During the last recession (2008'ish) I said repeatedly that house repossessions would be no where near the massive scaremongering that was going on in the media and I was right. The media were basing their headlines and scaremongering on the previous recession to that - the late 80's/early 90's or thereabouts.
The essential difference was that by the time the last recession came about the landscape of mortgage lending had changed massively. Traditionally, mortgages were taken on by banks and building societies. Banks are big affairs with lots of staff, buildings and money. By the time the last crash rolled around you had firms like Mortgage Express, Kensington and a myriad of either sub-prime or "only mortgage lender" firms spring up simply to doll money out - often to people who were in no way fit to be lent it.
If you fall into debt with your mortgagee they have the option of taking the house off you. The problem was, I think, that when a lender repossess a property it has a rather substantial legal duty towards the borrower in the form of things like keeping the property in good condition and organising a sale at a "proper" price. It can't just off-load it to the first bloke who comes along with enough dosh to pay off the debt. Taking possession of a property and dealing with it in a lawful way, one which fulfils the obligation to the mortgagor, is not a cheap or simple process. Your sub-prime lender who is operating from a few offices hundreds of miles away from where you are simply did not have the resources to do all this. Of course, if you're Barclays, Lloyds or HBOS you have thousands of people working for you, a few of whom you can reallocate into the basement offices in the form of a team to handle repos. This was never an option for most of the new lenders and I think that a great deal of people got off far more lightly than were their debt with a massive corporation.
There was a famous American property auction firm that set up a UK office to turn over repos at large, highly publicised auctions they were going to hold throughout the country. Their model was, if I recall correctly, that they would auction the house and stick a huge commission on the hammer price which was their slice. The law, as I mentioned, requires a "proper" price to be achieved. The proper "price" for the house is, of course, the total price the buyer hands over. The law then sets out how the proceeds of sale are to be distributed such as first paying off any head mortgagees (before the costs of the sale ie; their commission, which is wildly excessive in any event) and there is a set way in which it was to be done. The schysters were essentially ignoring their commission (which was something like 25%) and starting the distribution at the hammer price which you can't do. It was more involved than that but that was the general drift of things.
Anyway, that's massively off topic, to be fair!
You forgot to mention interests rates also crashed in that recession, that saved an awful lot of people from repossession.
Not so sure you are right about the banks either, they own the property once repossessed and can do with it whatever they want, usually auction, which is the fairest way, a good property will make the right money, a poorly cared for less. I assume the balance over the debt is paid to the people who lost the property, after fees, of which the bank will add too.
Sitting on an empty property to try and get the right money does not help anyone and the property is at risk of all sorts. Squatters, thieves, vandals, crack dens, fire, flood etc, it is in no ones interest not to send it to auction ASAP.
You are right about sub prime lenders, the days before computers and credit ratings were much easier, they have their uses though and some banks/ building societies were at it too.
They have their uses, if you know how to use them, build your credit rating while not paying rent, and paying their higher rates for a two year fixed, then finding another deal. So many lied though, took on more than they could afford and just got into more debt.
I used them after returning to the UK, had no choice unless I rented.
The problem is now, people have borrowed on very low rates and they are going up, depending how far they go it could be much worse than 2008. People prior 2008 had borrowed on high rates, which crashed to nothing, the deals that were available then were crazy cheap.
Prior to the crash, I switched both my high fixed rates, to trackers at high rate, but at 0.19% above base rate, and 0.69% for the buy to let, with Woolwich/Barclays, both were cheaper than my 2 year fixed with a micky mouse lender, when rates crashed, the first annual payment cleared the annual interest and more than that figure from the repayment sum. It was a gamble that paid off.
Things could be much worse this time around, energy costs are out of control, raging inflation is pushing prices on everything, energy is going to push inflation far higher, put businesses under, push people out of work, it is not really biting fully yet, increasing interest rates could push more over the edge, we did not have these issues in 2008 to the same extent, and interests rates went the right way. They Ain,t now.
