We get BBC America here which is a spinoff of World Service… has (some of) its own programming, including news broadcasts.
And I bought two houses in the UK in 1989 and 1991 - both with 100% mortgages. They were readily available right in the middle of that slump.
Looks like Chez 1 wins. 
That is not how American mortgages work.
Interest is calculated on the remaining principle every month. If it’s a fixed-rate loan, then it is amortized so the total payment (a chunk of principal plus that month’s interest) is the same every month. Any amount over the minimum payment is put towards the principal.
Pre-payment penalties are extremely rare for residential mortgages in the US, though I wouldn’t put it past some shady subprime outfit.
I would assume he was just dummying it down or explaining to people who don’t own as opposed to comparing different countries.
It wasn’t necessarily the sub-prime interest rates, no down payment, or extended durations of the morgages that causes the crash. It was the high risk and high principal practices of the lending institutions.
I just want to highlight this. The problem in the current market is that the *present/i] market value of the home is often less than what is owed on the mortgage. Most people, if they could pay off the mortgage by selling the house, would do so rather than experience foreclosure.
Sometimes, a bank will approve a “short sale” on a mortgage which is “distressed” meaning the owners are somewhat behind on payments, but not yet to the point of foreclosure. This means that the bank allows a sale for less than what is owed on the mortgage and forgives the debt in full. Again, this has to be approved on a case-by-case basis by the bank - it is not by any means an automatic right.
“People” are not the problem. No one gives a fuck about what happens to people or their little patches of dirt and collections of 2x4s. 
It’s the BANKS that are “underwater”.
There are two sets of interest on Mortgages in the US. There are points say 1 or 2% of the total loan amount that get added to the initial loan amount and the interest rate. The interest rate is what friedo is talking about and points are what Nava is talking about. When you get a mortgage in the US you can generally choose the amount of points you pay, this will affect the interest rate you get. I personally get mortgages with 0 points because you need to stay in the house for about 10 years to make it worth while to buy down the interest rate with points.
Your friend was wrong. Most mortgages are 20 or 25 years, and most people buy their first home with only a 5-10% deposit, if that (well, until the credit crunch that is. Mortage companies are now asking for higher deposits, which is fine for many second or third time buyers who’ve built up equity, but much tougher for first time buyers).
In America we don’t deal directly with the bank. We are sold mortgages from a mortgage company. They set up and sell the mortgage. They do not keep them . They sell it to a bank immediately. The bank buys up huge amounts of mortgages and shop them up. They spread the property around many financial papers. The mortgage is chopped up. That is one of our problems now. The mortgage has many owners from several countries. Who actually has the authority to redo a mortgage to keep the home buyer in?
It’s extremely disingenuous to imply that this happens in all cases. Huge numbers of mortgages are issued directly by banks, credit unions and S&Ls, and many are never sold to other companies. My own mortgage is an example.
The loan servicer does.
Interesting. Years ago when I was a loan officer (in the US), we used a specific form to perfect our lien on the loan’s collateral. That form was called a Hypothecation Agreement. These were used, iirc, when a borrower was using a savings account as collateral. I wish I could remember more about the wording on the form.
So many Australian comments, all of them being small adjustments of the one before…
A couple of points, though:
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Australia was only just starting to get into the riskier end of lending when the collapses started, so it avoided the worst of that. Most of the risky loans, however, were made by non-bank, mortgage-specialist lenders who undercut the banks on price. These groups weren’t helped by drastic increases in risk premia and many of them have now gone under. An American “subprime” loan is roughly equivalent to what’s called a “no-doc”[umentation establishing an income stream or savings history] home loan.
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Mortgages tend to be for 20-30 years, either at a variable rate or with a fixed rate for a 1-5 year period at the start (a relatively new feature, really only becoming common in the last decade or so). Many loans offer a discounted “honeymoon rate” for a year at the start, but the discount is much smaller than American equivalents have been.
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Mortgages are subject to stamp duties when they’re taken out and as such it’s much rarer to refinance a property unless you’re looking to borrow more or you’re selling and buying somewhere new. There are good mortgages and bad mortgages, but they’re all similar enough (and on variable rates) that there’s rarely much to be gained by paying out one bank and talking to another.
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Duck’s Quack Echo was talking out his arse. There are major differences in the means by which properties are bought between Australia and the US, especially in the way that agents operate, houses are located, costs are assessed and taxes are paid. “Foreclosure” is a term used by solicitors and almost no-one else. Your house gets repossessed.
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That said, it’s much rarer for it to happen in Australia - a repossessed house typically auctions for less than it would otherwise, doesn’t annull the debt if it’s higher than the house’s value and destroys your credit history pretty much forever. It’s much more common to sell up before the bank takes possession.
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House prices are relatively incredibly high, especially in Sydney (and lately, to a lesser extent, Brisbane and Perth). Mortgages have always been acceptable dinner party conversation.
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It’s nigh-impossible for someone to sell a residential mortgage, which is typically not a negotiable instrument. Lenders will instead securitise revenue streams coming from the mortgage.
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Banks aren’t highly regulated (any more). They’re only slightly more regulated in their activities in this area than the non-bank lenders. With that said, they weren’t really agile enough to jump into sub-prime debt purchases before the crash.
I’m still confused. How does a “career manic depressive” (which would seem to indicate to two *emotional *states, not two mental knowledge ones, unless it’s the new term for multiple personalities) believe two separate facts?
I’m going to be kind and assume two people using the same computer, one of whom didn’t log out.
The only thing that I’m unfamiliar with (in France) is the concept of borrowing against the equity. It seems to be commonly done in the USA, and I had never heard of this before I found this board. Maybe it’s possible to do so here too, but it must be very uncommon.
I never really wondered about repossession. In these cases, it’s common knowledge that the house is auctioned. But is it auctioned by court order, with the money going to the lender or is the house repossessed and then auctioned by the bank, I wouldn’t know. I assumed the former, but now that I think about it, I’ve actually no reason to believe so.
Some years ago, 30 years long mortgage became more common, and most people thought it was ridiculously long. 20 years would be the norm.
Also, bankruptcy is much more problematic here. A court might cancel your debts, providing you have no assets (so, basically, you have to sell whatever you own yourself and then petition the court for relief), but even then, it can be denied if it appears that you have a good chance of being able to repay them (for instance, you’re young and employed). And even this is a relatively new system. Before, there was no way to cancel your debts, and you might have to pay them back till the end of your life, in some cases.
Yeah well we’re pretty upset at our economy being destroyed by the action of a few rouge banks .
Actually there was a push by the govt a few decades back to get people into homes by offering a low start loans, however as soon as the higher repayments kicked in people has to default, how could it end up any other way,history simply repeated itself on a larger scale in the US.
Don’t worry. It’s just a piece of self-mockery - sometimes my sense of humour can get a bit warped.
Since the early 1990s recession officially (according to Bloomberg) occurred during 1990-1991 I can understand house buyers obtaining 100% mortgages in 1989 and 1994. However, I’m surprised they were available in 1991. Obviously I took my eye off the ball during that particular year.
Your American mortgage follows the French system.
Then pretty much every American mortgage follows the French system, and it should be renamed the American system, since there are more of us ;). Really, your original description of the US system is completely wrong.
Yes - readily available, and not just from obscure companies - I got mine from the Halifax.