Bank write offs

LoveDucati2

Just a quick thought

Instead of allowing the banks just to write off their own losses in toxic banks, could they not assist the thousands of people maxed out on mortgages and personal debt as well.

I owe my bank 220k. my house is worth ..(if i could sell) maybe 170k, bank writes off 50k, if they are writing 40 billion in bank debts off anyway, why couldn't they do this?

old boy

but surely you need to realise this is not allowed to happen to joe public

LoveDucati2

old boy wrote: »

but surely you need to realise this is not allowed to happen to joe public

LOL

sorry I forgot, only people with loans of over 100 million should be helped

Zynks

...and then if your house valuation went down another 20k after subsidising your current negative equity, should the state jump in again?

The problems the state needs to address refer to the survival of the a financial system, otherwise the economy dies.

The other issue is that confidence must be restored so consumers start to spend again, helping maintain jobs and generating tax revenue to the state.

By reducing your debts to the current valuation of your house nothing would be achieved really. You would remain maxed out anyway.

What you should consider is if you can afford your current repayments for your main home. If you can, consider yourself fortunate.

jank

You bought a house and now its worse less.
You made a choice and get over it.

population

jank wrote: »

You bought a house and now its worse less.
You made a choice and get over it.

In fairness quite a few people were duped into buying houses at over the odds prices by our corrupt govt cheerleading for the building industry.

I remember when house prices were stagnating in early 2007 and the first signs of trouble were on the horizon and Bertie came out and said that there "was never a better time to buy a house".

What a parasite. That there is the inmates running the asylum.

I know people made a choice, but the advice they received was poisonous

jhegarty

LoveDucati2 wrote: »

I owe my bank 220k. my house is worth ..(if i could sell) maybe 170k, bank writes off 50k, if they are writing 40 billion in bank debts off anyway, why couldn't they do this?

And if the value had gone up to 300k you would have been happy to hand over the 80k ?

nesf

The reason for a toxic debt "bank" is to improve the credit ratings of the banks in the system so as to put them into a better position to lend. Get the worst of the debt off the balance sheets of AIB, BoI etc and leave them in a position where they can get funding from the money markets. If the banks can't maintain a high degree of liquidity then they can't/won't lend to the private sector, if private sector companies can't access credit then their cash flow problems (even temporary ones) might force them to trim their workforce which aggravates the unemployment problem.

If banks can't loan money or offer companies overdrafts etc then this will screw over sensible well run companies and further screw over the workers in these companies. Writing off parts of everyone's mortgage debt does nothing to solve this problem.

jank

population wrote: »

In fairness quite a few people were duped into buying houses at over the odds prices by our corrupt govt cheerleading for the building industry.

I remember when house prices were stagnating in early 2007 and the first signs of trouble were on the horizon and Bertie came out and said that there "was never a better time to buy a house".

What a parasite. That there is the inmates running the asylum.

I know people made a choice, but the advice they received was poisonous

I agree that alot of people are stupid and swallow whatever Estate agents, builders, banks or TDs say. One should ALWAYS seek independant advice when doing any large purchase such as a house. But if people are stupid enough to follow those who only think of the bottom line and their own vested interests then I have no pity on them. I feel sorry for them of course but Im glad that Im away from the mess Ireland is in at the moment and hope one day to return. Not holding my breath though.

One just has to look at property abroad to see how people are being ripped off. One could get a 5 bed mansion with a pool up on the hills with a view of the alps, the city and the sea in the poshest area in christchurch for an average of a 3 bed semi back home in peak 2007 prices. Now that is value IMO! for 40 thousand euro you could probably buy a tiny shack in a bad part of town here. For years people just thought of getting on the ladder. I was in college for most of that period but was laughing to myself that the house of cards will come crashing down and maybe I could buy a house to live in (not a stupid investment) in 10 years time for the same price of late 90's thus saving me 100's of thousands of euros.

In the meantime im living my life to the best of my ability away from that mess and im seeing the world to boot.

bonkey

population wrote: »

In fairness quite a few people were duped into buying houses at over the odds prices by our corrupt govt cheerleading for the building industry.

Lets think this through...

These people are those who would not have bought a house except for the fact that the govt was cheerleading the building industry. There's no way of identifying them amongst all the other house-buyers, or indeed quantifying them, so we can't help just them.

So, we have to help all house buyers running a loss.

Lets assume this is done. What does that achieve? It shows that trusting a corrupt government (your own words) is a safe bet. Logically, from this, you should support your corrupt government. After all, if their cheer-leading was the factor that swung you from not-buying to buying, then its hard to imagine that them covering your losses (regardless of whether or not its the smart thing to do for the economy) will do less than buy your vote.

Alternately, we can have our corrupt government prop up the banks / builders (again, regardless of whether or not its the smart thing to do for the economy). If this - on top of personal loss - isn't enough to make those "quite a few" people that you mentioned stop trusting a corrupt government, then its hard to imagine what is.

So basically, rather than asking "is this the right thing to do for the economy", you seem to be suggesting "the corrupt government should buy public favour".

Personally, I don't think thats a well-thought-through position.

bonkey

jank wrote: »

I agree that alot of people are stupid and swallow whatever Estate agents, builders, banks or TDs say. One should ALWAYS seek independant advice when doing any large purchase such as a house. But if people are stupid enough to follow those who only think of the bottom line and their own vested interests then I have no pity on them. I feel sorry for them of course but Im glad that Im away from the mess Ireland is in at the moment and hope one day to return. Not holding my breath though.

Not so long ago, there was no shortage of threads on various forums here, with people insisting that buying houses was "as safe as houses". It was the best investment possible for your future. It outperformed the stock market, was a hell of a lot safer, and that all talks of a crash were just rubbish. At most, it would flatten for a while, or take a shallow dip and then continue to climb.

Of course, in the long run, they're possibly right. People who bought a house in mid 2008 will probably still realise a profit in the long run. Over the next 20, 30 or 40 years, there's good chances that their property will end up outperforming the stock market.

Its interesting to see, though, how quickly this long run thing gets forgotten when the short term isn't all rosy.

Liam Byrne

bonkey wrote: »

People who bought a house in mid 2008 will probably still realise a profit in the long run. Over the next 20, 30 or 40 years, there's good chances that their property will end up outperforming the stock market.

Who cares ? Some of us bought a house to LIVE IN, not as a half-assed investment/gamble.

Why is it that EVERY time speculators get involved that they screw up a system ?

It seems to be the main reason that most "capitalist" markets fail.....where it's not "supply and demand" but is instead people out to temporarily "own" something in order to make a quick buck.

Before anyone says it, the manufacturer - wholesaler - retail chain is different, because each person in that chain adds something or makes it easier to get something, and while they might charge over the odds a bit, it's the speculators that do the most damage because they add nothing and only want to drive the price up while preventing people that want things from getting them - a bit like ticket touts.

Thankfully we've almost eradicated that pest from financial markets (at least within the eurozone) but we REALLY need to make it a criminal offence in order to make sure that the capitalist system doesn't fall apart....although by now it might be too late.

population

bonkey wrote: »

Lets think this through...

These people are those who would not have bought a house except for the fact that the govt was cheerleading the building industry. There's no way of identifying them amongst all the other house-buyers, or indeed quantifying them, so we can't help just them.

So, we have to help all house buyers running a loss.

No that is not my point at all. At no point did I suggest support for that idea. I merely pointed out the facts of what our corrupt (and yes they were my words and I stand by them) former leader said. It is like buying shares, you pays your money you take your chances. Can go up down etc. But as has been shown in Anglo, there were serious conflicts of interest at play and the govt charged with taking care of it's citizens instead advised them to board a sinking ship. This was immoral behaviour.

Liam Byrne

population wrote: »

It is like buying shares, you pays your money you take your chances. Can go up down etc. But as has been shown in Anglo, there were serious conflicts of interest at play and the govt charged with taking care of it's citizens instead advised them to board a sinking ship. This was immoral behaviour.

And you expected otherwise ?

The dogs in the street know at this stage that if FF tell you "it's sunny out", then not only do you need an umbrella, but you'll probably find that someone who visited the Galway Races tent [ and possibly borrowed 100 million and possibly "loaned" at least 50K of that to a Taoiseach or two ] owns an umbrella factory!

bonkey

Liam Byrne wrote: »

Who cares ? Some of us bought a house to LIVE IN, not as a half-assed investment/gamble.

Those of you who didn't buy a half-assed investment/gamble shouldn't be unduly worried about the notional sale-value of the house you live in.

It may limit your mobility, but I would question the number of people who are really effected by this. Those who knew they'd be mobile in the short-to-medium term but still bought were still banking on the value of their property....they were still investing.

There are those who bought to live in, who had no intention of moving and/or "trading up", and who find themselves in a position where they now need to. These are the people I'd have sympathy for, but would still be of the opinion that they should have been aware of this risk before buying.

Why is it that EVERY time speculators get involved that they screw up a system ?

Because enough people are happy to make money.

Also, while the system is working (i.e. before it crashes) no-one wants to listen to doom-criers.

Also...if you're somehow aggrieved by the loss of value of the property that you bought to live in, then I'd suggest that you knew before you bought that "every time speculators get involved they screw up a system" and yet you bought anyway. So you bought into a system you knew would get screwed up...

It seems to be the main reason that most "capitalist" markets fail.....

Very few capitalist markets fail. They suffer short- or medium-term setbacks.

I'm at a loss to think of a capitalist market which has failed entirely, but I'm sure such exists.

bonkey

population wrote: »

This was immoral behaviour.

On the assumption that the government knew its stance was bogus at the time, then yes, it was.

I still stand by my point though - that the best way for people to realise this is for the government not to pay them for buying into it.

Liam Byrne

bonkey wrote: »

Those of you who didn't buy a half-assed investment/gamble shouldn't be unduly worried about the notional sale-value of the house you live in.

I'm not. But I am VERY worried about having to pay extra taxes that I can't afford to assist an incompetent government to bail out even more incompetent banks who engaged in what at the very least and most charitable definition can be described as dubious practices.

LoveDucati2

Anyway, my original post is not based on myself it is only an example

My main point is if our government is going to remove at least 150 billion which is a closer figure to the real toxic debt that we have in the 6 banks that the idiots said they would cover.

This is no different to removing 150 billion of mortgage debt off the people who need it the most.

jank

Of course, in the long run, they're possibly right. People who bought a house in mid 2008 will probably still realise a profit in the long run. Over the next 20, 30 or 40 years, there's good chances that their property will end up outperforming the stock market.

Thats bull im afraid. If you have money why dont you put it into a bank account? You will make a profit on it in a year. So why invest in a house.

House prices dont always go up and people are shocked now that this is happening to them!

Anyway it has been shown for long term investments shares ALWAYS outperforms houses. TBH investing in houses is too easy hence why the market got so over heated. Shares require alot more understanding hence why most people avoid them.

bonkey

jank wrote: »

Thats bull im afraid. If you have money why dont you put it into a bank account? You will make a profit on it in a year. So why invest in a house.

Same reason that people invest in all sorts of things....they perceive the higher rate of return as outweighing the risk involved.

House prices dont always go up and people are shocked now that this is happening to them!

House prices almost always go up. The last time Ireland had a major dip in prices (if I remember correctly) was around 30 years ago. That's an entire generation of investors. Considering that in the 80s, if you bought a house, you got a 20-year mortgage. That would now be paid off, and hte house would have risen in value pretty-much every single year. Allowing for the whole Celtic Tiger economy, it rose in value from the mid-90s for about a decade at a phenomenal rate.

Anyway it has been shown for long term investments shares ALWAYS outperforms houses.

Where?

Genuine question, because I've never seen that shown.

jank

bonkey wrote: »

Same reason that people invest in all sorts of things....they perceive the higher rate of return as outweighing the risk involved.

And did any of these people weigh the risk that the whole deck of cards would come down. For every property boom there has been a crash. yet supposedly for bright and educated people this fact did not register. Sure ireland was different?

bonkey wrote: »

House prices almost always go up. The last time Ireland had a major dip in prices (if I remember correctly) was around 30 years ago. That's an entire generation of investors. Considering that in the 80s, if you bought a house, you got a 20-year mortgage. That would now be paid off, and hte house would have risen in value pretty-much every single year. Allowing for the whole Celtic Tiger economy, it rose in value from the mid-90s for about a decade at a phenomenal rate.

Yea of course. With every investment one of the keys in timing. Investing at the very start of the boom would yield great benifits. But what if someone put all their money into Dell or Apple or Google or random oil company at the begining Would they have gotten more money or less.

It is like the famous bell boy and Joe kennedy tale. If everybody is putting money into something get the hell out!!
One can also think of warrens buffet most famous quotes here aswell.

Anyway saying that property almost always goes up is like say property almost always goes down. It is a pointless saying.
At the end of the day a house is something to live in. You can invest sure in other homes but when there so many doing the same thing then it can only lead to trouble.

bonkey wrote: »

Where?

Genuine question, because I've never seen that shown.

http://www.chambers.ie/index.php?id=379
http://www.forbes.com/2005/05/27/cx_sc_0527home.html
http://money.cnn.com/galleries/2007/real_estate/0704/gallery.stocks_v_realestate.moneymag/index.html

bonkey

jank wrote: »

And did any of these people weigh the risk that the whole deck of cards would come down.

They should have. That was my entire point...

fugazied

A lot of people who were flipping houses got nailed, but so did a lot of people who went into 100% loans (how that could have been allowed in the first place is insane) and had crazy interest plans where the rate jacked up sharply after a few years.
So many of the people burnt (IMHO) were the greedy (house flippers) and the ignorant (people getting loans with ridiculous terms), but also many hard working families got burnt from the inflated property market and having bad luck.

Victor

LoveDucati2 wrote: »

Just a quick thought

Instead of allowing the banks just to write off their own losses in toxic banks, could they not assist the thousands of people maxed out on mortgages and personal debt as well.

I owe my bank 220k. my house is worth ..(if i could sell) maybe 170k, bank writes off 50k, if they are writing 40 billion in bank debts off anyway, why couldn't they do this?

Do you realise that both are essentially the same thing, except one is on a macro basis and the other on a micro basis?

If a government agency assumes a particular debt, somewhere there is a corresponding asset, now that asset may not be performing at the moment, but a proportion will come good.

Sure, something has to be done with problem debts that are affecting the entire ecomony, but I presume your won debt doesn't affect the entire ecomony (sure, there may be many debts that are similar to yours).

ejmaztec

Irresponsible lending. It seems that the world and his father knew that the property bubble was going to burst, and that property prices were going to drop. The lending institutions must have also known this, but decided to lend 90 or 100% mortgages.

Had they capped advances to say a max of 75%, the situation would have been a lot different. The fact that they were offering sometimes the full asking prices drove the prices up even more.

I just cannot believe how stupid the lenders were (and a lot of borrowers for falling for it).

Easy money all round - and here we all are....

Victor

ejmaztec wrote: »

Had they capped advances to say a max of 75%, the situation would have been a lot different. The fact that they were offering sometimes the full asking prices drove the prices up even more.

At 75%, only those with substantial capital (€50,000-100,000) would be able to buy.

80-90% mortgages are reasonable, however its when they go over 90% they get unreasonable. Requiring people to have a meaningful deposit means they are more likely to be more conservative and responsible in their spending as people tend to spend to the maximum available.

Deposit |Loan ratio |Possible loan
€10,000 | 80% | €50,000
€10,000 | 81% | €52,632
€10,000 | 82% | €55,556
€10,000 | 83% | €58,824
€10,000 | 84% | €62,500
€10,000 | 85% | €66,667
€10,000 | 86% | €71,429
€10,000 | 87% | €76,923
€10,000 | 88% | €83,333
€10,000 | 89% | €90,909
€10,000 | 90% | €100,000
€10,000 | 91% | €111,111
€10,000 | 92% | €125,000
€10,000 | 93% | €142,857
€10,000 | 94% | €166,667
€10,000 | 95% | €200,000
€10,000 | 96% | €250,000
€10,000 | 97% | €333,333
€10,000 | 98% | €500,000
€10,000 | 99% | €1,000,000

bonkey

Victor wrote: »

80-90% mortgages are reasonable, however its when they go over 90% they get unreasonable. Requiring people to have a meaningful deposit means they are more likely to be more conservative and responsible in their spending as people tend to spend to the maximum available.

Here in 'Die Schweiz', standard policy is that mortgages are for a maximum of 80%.

I should point out, however, that this policy doesn't stand alone. There is quite a large amount of regulation and control in the renting sector, as well as mandatory pensions. The latter can be used as part of your 20% if you wish.

Its all horrifically complicated, but the end result is a market where apartment prices aren't spiralling out of control, despite demand/occupancy being in excess of 97%, and new construction only likely to keep up with increase in demand over the coming decade.

ejmaztec wrote:

Irresponsible lending.

Also irresponsible borrowing. When Joe Bloggs borrows to the hilt and beyond, surely he has to bear at least some of the responsibility for his own actions. It can't be entirely the banks fault for giving him the money.

silverharp

Victor wrote: »

80-90% mortgages are reasonable, however its when they go over 90% they get unreasonable. Requiring people to have a meaningful deposit means they are more likely to be more conservative and responsible in their spending as people tend to spend to the maximum available.

you have to throw in the increase in salary multiples and length of mortgages. Collectively they created the standing up at the football match syndrome , the first few pople benefited for a short period of time however once everyone does it , no one was better off

Dob74

Victor wrote: »

At 75%, only those with substantial capital (€50,000-100,000) would be able to buy.

80-90% mortgages are reasonable, however its when they go over 90% they get unreasonable. Requiring people to have a meaningful deposit means they are more likely to be more conservative and responsible in their spending as people tend to spend to the maximum available.

Deposit |Loan ratio |Possible loan
€10,000 | 80% | €50,000
€10,000 | 81% | €52,632
€10,000 | 82% | €55,556
€10,000 | 83% | €58,824
€10,000 | 84% | €62,500
€10,000 | 85% | €66,667
€10,000 | 86% | €71,429
€10,000 | 87% | €76,923
€10,000 | 88% | €83,333
€10,000 | 89% | €90,909
€10,000 | 90% | €100,000
€10,000 | 91% | €111,111
€10,000 | 92% | €125,000
€10,000 | 93% | €142,857
€10,000 | 94% | €166,667
€10,000 | 95% | €200,000
€10,000 | 96% | €250,000
€10,000 | 97% | €333,333
€10,000 | 98% | €500,000
€10,000 | 99% | €1,000,000

People should have to save for there mortgages. 20% down on any mortgage over 100k would have prevented this crisis. Why are houses in this country more expensive than cities like New York and Chicago? Irresponsable lending has got us into this mess.

ejmaztec

bonkey wrote: »

Here in 'Die Schweiz', standard policy is that mortgages are for a maximum of 80%.

I should point out, however, that this policy doesn't stand alone. There is quite a large amount of regulation and control in the renting sector, as well as mandatory pensions. The latter can be used as part of your 20% if you wish.

Its all horrifically complicated, but the end result is a market where apartment prices aren't spiralling out of control, despite demand/occupancy being in excess of 97%, and new construction only likely to keep up with increase in demand over the coming decade.


Also irresponsible borrowing. When Joe Bloggs borrows to the hilt and beyond, surely he has to bear at least some of the responsibility for his own actions. It can't be entirely the banks fault for giving him the money.

Already mentioned in the same post.

When the lenders and their agents told the potential borrowers about the wonderful schemes they had, the less prudent borrowers were putty in their hands.

Agents getting commission for arranging loans also helped to fan the flames. I understand that this practice has been curtailed somewhat - after the horse has gone.

ninty9er

Take the Seán Dunne example...if that loan has to be written off, he'll find himself with no plot in Ballsbridge, but the banks will own it. He's not good for the money, so they write it off. Mortgage holders are good for the money, and if they weren't the same would apply and they'd be left homeless.

The VALUE of your house isn't linked to your ability to afford it. If it falls tough, if it rises who cares. You're never going to see the extra value in cash and you're not going to lose the fall in value in cash, unless you're an idiot on the average industrial wage with 6 houses making interest only repayments which you now can't meet due to the houses being empty and generating no income that have to be sold at a loss.

The phrase that comes to mind is "if you fall off a wall and break both your legs, don't come running to me" I have no pity.