Repossession the ?best thing? for struggling home owners

[silverfox]

"The housing minister suggested repossession is the ?best thing? for struggling home owners on the day figures showed evictions reached a 14-year high.

John Healey?s comments came as statistics showed an average of 126 people a day were thrown out of their homes in 2009.

... As part of The Daily Telegraph?s investigation into MPs expenses, Mr Healey was found to have made a profit of ?88,000 on a flat in south London that was subsidized by the taxpayer for at least five years.

He was also found to have claimed ?1,317 to replace his own front door, while he overclaimed more than ?2,000 for mortgage interest.

Charities and politicians immediately called for an apology for the ?grossly insensitive? comment, accusing Mr Healey of having lost touch with reality... "

http://www.telegraph.co.uk/finance/personalfinance/7214915/Housing-minister-says-repossession-is-the-best-thing-for-home-owners.html

Despite the hypocrisy of his mortgage being subsidised by the taxpayer has he really lost touch with reality or is he being a realist? Does the bail-out of the banks mean everybody now expects to be bailed out of financial predicaments?

[Peckhamgatecrasher]

Repossession doesn't really solve the problem. The homeowner is still liable to pay the difference between the outstanding mortgage and eg, auction selling price. There is no incentive not to do a runner or go bankrupt if one's home is taken away.

Compulsory mortgage indemnity insurance actually only covers the lender, not the borrower.

It would be better to give an interest holiday and some solid debt reduction techniques. Possibly deducting mortgage payments at source salary would satisfy the lender while this process takes place.

[silverfox]

good point

[SteveT]

I heard something mentioned on the radio today when someone suggested the money should have gone directly to the borrowers, not the failing banks and building societies.

Interesting concept.

[Brendan]

Not sure if the figures are accurate but someone said that for the cost of the bailout the government could have just given everyone in the country ?10k which would have ended up in economy and eventually in the banks anyway.

But you see that would have meant that there would have still been the same amount of money in the economy but it would have been more evenly distributed and not in the hands of those special people who deserve it.

We really do owe these people so terribly much.

[Magpie]

The point about the bailout is that the government has not given the banks a cheque, it injected cash in return for equity stakes or as loans with interest conditions attached. At some point the government can (hopefully) expect to get its/our money back. The approach taken was based on what the Swedish government did with their banks in the 1990's, and actually a profit was eventually made on the orginal investment.

Paying off someones debt directly or handing out cash would mean that the money is effectively gone. The banking bailout is working reasonably well, low interest rates are being used by consumers and banks as an opoportunity to repare balance sheets. We need banks to be profitable so that they can pay off the debt they held, and restore sensible asset/liability ratios so that at some point down the line they can be sold off. What we don't need is banks paying their staff whopping bonuses. This is because its a big FU to the taxpayer not because the amounts are particularly significant in total.

[SteveT]

It would be less invasive on the defaulters to have a mortgage from the government rather than evict them from their properties.

It is much more effective if the monies from government go direct to the (usually temporary) loan defaulters.

How can it be good business sense to keep something afloat which has already sunk.

Let the failed establishment go and bail out only the loans would make more sense, and then increase the time and number of loan repayments rather than evict.

Repossession is the worst option of all in my opinion, and should only be used as a last resort if the defaulter refuses to repay the revised repayments.

[Jeremy]

Steve - interesting spin on things, but it wasn't really the domestic mortgage market which caused the financial crisis.

And as Magpie says, if you gave the money directly to the public, it would basically be a one-off injection into the economy, rather than a long term investment.

[SteveT]

Jeremy wrote:-

And as Magpie says, if you gave the money directly to the public, it would basically be a one-off injection into the economy, rather than a long term investment.

I would never recommend giving any type of money injection as suggested,

because inflation would go out of control,

merely minimise the damage caused by temporary unemployment on thousands of families.

[Huguenot]

I can't see how giving money to people who default on loans could benefit anyone.

I went credit card happy at a youthful age, and if someone had given me the money to pay them off I'd have gone on a three week bender and taken out more credit cards.

I'm not suggesting that those people evicted are exponents of over indulgence, I'm suggesting that 126 a day would be 126,000 a day if HMG was handing out cash rewards.

[SteveT]

I cannot see how repossession is the best thing for anyone except the bailiffs.

When bankruptcy happens in the States they try and keep the company trading at all costs, to maintain continuity of service.

Here we seem far too eager to leave people destitute and penniless surrounded by debt.