Thursday, November 10, 2011

Moral hazard


When HSBC reported its results yesterday, it revealed that there has been a $1bn increase in bad debt at its legacy US mortgage business. They have complained in the past how costly and cumbersome it is to maintain homes of customers who've simply posted the house keys back to the bank and cleared out. Grass needs mowing, gardens watering and weeding etc. Yesterday they said that they have more problems because customers are deciding unilaterally to take mortgage holidays, believing that their homes will not be repossessed. The political difficulty of seizing defaulted customers' homes has become a moral hazard which will encourage others to default.

4 Comments:

Blogger Angus said...

Uncharted territory . Gullivers travels .

10:54 am  
Anonymous kinglear said...

I'm quite surprised that some bright spark hasn't packaged a whole lot of these houses into lumps of say $100 million sor sale to entrepreneurs who have cash. The average price might be eg $50,000 and there are US agencies which guarantee rents, and ( eventually) they should be sellable.
The problem, I think, is that the vast majority of these overhang houses were built in the wrong place with the wrong specification - and, of course, at the wrong price.The " destruction of capitalism" isn't being allowed to work

7:25 am  
Blogger Winchester whisperer said...

LOL Angus

Yes KL - you should get over there and do a deal with them

8:47 am  
Blogger Welshcakes Limoncello said...

My sympathy is all with the customers.

11:19 pm  

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