I heard on the radio & read comments regarding reaction to Matt Coopers negative equity proposal. Banks could purchase the negative equity on the house and owners have the ability to buy back the banks share in the house!
What’s the chances of this occurring?
Hopefully no chance. Its great that Cooper is trying to start the debate, but this is a terrible idea.
1. who and how do you decide what the negative amount is?
2. The people who make the decision to get on this train will probably have massive Neg Eq and will want to load it all on the banks
3. It gets the banks back into the middle of the property game, with all the houses in Neg Eq by and large being out in the satellite towns where they may never appreciate
4. Where does the bank get the money to buy the stake in the house?
5. Considering you have a big chunk taken off your mortgage, and the bank are now holding part of your house, they in effect have an asset thats not generating any income, rent etc
6. The money used to give you the mortgage in the first place is borrowed from another bank in europe and the interest still has to be paid. So this bail-out for Joe the Plumber is going to cost the bank every single month, with almost no chance of a return on investment
7. Why on earth would anyone try to persuade the banks to get on board?
8. Why would we want to pump good money after bad.
Personally I think it must come to a hard and fast rule; if you want out, you must sell the house, and then deal with the Neg Eq separately.
You either keep ownership of your house or you lose it, I don't believe you can have it both ways. That way only the unfortunately desperate ones make the decision to get out, and the market is no flooded with sellers even more than it needs to be.