annoyed to hear about the various secret deals that are being considered if Banks get themselves into trouble through their own mishandling of funds and irresponsible lending.

And yet for the humble man on the street if he gets into trouble due to ill health/ redundancy divorce etc then it seems he is out on the street very quickly. This will be happening even more it is reported- due to the expected financial conditions this year.

It seems to me that the banks never have to take responibility for their bad decisions but we have to bear the brunt of situations that may not even be our fault.

I would in an ideal world like to see the following.

Some sort of mortgage protection policy should be compulsory - however it should be a standard policy available to all in PIL at a standard percentage of the mortgage payment. The fact that everyone should have cover would bring the cost down.

Also all mortgage holders should have at least one chance to have all payments interest frozen once in the term of the mortgage in the case of extreme change in circumstances. A breathing space rescue package ( sound familiar?) I dont think this would be over generous form the banking industry as in some cases if they take the property back to soon -they may loose money anyway - if the mortgage holder can not re-pay and there is negative equity.

Lastly we mut have better money management classes in schools ( personally i will be giving Martin Lewis new book to all teenagers I know)
and make mortgages simpler and easier to understand.



If you do get into problems - always try not to miss whle payments - pay what you can - get advice quickly and ensure you know your rights- then ask on here




Jan

I agree with you Jan,

We were in this position this year when unexpectedly hubby had a couple of emergency ops which put us behind with the mortgage 3/4 months and the Mortgage Company although we were making regular payments on account, they decided that they would repo the house.

Fortunately, we did get some very good help on this front and we used the Norgan! case (I think that was the name) and they then agreed to the mortgage arrears being paid over a four year period. Which has added an extra burden but at least we get to keep the house.

Another good point for everyone is if you do get into arrears, phone them, tell them when they can expect the next payment and how much! and as long as you keep to your arrangement on a week to week basis, or put some proposals to them over a longer period. You will find most lenders fairly ameniable.

DS

[righty]

Re: General comment about mortgage arrears

Go here for a little cheer

http://www.legalbeagles.info/forums/...5610#post55610

[argentarius]

Re: General comment about mortgage arrears

I'm not sure what sort of secret deals you are talking about, scoobydoo.

The only significant case that's actually happened is Northern Rock, and Northern Rock's shareholders have been completely stuffed by the way the government has handled the situation. It's scarcely been an example of banks failing to reap the consequences of their bad decisions.

Regarding your specific suggestions:

Compulsory PPI

A lot of people choose not to buy PPI because they really don't need it. This may be because their employer pays them generous sick pay, or because they have sufficient savings to cover their mortgage for a year, or because they feel they can depend on relatives to bail them out.

It is wrong to make people buy insurance they don't need - it's a waste of their money.

The argument about the cost coming down if more people buy it is not really true. It's already possible to buy PPI very cheaply direct from insurers. The reason it's expensive isn't because the insurers make lots of money out of it, or because of the small number of people who buy it; it's because the lenders apply a large mark-up to the premiums.

The other problem with compulsory PPI is that there are always circumstances where PPI won't pay out, unless your vision is for a policy with no qualifying conditions which is universally applicable. Even then there will always be grey areas such as self-employed people whose business is doing badly - they aren't sick, or unemployed, or anything else; they merely aren't earning enough money to pay their bills. How would you expect these people to be helped?

Payments/interest frozen

If you mean "payments frozen", then I'm not sure why. It shouldn't be necessary if you insist on compulsory PPI. But as I don't agree with compulsory PPI, I would accept that it should be possible for lenders to allow payments to be frozen for borrowers who have sufficient equity in the property.

It's not reasonable for borrowers who borrowed 125% of the value of their property off Northern Rock, for example, to have their payments frozen for any significant length of time - there is no security in the property for the lender in any case. But such borrowers should obviously purchase PPI in the first place if they treat paying their mortgage as a serious issue.

If people are so budget-constrained that they feel they can't afford their mortgage payments, and PPI, then they shouldn't buy a house.

Whilst it sounds like a good idea for the lenders to avoid repossessing "too early", most lenders don't leap into repossessing very quickly at all and the courts are loath to allow repossessions if they are applied for too early. But the unfortunate reality is that once arrears have gone beyond a certain point, a significant proportion of cases do end up in repossession in any case and, from the lender's point of view, it's better for it to happen (say) 6 months earlier with (say) £5,000 less arrears on the mortgage account.

My wife agrees hugely with you about money management classes in schools, although it really needs to continue into early adult life and particularly would help those at college/university. A lot of people really don't have a clue, and accept the "easy money" that's offered to them by banks/high street retailers/whoever without much understanding of the requirement to service the debt. And too many people who then get into trouble don't seek appropriate help - because of shame or whatever. So I applaud your comments in this paragraph.

[scoobydoo]

Re: General comment about mortgage arrears

I do agree with some of your points regarding PPI - I think what I am really trying to get at is that it is the most vunerable members of society that are left most exposed to the complexities of our financial institutions. The paperwork and understanding that are involved in obtaining a mortgage now is beyond a lot of people. Therefore they just chose the cheapest option at the time and hope for the best. We have to insure our car ( in theory) and yet with our mortgage/house it is left to pot luck as to whether we do or not. I think I read somewhere that one of the scandanavian countries they do successfully run a national scheme to cover loss of income - a sort of extra nattonal insurance scheme - in other words we would all pool in to help each other.

Please dont think I am entirely on the side of the borrower. I am actually an ex BS employee and dealt with possessions for several years. And believe me I have seen the results of people borrowing too much money. And also lots of cases where people are just incapable of handling budgets.
HOWEVER in the dim and distance past the salary ratios were sensible. You had to put a deposit down or prove you could make the payment ( e.g show a rent book)
You were not encouraged to borrow for furnishing the house ( remember the days of second hand furniture?)

I agree that the BS who have lent 125% on properties are in a difficult position and people were foolish to take out these loans - BUT I also feel these institutions should also take some responsiblity for encouraging people to take out these loans in the first place and then just pulling out the rug from uder their feet. Also the fact that people with these high loans have also been able to get themselvesi into problems with credit cards at the same time is unforgivable.

I hope you are right about possessions not being easy and I agree in the past Judges have been sympathetic with the borrowers - I would always advocate asking for help ASAP. Also always pay what you can afford each month - do not miss whole payments. Also beware of those companies who have a second charge on properties with very little equity - as they will go for possesion much quicker.

So to summarise I would like to see

A fairer more simple mortgage insurance scheme
Less small print on mortgages
more mortgages with long term rates ( less drawing people in with short term offers)
Not so many types of mortgages
Financial institutions to be held to account for irresponsible lending
More education on financial advice.
At times of financial crisis a longer term view of the best way to treat mortgage arrears for those in genuine trouble - which does not mean landing them with charge after charge - just for the sake of punishment.

I always tried to help people not make their situation worse.

I feel a more human approach is needed at the moment - and lets face it we are where we are to a certain extent because some finacial instituations have mishandled our money and made very bad basic decisions themselves - now they want to punish borrowers for doing the same? Not really fair is it?

Jan

[argentarius]

Re: General comment about mortgage arrears

Echoing some of what you've said, I think that one of the few benefits to come out of the present credit crunch is that borrowers' short-termism may be undermined.

It's not the lenders' fault that borrowers have tended to choose short-term deals rather than longer-term ones, save that many of these short-term deals have been priced unrealistically cheaply.

Hopefully people will now not take a 2 year cheap(ish) deal on the assumption that they will definitely find it a piece of cake to remortgage 2 years down the line.

But then, having said that, just when sanity appeared to be returning to the mortgage market, along come HSBC with their "match your deal" short-term offers. And, even worse, they are doing the Northern Rock-style deals with huge fees (up to £4,099) but low payments - enabling borrowers to keep kidding themselves that they can afford their lifestyle but eroding their equity.

The public perception seems to be that HSBC are doing these mortgages at a loss, to gain market share. That perception is rubbish. HSBC are making around 5.35% (including fees) on these loans, which is around 0.60% more than two-year swap rates. So, HSBC aren't losing money as such; they are simply failing to make as much money as the other lenders are currently seeking to do.

[righty]

Re: General comment about mortgage arrears

I agree with much of what has been said about consumer borrowing. Nevertheless I think we have to look deeper into the many reasons for this borrowing.

It's not all fast cars, exotic holidays & expensive clothes.

I suspect the majority of the most vulnerable short term borrowers are borrowing just to keep food on the table, a roof over their head & a warm home by using expensive sources of lending such as credit cards

Having met quite a few it's my experience that very few consumers borrow just to finance expensive lifestyles its' usually for the reasons I give above

[argentarius]

Re: General comment about mortgage arrears

Whilst what you say, righty, may be true for a lot of those who get into trouble with debt, I'm pretty certain that you'll find that a majority of borrowing is initially to fund (what some may see as extravagant) expenditure rather than to live, or indeed to reschedule other debt.

[righty]

Re: General comment about mortgage arrears

Well not as I see it. The debtors I meet have borrowed not to improve their lifestyle but simply to maintain their present one.

We keep reading in the press & elsewhere about feckless debtors with big cars (& that great favourite of the press) plasma TV's being bought & not paid for.

This may be true of some but most of those I meet who DO have such goods usually purchased at at time of their full employment in other words when times were good & not expecting them to change

It's their dramatic change in circumstances, such as redundancy or sickness that has brought them to their knees & not wanton extravagance

[scoobydoo]

Re: General comment about mortgage arrears

I agree to a certain extent but I do feel that the most recent climate did encourage youngsters and first time buyers to borrow secured/unsecured loans that in many cases they can not afford. For example I know of one young lady of 22 who has been allowed £20000 of unsecured loans for cars/clothes / phones etc. When her parents found out they took out a secured loan at a lower rate so she could repay them instead . Guess what when she had repaid some CC she was allowed to borrow more and now her parents have been caught up in the NR debacle and with the secured loan as well they are in serious trouble. Now I am not saying I have sympathy totally -and my children have never even taken out a CC. But I am saying that there was a culture of easy money /unsecured or secured and I do think the banks/ financial institutions have been responsible for encouraging this culture . Now they have had their fingers burnt (putting it mildly) those people encouraged to take out CC and loans are having to pay dearly. Why can the Banks be bailed out and in their directors in some cases get massive pay outs - where as the consumer has to pay.




Jan

[Amethyst]

Re: General comment about mortgage arrears

Yep I agree totally, when I first got a house and married etc I was 23, and on a low income, and they threw offers of loans and cards at us. I was vaguely sensible and never ran up huge credit card bills. But they did all grow and I consolidated, then they grew again so I borrowed against house to pay it off, then carried on.......plus I never ever have bought a brand new bit of furniture, a new car or anything....its all been living - yes most likely beyond my means but I've never been frivolous, just prefer Heinz beans to Tesco value, and that kind of thing. Its just too easy in my opinion, and I think it should be made a lot harder to obtain credit, especially for under 25's.

[argentarius]

Re: General comment about mortgage arrears

Well not as I see it. The debtors I meet have borrowed not to improve their lifestyle but simply to maintain their present one.

We keep reading in the press & elsewhere about feckless debtors with big cars (& that great favourite of the press) plasma TV's being bought & not paid for.

This may be true of some but most of those I meet who DO have such goods usually purchased at at time of their full employment in other words when times were good & not expecting them to change

It's their dramatic change in circumstances, such as redundancy or sickness that has brought them to their knees & not wanton extravagance

But I think you're missing the point.

It's not necessary to borrow money to buy "big cars and plasma TVs" whatever your level of income.

When I had less money than I do now (but earned a reasonable amount) I bought a reasonably sensible second-hand car. OK, it was on credit, but it was only a few thousands pounds and I needed the car for work.

Now I have a better car, but I didn't borrow money to buy it. I waited until I'd saved enough money to get rid of my old car and to buy a new one.

I don't have a plasma TV - I don't think I need one. You can buy a perfectly good working brand new TV for hardly anything nowadays.

The problem, surely, is the societal belief that it's appropriate to borrow money for wanton extravagance like big cars and plasma TVs, whatever your level of income.

In any case, if you borrow money for a big car at least you can sell it if you get into financial hardship. Plasma TVs are in a whole different sphere of extravagance IMHO.


And the debtors you are talking about might only be maintaining their lifestyle, rather than improving it, but their lifestyle has (presumably) always been financed on debt or there wouldn't be a problem.

I agree to a certain extent but I do feel that the most recent climate did encourage youngsters and first time buyers to borrow secured/unsecured loans that in many cases they can not afford. For example I know of one young lady of 22 who has been allowed £20000 of unsecured loans for cars/clothes / phones etc. When her parents found out they took out a secured loan at a lower rate so she could repay them instead . Guess what when she had repaid some CC she was allowed to borrow more and now her parents have been caught up in the NR debacle and with the secured loan as well they are in serious trouble. Now I am not saying I have sympathy totally -and my children have never even taken out a CC. But I am saying that there was a culture of easy money /unsecured or secured and I do think the banks/ financial institutions have been responsible for encouraging this culture . Now they have had their fingers burnt (putting it mildly) those people encouraged to take out CC and loans are having to pay dearly. Why can the Banks be bailed out and in their directors in some cases get massive pay outs - where as the consumer has to pay.

I'm not going to agree with you in two regards.

Firstly (just to get it out of the way) you keep posting about the banks getting bailed out. Will you please explain who you are talking about? Northern Rock did not get bailed out - its shareholders have lost effectively all of their money thus far. If you'll explain which bank has been bailed out it will stop me having to repeat the question. And if you are talking about Applegarth getting a "massive payout", I believe that all he's had is pay for his contractual notice period. Now, whether that's right or wrong is a different matter, but it's not relevant to this discussion to be honest.

Secondly, it's not banks' fault if people borrow recklessly. It's not Tesco's fault that they sell food, and obese people eat too much of it. It's the obese people's fault, and nobody (nobody rational, anyway) would claim anything else. Debt is no different in the slightest and saying that it is is abrogating individuals' responsibilities to live their own lives and to make personal choices which aren't stupid. Nobody makes people borrow money - they choose to live beyond their means by doing so.

If people don't have self-control, they should not open accounts which enable any form of credit and they should live entirely in cash. It's the only way to avoid debt if you don't have self-control.

Its just too easy in my opinion, and I think it should be made a lot harder to obtain credit, especially for under 25's.

I find that comment shockingly ageist. People can be 21 and be completely sensible. I bought my first house when I was 20 and therefore borrowed a lot more than the young person with £20,000 of debt referred to earlier. Should I have been deprived of that option simply because some 20-year-olds are stupid? I think not.

[strangewayofsavin]

Re: General comment about mortgage arrears

In an Ideal world, we all will live within our means, but if the financial enities in this country will manufacture easy credit products, and advertise these products mainly to the vunarable or lower classes, then surely this comes with a responsibility to lend resposibly?
Why offer Mr Jones a new credit limit or a new loan when prevoius records show mr Jones has a problem with his finances?
The truth is finance companies are profit driven (like all businesses), so what happened to Due diligance?
Why manufacture more products for the financially unworthy and slap an extra 3.5% over base rate (on mortgages)?
Why when a debitor gets into trouble, and the finance company file for a CCJ, send the debitor offers of extra finance under different companies of the same umbrella?
I am sorry ARG, but you views seem byast, and I cannot help but wonder if you work for G.E Money or the likes, get a grip, if you offer a life line to the financially destitute, what are they going to do?
You know the answer, I know the answer, and so do the financial institutes of this country.

[righty]

Re: General comment about mortgage arrears

Argen why are you saying I'm missing the point? I'm referring to the constant press reports when I mention plasma TV's being a favourite item with which to pillory the so called feckless debtor.

I'm also aware we did it different 'when we wus younger' & of course we can all cite cases of irresponsible lending. What I'm saying is irresponsible lending is & has not been as prevalent as the media would have us believe. It was easier to borrow yes but that isn't the same as 'irresponsible' lending most people borrowed simply to live

As for the comments "we or our parents managed when they were young" simply adds fuel to the misconception that people cannot manage their income AND that's why they find themselves in debt - not that their expenditure is so high because of rising living costs, fuel, council tax etc but simply because they can't manage - or that their outgoings exceed their incomings because they no longer have the same level of incomings for various reasons including redundancy sickness etc

As I state most debtors that I know find themselves unable to pay their debts because of their change in circumstances NOT because of irresponsible lending or irresponsible borrowing for that matter & to suggest otherwise is rather strange coming from a site such as this where the evidence to support otherwise is all around us