How ‘Shared Equity’ in an arrears cases would(n’t) work

This piece is a demonstration of the way in which a a bank will opt for ‘shared equity’ with a home owner who is in arrears as means to keeping them in the property. It is important to remember, the ‘big bad bank’ wants people to stay in a property with arrears, only during a strong upward cycle do they tend to repossess property rapidly. What you will see next is in effect, a legal accounting trick, and one which actually leverages the individual even more.

So the situation at the start shows the asset value versus the value of the underlying security (in fact it is a little more complicated than this but for the sake of explanation the property and asset are the same value). Then along comes a property crash (we had a banking crisis thrown in for good measure).

Now the borrower is 200% leveraged, or at 50% in negative equity (their …

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