Government should take over bank repossessions to use as social housing.

[garlicbaubles]

Just watched Panorama's Britain's Hidden Housing Crisis. Since we're facing a tide of homelessness - and the banks owe us shedloads of money - should we not insist on repossessing property from them? Why should they own it? Then perhaps people could get homes and we could all start moving forwards, instead of careering into Dickensian social problems.

AIBU?

That looks so straightforward, TSC, it's probably too sensible for govt to grasp! (Perhaps if there were some way to reframe your idea as an expenses scam, they'd get on board ...)

Filibear - The money is owed to the banks. The banks owe a trillion to us. So we repossess from them, no? Simples!

And the banks get the money from whom? Think about it.

The banks are not lending their own money.

er- because the banks do own the properties? They lent the money in the first place. How do banks "owe us money" anyway? (apart from those like Northern Rock who were bailed out) - but even then, that was not done for the banks' benefit, but to protect those ordinary people who had their money with them. I am not an economist (but am married to one) but I know enough to know that it is NEVER simple and despite what some people like to think, "they" are not making huge piles of cash out of "us" in some sinister way.

"Why should they own it?"

Because they paid for it?

Mortgages cease to exist if loans cannot be secured against the property. Now, just imagine how much more expensive it would be if you could only get the rates of unsecured loan for a house purchase.

1. The banks are borrowing money to lend for mortgages. 2)The mortgagee pays the bank
2. The bank takes their cut to pay for staff etc and make a profit (or not in some banks cases)
3. Then the bank pays the loan back.

Do you have savings or pension funds because that is where the money needs to go back to. If the government took over the property our private pensions and saving would be wiped out!

No. Absolutely not. This is an insane idea. We need the housing market to function properly not prop it up even more.

The reason house prices have stayed high and unaffordable even after the financial crisis is because banks are hoarding repossessed property and not selling it off. In some cases rolling over loans at ultra low rates and not repossessing when they should be.

The banks are terrified of starting a cascading default as they try to offload property onto the market and forcing house prices lower. They know full well that driving house prices down will trigger waves of homeowners handing back the keys rather than continue to pay their mortgage. This happened in the US and also in the UK in the early 1990s. It was called 'jingle mail' as homeowners posted keys through doors of building societies and banks and just ran away.

Problem is we need house prices to fall so young families can buy a home and investors can buy cheap property and afford to rent them out at reduced rents.

I am strongly suspicious that this idea has been doing the rounds for a while and has been cooked up between bankers not willing to take losses and Govt who don't want to have to admit the system is still deeply in crisis. How conveneient to get the Govt to take the repossessions of the hands of the banks so they dont have to take the loss.

Incidentally, banks are also doing this with bankrupt firms as well. Keeping them on life support as 'zombies' instead of calling in the loans and liquidating.

If we keep on with what is called 'extending and pretending' loans to bankrupt homeowners and businesses that they can never repay or service properly the economy will never recover. We need to clear this debt by defaulting and writing it off. The pain has to be taken. Only then can new entrepreneurs get started and families move on with their lives.

And following on from my simplistic post, if the mortgagee can't afford to pay the mortgage they would probably not be in a position to rent the same house unless massive subsidies would be given by the government.

The incentive would be to buy the best house possible by any means, default on the mortgage on purpose and get the government to let you stay for reduced rents?

Crazy idea.

I understand the points above and am asking for a bit of lateral thinking. Going "Them's the (financial) rules" is what got us into this mess.

The finance industry fucked up massively by taking stupid gambles. We 'lent' them enormous amounts of money to save their system, which they fucked up. We're still pumping money in! The industry collectively defaulted on its promise to pay. As it happens, I fucked up far less and my home was repossessed. When I defaulted, the bank took back the property.

When banks repossess people's homes, they do not sell them and give the money back to us. They keep it and use it for more 'financial instruments'. They are not even facilitating loans to small business and home buyers, which were conditions of some the extra money we gave them. They renege on every deal we do with them, but we're not taking their property in lieu.

Meanwhile, we need homes. I don't think a largely moribund property portfolio is that much use to the banks. Its existence will not in any way relieve our ongoing crisis. A safely housed population is, however, less likely to make things worse than a homeless population co-existing with millions of empty homes.

If it makes things easier to understand, replace "Government" in my title with "Bank of England".

Btw, sockmuppet, I don't have pensions or savings. They were wiped out by 'financial instruments' and, as I've said, my home was repossessed. I was one of the previous wave of dispossessed.

MoreBeta, I like your posts and usually can grasp what you're saying. I didn't understand your last, though. Please will you elaborate on zombie businesses & mortgages?

In the USA I believe that you can just hand the keys to the bank and walk away, whereas here you would still keep the debt as well as losing the house. Seems we have it really tough in the UK.

garlic - a zombie business is one that is still operating but is so overburdened with debt that all of its income goes to pay interest. It will never generate profit for shareholders or ever be able to pay back its debts.

Like a zombie it is half alive and half dead, stumbling on only because it owes so much to the banks that the amount owed exceeds what can be recovered. Hence they are unwilling to call in the debt because the would never recover anything like the full value of the loans they have made to it.

A zombie mortgage works the same way. The mortgage exceeds the value of the property and calling in the mortgage would result in a loss to the banks so they just allow the person to stay in the property and charge them a very low rate of interest in a desperate attempt to avoid the evil day when they have to call in the loan. There are huge numbers of commercial properties and increasingly residential properties in this position.

Pam, you're dependent on the bank to sell the property for at least the amount outstanding. They're not known for making an effort to sell at a good price. If they say they didn't get enough to cover your debt plus selling fees, you still owe them. I don't know how it is in the US.

Thanks, Beta - so this is what I proposed to my bank back then! I didn't know I was offering to be a zombie

The fact they turned me down (and everyone else I've known who has tried - and the people in the documentary) convinces me it's all about book assets - to facilitate ever-greater debt creation - than any kind of financial common sense at an individual level. And, while we're looking at a country full of individuals who will be homeless, I think we need to walk all over that and take practical action.

I don't buy the "give people an inch, they'll take a mile" theory that such a policy would make everyone suddenly default on their mortgages. For one thing, home ownership is such a fetish in Britain, we wouldn't give it up readily. Plus, our systems are well-equipped for means testing so it should be easy enough to determine whether a claimant really can't make their repayments.

Garlicbaubles

You say your pension was wiped out by financial instruments and you don't have one. Unless you have bought your annuity and are over 60 you must have something if you paid in to one.

This is in no way a workable solution.

YABVU.

I want less government interference, not more!

Garlic "I don't buy the "give people an inch, they'll take a mile" theory that such a policy would make everyone suddenly default on their mortgages. For one thing, home ownership is such a fetish in Britain, we wouldn't give it up readily"

I think about 40% of British public don't currently own their home. A proportion of these might be more likely to buy if the risk of default doesn't end in eviction. I don't think it's a good idea.

Nope, Sock! It's very sweet that you have such faith in pension funds, however my main one was embezzled for the second time (first time was high profile; they kept quiet about the replacement fund which also went bust). Some staff retired on £5,000 compensation, having paid full contributions for 25 years. Another one took annual 'fees' that surprisingly added up to the total value of my pension - it was missold but I couldn't claim as no longer had full documentation. I do have an annuity from the other. It's worth just under £300 a year. That one was actually well managed but, sadly, I only worked at that company for a few years. It's a bit crap for 20+ years of paying in to pensions.

But you keep on trusting them

Also in regards to give people an inch...

Many people take a mile where ever the can;

Examples include, School catchments and people play the system renting in the area until they secure a place......People finding loop holes to avoid paying tax.....people choosing not to live together to claim more benefits.

Just 3 examples off the top of my head. People would take advantage.

Was this a company pension scheme Garlic?

"Another one took annual 'fees' that surprisingly added up to the total value of my pension - it was missold but I couldn't claim as no longer had full documentation."

Did you not get a yearly statement with their fees on?

MoreBeta is right - we need the banks to take these losses and the housing market to fall.

No reason that THEN the govt can't decide to invest in reasonably priced repossessed housing in suitable places (ie not the crap flats that were built in an inflated market for buy-to-let) to increase the social housing stock.

I think it would be great if someone started a not-for-profit pension fund that took everyone's contributions and bought housing to rent out at decent prices on long term contracts - I think there is potential there for a stable (though not massive because it won't depend on speculative increases) income stream AND providing a much needed source of long term rental housing for good reliable tenants.

Obviously council housing used to provide that, but there's so little stock left that new social lets only go to the really desperate if you like to put it that way (ie not working people who can't afford / don't want to buy).

"the banks owe us shedloads of money"
No they don't. We didn't just give them a load of money. The banks which were nationalised, we now own. When we sell them we will either make a profit or a loss. They don't owe us that money.

The money I suspect you are perhaps confusing could be the asset protection scheme which was more like a government backed insurance scheme. The government charged for banks to use that scheme and most have quit it now because of the charges now things are not so dire. Last time I heard we actually made a nice little profit out of them.

"The banks owe a trillion to us."

Really? how did you work that one out? Given our entire national debt is about £1.2 trillion and we've been running a deficit for 26 out of the last 30 years, I find it hard to believe the banks ran up £1 trillion on their own.

The banks did mess up. But they are not responsible for our current mess. That is because western governments have borrowed so much money that now we're struggling to pay it back.