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Sobering face of sale nothing to smile at

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  • Sobering face of sale nothing to smile at

    Sobering face of sale nothing to smile at

    4:00 AM Sunday Dec 13, 2009
    Rose Taylor is losing her home. Photo / Janna Dixon

    One in three people viewing realestate.co.nz earlier this year searched the words "mortgagee sale", hunting a bargain ripe for plucking.
    But behind the statistics is the heartache of homeowners such as Rose Taylor, whose Hamilton home will be sold by her lender, Sovereign, on Friday.
    Taylor bought her home two years ago, when her 28-year marriage ended. But she began suffering depression, an illness that affects one in every six New Zealanders, and lost her job.
    "I was happy in my job, but things just went down when our marriage broke up.
    "Through my depression and stress I ended up losing my job of six years."
    Taylor was forced to go on the sickness benefit, and despite trying to to raise more money by taking in boarders, could not keep up the mortgage payments.
    When her home is sold, Taylor will still face years of repayments, not only the mortgage arrears, but for the inevitable shortfall on the sale.
    Although she paid $320,000 when she bought the house with a $300,000 mortgage two years ago, the property slump has bitten around $45,000 off its value, leaving it worth less than $275,000.
    And six months' worth of monthly $2000 mortgage payments have accrued since Taylor became unable to work. She says to end up owing so much is "the hardest part, after close to 25 years of owning homes".
    She is looking for another job, but "there's not too much out there, and I still have my bad days, so will have to start part-time".
    Lynn Eagar of Ray White in Hamilton says at least 20 per cent of mortgagee sales could be avoided if the homeowner addressed the problem early, but sadly many don't know they should talk about it.
    Darryl Evans, chief executive of Mangere Budgeting Service, says asking a budget adviser to help can give the homeowner more options.
    The good news is mortgagee sales are set to decline. Sales numbers lag listings numbers by up to three to four months, and Alistair Helm, chief executive of realestate.co.nz, says listings are dropping as Christmas approaches.
    "At the height of April, May and June we were seeing about 450 mortgagee-sale listings on the website at any one time. That's come down to around 300 now and will rise to about 330 after Christmas."
    Recent weeks have seen a significant fall, which Helm expects to drop further from the current level of 322 down to 250.
    "This is a seasonal effect of fewer new listings being posted. Banks do not list over Christmas as activity dries up."
    The number of website visitors searching for the key word "mortgagee" has also been falling over the past eight months, now accounting for about 600 a week, or 7 per cent of all searches. Searches for mortgagee sale listings on the site peaked at more than 3500 a week, or around 30 per cent of all searches, late last year and early this year.
    Helm says mortgagee sales generated most interest when property sales slumped to a low of 4000 a month. "The only people prepared to be buyers in that market were adamant they were going to get bargains. In theory, mortgagee sales are bargains because they are desperate sales."
    Now, he thinks, buyers realise mortgagee sales are not always a bargain. "As long as they're not trashed, they tend to be treated as a property for sale at auction.
    "There's a bit of motivation in that the sale is going to be closed because the bank wants to get rid of it, but it doesn't mean it's going to be chucked out at bargain-basement price."
    Terralink's latest data shows mortgagee sales in September passed the high of 321 in July this year to hit 343, making the total for the first nine months of the year 2167, compared to 790 for the same period last year.
    The September sales represented a 130 per cent increase over September last year, when mortgagee sales were already rising.
    Helm says Terralink's mortgagee sales data is anomalous because it counts all mortgagee sales, including bare land, businesses, commercial property and unfinished developments.
    "It's something I think is misleading," Helm says.
    The number of sales could be rising because sales of developments and sections may be growing proportionally, he says. In Auckland, mortgagee listings have dropped to 130 since their February peak of 225, but have picked up in the provinces.
    The real pain is in rural and coastal areas, as finance company receivers force section fire sales more aggressively.
    Like listings, sales have shifted from being predominantly in major centres to provincial New Zealand. Around a third of nationwide sales in September were in Auckland, compared to 44 per cent just over a year ago.
    The regions with the largest increase were Northland, from three sales in September last year to 33 in September this year, and Hawke's Bay, from three in September last year to 24 in September this year.
    Get help
    IF YOU are struggling to pay your mortgage, contact a reputable budgeting service.
    There are more than 200 free budget advisory services around the country and a free budget phone line: 0508 BUDGET LINE (0508 283 43.
    Latest breaking news articles, photos, video, blogs, reviews, analysis, opinion and reader comment from New Zealand and around the World - NZ Herald
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    Maybe bankruptcy would be better than
    what Rose is facing, for the future?


    • #3
      My heart goes out to this lady..........

      But. Only $20,000 equity available after 28 years of marriage? A separated woman of "a certain age" taking on a mortgage commitment of $2000/month?

      Sad sad sad.


      • #4
        I wonder if it might not be time for NZ to introduce legislation that clears a home owners debts once a bank completes a mortgagee sale. The US brought in such legislation in the 1930s. It means even if there is money still owing after a bank sells a property the Mortgagor is free and clear. It would make NZ banks more cautious in lending, and it would make them determined to get the best price at a mortgagee sale.

        It may seem unfair on banks but how many people subject to a mortgagee sale would actually be able to repay the bank the balance. Passing such legislation would just remove the administrative steps and costs involved in a bankruptcy.
        Last edited by Perry; 14-12-2009, 06:01 PM. Reason: fixed typo
        The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.


        • #5
          I'm not sure it is a good Idea or not.

          Why did the US introduce it ?
          Imagine what it could do to property values here. On the one hand, as you point out, it would make the lenders more cautious (& hence tighten the market) but on the other hand could NZ handle people walking away from property as they do in US. (jingle mail) ?

          In someways though, would it be that different to closing down a company & walking away from creditors as happens all too often here.

          In my experience, mortgagee sale is the last resort for the banks, as it creates all sorts of problems for them. If you can service the interest, or even most of it, that is preferable to them than going to mortgagee sale.
          i think we are past the point of the banks letting property sell for lots less than the mortgage, from stoies I have heard, they seem to be holding out for as much as feasible these days, so that their losses are minimal if any.


          • #6
            Originally posted by Keithw View Post
            I'm not sure it is a good Idea or not.

            Why did the US introduce it ?
            In the 1930s the issue was depression of prices. Banks were foreclosing as reducing house values left the mortgagors in massive negative equity.

            Banks hunting Mortgagors after foreclosure were only making the situation worse and helped drive house prices even lower. Like you I wonder if it would work or not especially when such actions often have unintended consequences.

            I understand the jingle mail phenomenon mostly occurs with property speculators. Home owners tend to do more to retain their home.
            Last edited by Austrokiwi; 14-12-2009, 08:26 AM.
            The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.


            • #7
              Originally posted by Winston001 View Post
              My heart goes out to this lady..........

              But. Only $20,000 equity available after 28 years of marriage?
              I was thinking that this part of her story doesn't add up. There is more here that we are not being told about so I wouldn't be feeling too sorry for her until I knew ALL the story.
              Last edited by Perry; 14-12-2009, 06:02 PM. Reason: fixed quoted text