More bad housing news. More than a fifth of UK homebuyers who have a chequered credit history have fallen behind on their mortgage payments and even those with top-quality ratings have seen a statistically significant rise in delinquencies in the first three months of the year.
With homeowners no longer helped out by the rising house prices and the largesse of banks offering refinancing on favourable terms, some experts are betting on a sharp rise in repossessions in the UK.
Note the US foreclosure picture, from Lehman Brothers, right.
In the current environment, the two terms – foreclosure and repossession – are increasingly being used interchangeably, at least on this side of the pond.
On inquiry, the Council for Mortgage Lenders doesn’t seem clear on the transatlantic distinction – they in any case refer to “taking possession” rather than the more emotionally-charged “repossession.”
Either way, UKForeclosures.com (Coming Soon!) isn’t bothered.
Welcome to UK Foreclosures, the future of real estate purchasing. We are the easy way to search for properties in various stages of foreclosure throughout the United Kingdom from the comfort of your own home.
UK Foreclosures? Real estate purchasing? American jargon gone mad.
We consulted a lawyer or two.
One property litigator, with 25 years in the business spanning the 90s downturn, has yet to be involved in a foreclosure in the UK. Foreclosure requires a court to overturn a borrower’s equity of redemption – broadly the borrower’s right to repay a mortgage either through a sale or through instalments.
The process is cumbersome – likened to getting a divorce – requiring an order nisi, then an order absolute. And the UK courts don’t like it.
Under a UK repossession, the lender takes control of the house and sells it (with some loosely worded obligation to get a reasonable value for the house.) The borrower maintains equity of redemption – and so can take steps to prove they can refinance or find another way to pay. If the property is sold, any equity left in the house, after all creditors have been repaid, is returned to the borrower.
Under foreclosure, the lender takes back the property, full stop, extinguishing the borrower’s equity of redemption. On a sale, the lender keeps the entire proceeds – and while mortgage deeds still allow for foreclosure it is, we’re told, virtually unheard of in the UK.
To complicate matters further, US foreclosure laws vary by state – with differing rights of redemption, judicial, non-judicial and power-of-sale variants. We won’t pretend to understand the details. But it all seems to mean that there is vastly greater potential for bus tours of cut-price foreclosure properties coming to auction in the US than the UK.
This doesn’t mean that the outlook for UK property isn’t bleak. And there are many scarred by the last wave of UK repossessions.
But it may, at the very least, mean that the team behind UKForeclosures.com has a flawed (and certainly poorly named) business.
Related links
Sharp rise in overdue mortgage payments – FT.com
Recent borrowers hit by problems earlier – FT.com