Call for govt to step in with mortgagee sales

Tuesday 10 November 2009

The government is being called on to purchase the properties of home owners who default on their mortgages in a bid to save them from being forced into mortgagee sale.

By The Landlord

Alliance Party finance spokesman Professor Jim Flynn says the government needs to think outside the square to prevent ordinary Kiwis losing their houses during the economic crisis because of defaulting on their mortgage.

In August this year, mortgagee sales nationally stood at 241, compared to 100 last year and 40 in 2007; although the August figure has come down from the peak in July this year, where the number of mortgagee sales stood at 321.

"The increase in mortgagee sales in 2009 has been phenomenal. At one stage, one in five house sales was a mortgagee sale," Terralink managing director Mike Donald says.

Flynn says the solution is simple:

"Rather than have people face mortgagee sales, the government should buy the house off the banks for their rateable value. The bank would be relieved of a ‘toxic' asset and the government would get something in return for helping the bank."

He says the home could then be rented back to the occupiers at around 20% of their income.

It would mean people could afford to stay in the family home and are spared the upheaval of trying to find alternative accommodation, which could result in overcrowding, children having to move schools and a loss of social support systems.

"All of these things put considerably stress on families and could end up requiring more taxpayers money than buying the original home," Flynn says.

The greatest advantage would be that the government increases its stock of state housing.

Flynn says there would need to be provisos to make sure people who could afford their mortgages didn't default to tame advantage of the scheme.

"In general, it would need to be limited to properties of no more than the median house price for a particular city or town."

Comments from our readers

On 11 November 2009 at 9:42 am Sam said:
This is just stupid. It is like saying kids should never be forced to lose. The risk of buying a house was there from the start. The tax players who do not own houses should not have to pay for this.
On 11 November 2009 at 9:48 am matthew said:
would there be any way that those affected in this fashion could reasonably look at buying it back from the government when they have recovered financially and how would the government conduct that sort of transaction?
On 11 November 2009 at 12:48 pm frank said:
I have just had another big bill from my accountants, i wonder if the government could pay that for me?
On 11 November 2009 at 1:23 pm Martin said:
Enough already! If you give the house to those who over-committed what about the people who responsibly saved and didn't stretch? You must give them a similar house surely! The financial crisis might have lasted a year or two but the repurcusions from the financial bailouts will be with us for more than a decade.
On 11 November 2009 at 9:46 pm Phil said:
So while the govt goes further in debt by a billion a month they are expected to fork out for mortgagee sales too. Life no matter how hard you try will never be perfect for everyone.
On 13 November 2009 at 5:10 pm nelson said:
Most of these people facing mortgagee sales have lost their jobs or had their hours reduced so what money they get is not enough for household expenses and repaying the mortgage. Should we further penalise these unfortunate people by throwing them out in the street or should we extend a helping hand, after all you could be next!
On 13 November 2009 at 10:10 pm Jason said:
No, I will not be next because I have not greedily purchased property without keeping some savings aside for a rainy day. Anyone facing mortgagee sale has stretched too far and has only their own greed to blame.
On 14 November 2009 at 4:13 pm Rakesh said:
I think it is a stupid idea which is unaffordable, prone to abuse and the article nowhere states how to prevent that. Carefully analysed, majority of such forced sales are where we had over stretched on rental properties and/or diverted business money to rental portfolio.
Commenting is closed

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