Mortgagees back in vogue?
Friday, June 26th 2009, 4:24PM 
9 Comments
Mortgagee sales are likely to hit the headlines again when the latest stats come out showing a big increase in the number of properties sold this way.
We’ve been looking at this issue for an article in the next edition of the NZ Property Investor magazine. Mortgagee sales are interesting, as most people think that banks are unhelpful and will move to a sale quickly.
It reinforces that notion banks are bastards.
Indeed the opposite appears to be true. Around 30-40% of mortgagee sales are conducted by banks, yet they are responsible for more than 80% of all home loans written.
That suggest second tier lenders, particularly finance companies and mortgage funds, are the ones fuelling this market along.
The latest stats, yet to be released by Terralink, will show that the number of mortgagee sales have increased yet again from just over 200 in March to more than 250 in April. No doubt this will be trumpeted as some additional sign of doom and gloom for the property market.
However, if this market is being driven by the second tier lenders rather than that banks, then it wouldn’t be out-of-line to assume that they are well through the process of liquidating their loan books and the number will start falling again.
So for investors looking to nab a bargain (according to QV the sale price of a property is on average 16% below market value), then they better get in quick.
The other thing which came up when researching this area was that banks actually want to avoid mortgagee sales.
As one said: “It is in the bank and customer’s best interests to not force the sale of a property, due to increased costs and the risk of the end sale price being lower than what could have been reached through a normal sale.”
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Comments from our readers
On 26 June 2009 at 9:40 pm Gail said:
You decide the risk you want, not the banks. When you go to the supermarket you know what you can afford to spend and you know what a lemon is. Do you blame the supermarket if you overspend on your budget?
Banks don't claim to be a form of social security. You can't expect them to cover your butt. If risk adverse do your sums accordingly and don't cry over spilt milk.
On 26 June 2009 at 11:22 pm Mike said:
How can a sale price be below market value? It is sale prices that determine market value. On 27 June 2009 at 8:27 am Aaron said:
Gail, as you will know may people get swept away in the stampeed of a bullish market when their wallet is fat and everyone around them is a property expert making a fortune. So the nigeive property investor, thinking property "values" will keep rising forever, as they do right, except the would be investor/home owner does not know about the major set backs along the way.
So along they go to the bank who has been in the game for centries and looks at their wealth todate; car, stereo, golf clubs, gold watch, their current income from the job that "just can't de without them", (until the down turn) and well and behold the bank says yes Mr Investor with a record like yours we would gladly lend you the money.
It is at this point of the supermarket check out where the bank, with centries of experencing bearish markets, should factor in the unavoidable but unforeseen down turn to protect their "valued" customer.
Furthermore, how often do these victims buy a property? Once or twice in their life? How often do they go to the supermarket? How experienced is the check out operator in bullish and bearish markets? What is the risk in buying a box of weet bix only to find that you cannot meet the payments? What is the risk if you buy your weeties in the wrong ail vs buying a 30yr mortgage in the wrong street etc etc
Good point Mike, however the "market value" you talk of is the market value that particular purchaser puts on that particular property, the "market value" in the general sence, and what a registered value is based on, is the sales of many properties in the same location, of similar construction, and in relitive sale dates.
A bit different to working out the value of weet bix eh?
On 27 June 2009 at 8:50 am Anita said:
I agree with Gail. It's down to the consumer .We all should either have a nest egg or have these kind of situations factored into our maths.The blame definitely is with the person doing their budgets. On 27 June 2009 at 1:53 pm Gert said:
I agree with Aaron and feel really sorry for Steve. Steve has made the effort to continue with his payments and has been open and frank with the bank. Yet they avoid communicating with him or trying to find a solution. His arrears of $4k is minimal in the total value of everything involved. That is why I agree with the sentiment that the banks are indeed bastards.
When applying for a loan, the banks are keen to point out how expert they are in risk assessment. They won't lend if it is risky. Calling in a loan acknowledges that they got their assessment wrong, yet they will blame the "inexperienced" borrower for being greedy. But who is making the greedy profits? And who is changing interest rates (and margins) around at will?
Lastly the question of market value. Simplistic theory states that whatever price a transaction is closed at constitutes the market price. Well, that is rubbish. It is only market value/price when it is a general price at which transactions occur between willing buyers and sellers. Mortgagee sales are reluctant sales and so are many other situations. How can it cost $400k to build a new house, yet be sold for $47k "at market"? This is obviously below its real value, unless this is the selling price for the whole street because of some calamity - then this would be the new market value.
On 29 June 2009 at 11:51 am John said:
I think the banks were way more reasonable in Australia when I used to live there. I easily got a 'mortgage holiday' for about 7 months when my wife was off work with a new baby. They just let the sum borrowed go up a bit. Very obliging. On 30 June 2009 at 10:55 am John A said:
Steve shouldn't blame the bank for his predicament. If he had followed the advice to save and always have 3 months income stashed away for a rainy day he wouldn't now have to vent his wrath against an institution that lent him money to buy his own home instead of having to rent. Alternatively he could have been prudent when taking out his mortgage and bought himself some form of insurance against loss of income due to illness/accident. On 7 August 2009 at 9:01 pm Roydon said:
The Banks are only a lender if there boxs get ticked that means you can borrow but you know what is in your life some of there forms dont look into other items that we have going on, We need to ensure we leave some fat in the cubboard. I know i didnt, but I have just refinanced with another bank and that means I am alot better off on cash flow per month.
Yes to refinance means we may have to pay the penalty but only you can make the call do you want to make monthly life easier or skrimp and try to save by not reducing your equity and stay with the same bank and leave all the same at the end of the day it is your call and there are alot of companies out there that will help you just google help on FINANCIAL INVESTMENTS,I found one company very good is Tracey Munns from Connect mortgages.
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I am making the regular payments, the house is on the market ( and has not sold ) but I cant pay the arrears. So now I am in the second phase of the collections process. My correspondence is not acknowledged, in fact they don't even know where it is....? They are forcing me into payment arrangements that I can't afford and at the end of the day, they are only about the "when" and not the why...... My Arrears are less than $4000.00.
Fuck the Banks.