mortgage debt writedowns

roozer

is this new move by the banks to allow debt write downs for mortgage holders in arrears not a huge incentive for those on interest only or struggling to pay, to intentionally go into arrears at the hope of getting a write-down themselves?

Gumbo

roozer wrote: »

is this new move by the banks to allow debt write downs for mortgage holders in arrears not a huge incentive for those on interest only or struggling to pay, to intentionally go into arrears at the hope of getting a write-down themselves?

I think the write downs will only be given to people genuinely out of work.

Ie. I couldn't just stop paying as I'm in employment.

hfallada

They are suggesting x amount of a mortgage is shelved for a while. So the homeowner pays interest on the smaller amount to encourage them to make repayments. Then in a few years review their situation and if it's worsened they may write off the debt.

IMO its to encourage people to pay their mortgage to reduce the number of people in arrears on paper. Put also to allow for the legalisation to be put in place for the banks to reposs houses are there
is a loophole at the moment

Taxi Drivers

roozer wrote: »

is this new move by the banks to allow debt write downs for mortgage holders in arrears not a huge incentive for those on interest only or struggling to pay, to intentionally go into arrears at the hope of getting a write-down themselves?

I think you'll find that this was an aspirational indication by the government rather than a move by the banks. The government said it would be useful if writedowns were considered in some cases. The banks have not said they will allow writedowns.

Scortho

roozer wrote: »

is this new move by the banks to allow debt write downs for mortgage holders in arrears not a huge incentive for those on interest only or struggling to pay, to intentionally go into arrears at the hope of getting a write-down themselves?

The bank isn't going to write down anyone's mortgage who they think can afford to pay. They will have access to a persons financial statements and accounts so they will see what's there.
They'll also require a statement of expenditure to see if they can get anything there. If they see the missus buying a prada dress or Hermes bag in bt's every second week they won't be too long telling a person where to go. Likewise if the kids are in private schools they'll be told to take them out or if they have a new car they'll be told to sell it.
(remember these people are defaulting on loans, so there has to be a bit of reality.)

It looks like government policy will be to keep all people in their family homes and reposses btls in arrears. Then when that's done in a few years time, see what the arrears situation will be like. Just because you're in arrears today doesn't mean that you won't be in 2/3 years. You may have found employment or received a pay rise.
As Hfalada has said it's most likely going to be debt parking as a persons situation may change. It'd be rather unfair on a person who isn't arrears if there neighbour gets a portion of there debt wrote off and then in 2 years time is earning more than him.
Other possible actions would be debt for equity exchange, extending the life of the mortgage and the bank repossessing and renting it at the market rate.

Mr.Micro

For all the genuine people out there in trouble with mortgages there are many others who can pay but do not. It is only right that each mortgage will be dealt with on an individual basis if required, not a blanket writedown that the chancers hope for.