I don't know if you've read my earlier posts, so I'll just say before I post, I'm for negative equity portability. I do however, think its not practical, and difficult to implement.
This isn't a swap of address. It's a sequence of steps involving:
Between steps 1 and 2, the person has unsecured debt with the bank.
- A house is short-sold (i.e. for less than the value of the mortgage)
- A house is bought with a mortgage providing LTV > 100%
.
legal problem: my basic understanding is that the mechanics of conveyancing do not currently allow such operation. The solicitor can only released the deeds on the current house if there is enough money to clear the existing loan, which is not the case for home owners in negative equity. So, a law change might be needed
Why would it just be a change of address? If there's a time gap between selling a house in NE and buying a new one, the bank is left with unsecured debt between the two transactions. That leaves them open to the borrower not going ahead with the house purchase and bankrupting away the unsecured debt.... It would just be a change of address if NE mortgage products were officially approved and backed by the government and the mortgage regulator.
Why would it just be a change of address? If there's a time gap between selling a house in NE and buying a new one, the bank is left with unsecured debt between the two transactions. That leaves them open to the borrower not going ahead with the house purchase and bankrupting away the unsecured debt.
I don't know how you could have a system in place to prevent it happening if the sale precedes the purchase - once the NE house is sold, it's sold and I can't think of any mechanism for a bank to force someone to complete the purchase of another house. Compelling the purchase to be done first would leave the risk of the borrower/bank being stuck with 2 properties if the NE house sale doesn't go through. I'm not sure how feasible totally contemporaneous transactions would be but that could work. The only other way (other than the bank just trusting the borrower to do the right thing...) is to only allow it where there is a secured guarantor for the time between the sale of the NE house and the purchase of the next house.what I mean is that it would be a change in address if there was a system in place that could prevent that to happen, which I assume it will require a change in existing law.
How do they do it in the UK? They already have NE transfers in place .guardian.co.uk/money/2011/jan/27/negative-equity-mortgage-lloyds
The only other way (other than the bank just trusting the borrower to do the right thing...) is to only allow it where there is a secured guarantor for the time between the sale of the NE house and the purchase of the next house....
...so maybe they take control of the savings for the gap time - so at least if the borrower doesn't buy the next house, they have some contribution towards the unsecured loan they have been left with.
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