Wednesday, August 25, 2010

Negative Equity. Should The Nationalised Banks Shoulder Some Of The Blame And Should They Be Forced To Pay?

It’s a phrase that appears specifically intended to turn a total disaster into a monotonous platitude. The recent phenomenon of Negative Equity can mean woe and worry for tens of thousands , but has only really been around for the last few tens of years. When we buy financial investments there is generally a sort of health warning attached which says words to the effect of “investments might go up and down”, but when We Buy Homes nobody seems to be obliged to apply such a warning.

We Buy Houses to live in, or so we understand , but they are also the most expensive investment we ever make , generally , and as such there is a more or less free market that facilitates the trading of property and it most surely does go up and down, even to the point where the price of a property might well be less than a mortgage that a property owner has taken out against it. Negative equity in motion .

But this round of negative equity has an especially rancid taste about it. Many thousands of people were lured into putting down little or no deposits against their properties by unbelievably attractive packages offered by a number of financial organisations . These were widely taken up mainly by people in the United States who really should not have been offered loans at all.

If presently I was to Sell My House I am in the fortunate position that I would take away a substantial amount of equity with me. I am not currently consider that I mat need to Sell My House but I am conscious that my circumstances may change in the future therefore I take my home owner responsibilities seriously. But I also propose that my lender should take some responsibility for what happens to my home. After all they have invested very heaviliy in it. They should not be permitted to say that when We Buy Houses we must take all the responsibility for what happens if circumstances change and we get into difficulties.

When We Buy Homes with a loan it should be crystal clear to the lending institution what the penalties are if the economic climate changes and the home buyer is not able to make the monthly payments to repay the loans. They should not be allowed to entirely abuse their responsibilities when a homeowner experiences problems . And they most certainly should not have been bailed out by a weak government with such an obsession with business that they have been prepared to shore up institutions at the expense of the taxpayer, when they could have intervened in dozens of different ways which would have benefitted both the homeowner and the taxpayer and would have alleviated the effects of the house price fall letting more people to stay in their homes.

It’s pretty obvious that this will not be the last house price crash. Prices will rise and fall again. Lenders will over lend, not check buyers’ financial capabilities, buy up indifferent value bonds etc all over again. Why do I think this? Because no effort has been made to control the way the whole system operates. The new Lib Con government has not made any real noises about changing the way the house buying system operates as far as financing house purchases goes.

The nationalised institutions are no more responsible for their part in the house purchase transaction process than they were before . Their only real answers so far have been to make house purchases more difficult and financially awkward for everyone whilst allowing repossessions to mushroom . And without a solid government that is prepared to legislate this boom and bust process is bound to re occur over again.

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