Explain to me why borrowers are responsible for the current mess?

Dannyboy83

Originally Posted by stepbar

Youse seem to be fully intent on absolving people (as in the borrowers) of any blame in all this.

I'm starting to very seriously believe the Indymedia lads have sent a few of yiz over to stir sh1te. Some of the stuff wrote in this thread is absolutely mindblowing

Two questions:
1. What is IndyMedia?

2. How are homeowners to blame for the current drama sweeping through our banking sector?

BTW, I'm not a homeowner so I'm not inclined to get offended, but I genuinely don't understand how people are deflecting blame from Bank managers onto home owners?

My understanding:
There was a monopoly, lack of supply, burst in demand
There was an unregulated market
There was a boom on property price increases


The only way that homeowners could be to blame in my understanding is if:
A) There was an alternative supply of houses at a significantly lower price which people dis-regarded for some bizzare reason?
and
There were alternative financial institutions offering significantly more competitive rates than the main six, which people dis-regarded for some bizzare reason?


Strictly speaking, the only homeowners who benefitted long term from the boom, were those who bought the property prior to the start of the boom.
There are many, many people who did not benefit at all and are in negative equity.

Can someone point out to me what I'm missing?

Darragh29

(1) IndyMedia is a heavily sensored Irish website that is a focal point for extreme left wing views.

(2) No, people who wanted to buy a home are not responsible for the current disaster. People who selfishly hoovered up property all over the place, are to a large degree responsible for this absolute mess. Also they were in cahoots with the banks, developers and FF, who are also responsible...

P. Breathnach

Dannyboy83 wrote: »

Can someone point out to me what I'm missing?

You are missing so much that it would take more time than I have to tell you (and I am retired, with plenty of time).

I'll give you one point to get you started: borrowers and homeowners are not the same set.

SkepticOne

Borrowers are not responsible for the current mess. Borrowers are responsible for their debts and if they don't pay their debts then they can, quite rightly, be pursued. However borrowers are not responsible for the financial health of lending institutions.

If a lending institution engages in reckless lending e.g. doing away with the deposit requirement during a housing bubble then they are responsible for the problems that ensue. This does not mean that those who took out those loans don't have to pay them back. They do. But they are not responsible for the problems of the banks. Banks, like any business, are responsible for their own financial affairs.

Zynks

Dannyboy83 wrote: »

2. How are homeowners to blame for the current drama sweeping through our banking sector?

Are you old enough to remember the old wild west movies that had scenes where someone shot a gun and it would trigger a mad mass run of bisons?

Well, the property bubble is a bit the same. A biased media benefiting from property ads together with low interest rates and banks getting silly on loans and mean estate agencies triggered something similar to one of those shots, and the homebuyers went mad buying.

Unfortunately a lot of stuff went wrong at the same time, resulting in a lot of property becoming available, but not enough people with the cash/interest to buy them. Value went down and banks entered the equivalent of negative equity.

That is like a shot from the other end, making the bisons turn around in the opposite direction.

In the case of those movies, the fault was of who shot the guns.

However, we are humans and supposed to know a bit better. That is why homeowners (at least the ones that bought into all that BS) have some responsibility for what's going on.

Darragh29

SkepticOne wrote: »

Borrowers are not responsible for the current mess. Borrowers are responsible for their debts and if they don't pay their debts then they can, quite rightly, be pursued if they happen to be a bank, they can be bailed out. All other debtors however can be pursued. However borrowers are not responsible for the financial health of lending institutions.

If a lending institution engages in reckless lending e.g. doing away with the deposit requirement during a housing bubble then they are responsible for the problems that ensue. This does not mean that those who took out those loans don't have to pay them back. They do. But they are not responsible for the problems of the banks. Banks, like any business, are responsible for their own financial affairs.

:rolleyes:

Dannyboy83

P. Breathnach wrote: »

You are missing so much that it would take more time than I have to tell you (and I am retired, with plenty of time).

I'll give you one point to get you started: borrowers and homeowners are not the same set.

Well, you can make a start, I'm all ears.

I'm aware borrowers are not the same set. There are many sub sets.

But presumably, borrowers repay their debts or default & face jail and have their assets/collateral confiscated.

Dannyboy83

Zynks wrote: »

Are you old enough to remember the old wild west movies that had scenes where someone shot a gun and it would trigger a mad mass run of bisons?

Well, the property bubble is a bit the same. A biased media benefiting from property ads together with low interest rates and banks getting silly on loans and mean estate agencies triggered something similar to one of those shots, and the homebuyers went mad buying.

Unfortunately a lot of stuff went wrong at the same time, resulting in a lot of property becoming available, but not enough people with the cash/interest to buy them. Value went down and banks entered the equivalent of negative equity.

That is like a shot from the other end, making the bisons turn around in the opposite direction.

In the case of those movies, the fault was of who shot the guns.

However, we are humans and supposed to know a bit better. That is why homeowners (at least the ones that bought into all that BS) have some responsibility for what's going on.

This is one theory I can't reconcile I'm afriad.

As somebody who struggled for ages to buy a house, but salary never kept up with the pace (by a longshot), I understand that people really didn't have any alternatives.

In 2008, I was paying E1000 rent per month in Cork City (gf was sick and couldn't work). I could have paid a mortgage for less if I'd been approved for a mortgage.

Is it expected of people with families/starting families etc. to put their lives on hold and wait until the bubble bursts?

Lending to people who cannot repay I woud consider reckless (i.e. lending to me back in 2008)
Borrowing when you've been approved because you have no alternative however, I don't see it as reckless, unless you have lied in your application (in which case I would fully agree that the fault is on the borrowers shoulders)

herya

Dannyboy83 wrote: »

Well, you can make a start, I'm all ears.

I'm aware borrowers are not the same set. There are many sub sets.

But presumably, borrowers repay their debts or default & face jail and have their assets/collateral confiscated.

Borrowers (as in property portfolio owners and developers) fueled the trend by getting more and more loans for property which led to the increase in prices known as the bubble. If they wanted to become property tycoons thanks to their bank loan department having no means nor business sense then yes it's probably their fault.

SkepticOne

Darragh29 wrote: »

:rolleyes:

The state may not hold them responsible and may bail them out but that doesn't mean that everyone else has to. As far as I'm concerned, businesses are responsible for their own financial affairs. I might lend you money but it is up to me to make sure you will be in a position to pay it back. If you don't I can go after you but I can't expect wider society to help me out, which is what is happening now in Ireland.

glaston

Indymedia is a vile website, probably the scariest thing you will find on the internet.

Irish people got a bit carried away borrowing money. I think everybody should be personally responsible for their actions (not just those in positions of power) but many in the country dont subscribe.

http://www.independent.ie/business/irish/personal-debt-is-strangling-us-1428468.html

Zynks

Dannyboy83 wrote: »

This is one theory I can't reconcile I'm afriad.

As somebody who struggled for ages to buy a house, but salary never kept up with the pace (by a longshot), I understand that people really didn't have any alternatives.

In 2008, I was paying E1000 rent per month in Cork City (gf was sick and couldn't work). I could have paid a mortgage for less if I'd been approved for a mortgage.

Is it expected of people with families/starting families etc. to put their lives on hold and wait until the bubble bursts?

Lending to people who cannot repay I woud consider reckless (i.e. lending to me back in 2008)
Borrowing when you've been approved because you have no alternative however, I don't see it as reckless, unless you have lied in your application (in which case I would fully agree that the fault is on the borrowers shoulders)

I honestly wasn't hoping to get into this.

Issue #1: you were comparing rent vs. mortgage repayment when you should consider what was the total debt you were getting into

Issue #2: When comparing rent vs mortgage you should actually compare interests vs rent so you can compare "wastes" .

Issue #3: "I could have paid a mortgage for less if I'd been approved for a mortgage." - you mean the mortgage for the same place you were living in? I would be very surprised if that was the case. Most probably you would me moving to a smaller or lower-end place. If you look at issue #2 you might find it wasn't that interesting after all.

Issue #4: "Is it expected of people with families/starting families etc. to put their lives on hold and wait until the bubble bursts?": How does renting put people's lives on hold?

Don't get me wrong. I bought in 2003, and I was scared s#@tless at that time because I knew it was a bubble. I knew the risk I was getting into, but we took the risk because in our case it was acceptable enough and we had contingency plans.

We will probably be in negative equity at some stage, but we bought based on the value we perceived on the property and not based on how much the monthly installments were likely to be.

Ultimately I did also contribute towards the bubble.

Dannyboy83

Zynks wrote: »

I honestly wasn't hoping to get into this.

Issue #1: you were comparing rent vs. mortgage repayment when you should consider what was the total debt you were getting into

Issue #2: When comparing rent vs mortgage you should actually compare interests vs rent so you can compare "wastes" .

Issue #3: "I could have paid a mortgage for less if I'd been approved for a mortgage." - you mean the mortgage for the same place you were living in? I would be very surprised if that was the case. Most probably you would me moving to a smaller or lower-end place. If you look at issue #2 you might find it wasn't that interesting after all.

Issue #4: "Is it expected of people with families/starting families etc. to put their lives on hold and wait until the bubble bursts?": How does renting put people's lives on hold?

Don't get me wrong. I bought in 2003, and I was scared s#@tless at that time because I knew it was a bubble. I knew the risk I was getting into, but we took the risk because in our case it was acceptable enough and we had contingency plans.

5. We will probably be in negative equity at some stage, but we bought based on the value we perceived on the property and not based on how much the monthly installments were likely to be.

Ultimately I did also contribute towards the bubble.

All good points.

1: No argument

2: At a conservative estimate, I've wasted E30,000 on rent in the last 5 years, realistically closer to E40k.

3: Fair comment, not in all areas, but in the 2 of the 4 areas I was living in, this was the case. On the other hand, renting has given me mobility and the ability to go from slave labour to a little below average.

4: Doesn't affect me personally as I've chosen not to have a child until I have the security of my own home. However, the expense of a child makes accumulating the lump sum necessary for payment very difficult.

5. Good point, but the problem was that values were distorted. e.g. somebody owning an apartment in a rural area may have paid through the nose, but is unlikely to be able to shift it for a very long time now.
If you bought in 2003, you should be fine, i'm sure inflation will take care of it. Agree all the same.

Last point, I presume the older generation owned some of the houses first and sold them for a profit. Surely they are as accountable as anyone else.
Hell, I'm probably to blame for paying extortionate rent, but I didn't fancy living in my car.:D

Dannyboy83

herya wrote: »

Borrowers (as in property portfolio owners and developers) fueled the trend by getting more and more loans for property which led to the increase in prices known as the bubble. If they wanted to become property tycoons thanks to their bank loan department having no means nor business sense then yes it's probably their fault.

By this definition, I can see the point made by stepbar.
But when has it ever been any different since the 16th century?

Either you earn money, inherit money or you borrow money (or in the case of poiticians just steal/embezzle it).

Most SMBs borrow it.

Zynks

Dannyboy83 wrote: »

All good points.

2: At a conservative estimate, I've wasted E30,000 on rent in the last 5 years, realistically closer to E40k.

That is cost of living, not waste. unless you have the option of living somewhere for free.

Dannyboy83 wrote: »

4: Doesn't affect me personally as I've chosen not to have a child until I have the security of my own home. However, the expense of a child makes accumulating the lump sum necessary for payment very difficult.

A bit of contradiction there. In any case, I would strongly recommend that you do not turn property ownership into a pre-requisite for parenthood. I can think of several more important things.

Dannyboy83 wrote: »

If you bought in 2003, you should be fine, i'm sure inflation will take care of it. Agree all the same.

We are more likely to see deflation for a while, which means in real terms my debt increases. But I should be fine, for other reasons.

Dannyboy83 wrote: »

Last point, I presume the older generation owned some of the houses first and sold them for a profit. Surely they are as accountable as anyone else.

Yeah, those elderly ladies ganged up and scared people into buying their houses at extortionate prices. They should all be in jail!!!

Going back to the main issue of the thread, I do think buyers have contributed indirectly to the banks' pains today, though that doesn't excuse them of acting like kids selling lemonade for pennies in stands in the street.

Dannyboy83

I was just watching this there.

Interesting Video: The Generation Game
http://www.davidmcwilliams.ie/category/media/video

Darragh29

herya wrote: »

Borrowers (as in property portfolio owners and developers) fueled the trend by getting more and more loans for property which led to the increase in prices known as the bubble. If they wanted to become property tycoons thanks to their bank loan department having no means nor business sense then yes it's probably their fault.

At the end of the day, we haven't been paying developers and bankers hundreds of thousands of taxpayers Euro a year to run the country for us. People will naturally do what they perceive they can get away with. This is why we have laws and a system of governance that we are supposed to place our trust in as citizens. The people who we trusted to protect the common good and our common interest as citizens of Ireland, have completely and utterly failed us. That's how I see it. I'm noticing that people are getting more angry by the hour now at what is unfolding.

herya

That's true. But everyone who willingly jumped on the property bandwagon has mostly themselves to blame. Some circles created this fashion of adding properties to your ahem portfolio yearly or upgrading or remortgaging or name it... as it was in their interest. What could state institutions actually do when people followed willingly? That's the downside of the free market, you can lose your money freely.

It's like every other fashion - you are bombarded with messages and it's hard to resist when your neighbours and family lead with example. But at the end of the day nobody holds a gun to your head.

I think I'm a libertarian?

thebman

herya wrote: »

That's true. But everyone who willingly jumped on the property bandwagon has mostly themselves to blame. Some circles created this fashion of adding properties to your ahem portfolio yearly or upgrading or remortgaging or name it... as it was in their interest. What could state institutions actually do when people followed willingly? That's the downside of the free market, you can lose your money freely.

It's like every other fashion - you are bombarded with messages and it's hard to resist when your neighbours and family lead with example. But at the end of the day nobody holds a gun to your head.

I think I'm a libertarian?

The State probably could have discouraged it and introduced measures to make lending unreasonable amounts to people impossible.

Why the hell where people allowed to borrow this amount? The banks shouldn't have done it and the government/regulator should have put a restriction on the max allowed to be borrowed by someone (such as 3 times their salary).

Permabear

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Scofflaw

donegalfella wrote: »

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You make it sound like a bad thing...

cordially,
Scofflaw

eoinbn

herya wrote: »

What could state institutions actually do when people followed willingly?

Google: Bacon report housing.

Permabear

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jmayo

donegalfella wrote: »

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I think you are the only one that sees taking over Anglo as an enrichment process what with their probable 20 billion bad debts

Permabear

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Scofflaw

donegalfella wrote: »

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Er...this is about real estate?

puzzled,
Scofflaw

Permabear

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bobbiw

You make your bed you have to sleep in it. Borrowers would not complain if they made a 30% return, they dont even want to pay tax on that money do they.

So if they make a loss its the same thing.

But you only have negative equity when you sell. If you are going to live in the house for 20 years you can expect it to go up and down in price. But its a home.

there were a lot of little snobs talking blah blah blah about location location, now they are not.

People should have seen it coming. Ireland is just a launching pad for US companies, nothing more, people need to face that the boom was just that, a boom and it may not come back again.

djpbarry

Zynks wrote: »

Issue #4: "Is it expected of people with families/starting families etc. to put their lives on hold and wait until the bubble bursts?": How does renting put people's lives on hold?

I don’t understand this mentality either. Why is it essential to own the building in which you live?

Dannyboy83 wrote: »

2: At a conservative estimate, I've wasted E30,000 on rent in the last 5 years, realistically closer to E40k.

3: Fair comment, not in all areas, but in the 2 of the 4 areas I was living in, this was the case. On the other hand, renting has given me mobility and the ability to go from slave labour to a little below average.

If you’re not the best-paid person in the world, then why are you paying so much rent? In Cork?!? As a rough estimate, I’d say I’ve spent about €24k on rent over the last 5 years in Dublin. And it’s not “waste” if that money has provided you with somewhere to live, is it?

jmayo

donegalfella wrote: »

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Sorry my definition of the state was you, me, all of us and our kids.
I think your definition here is the apparatus of government.

You are right though that certain people in high positions, be it public or private see this problem as somehting the "little" poeple can carry.

The problem with some of the real estate is that it no longer is worth a fraction of what it was at the time of the loan.

Sure the state has loads of real estate anyway what with all those lovely decntralisation office sites around the country, that were probably bought from friends of de party :rolleyes:

Carawaystick

djpbarry wrote: »

I don’t understand this mentality either. Why is it essential to own the building in which you live?

Because if the landlord has a niece or nephew he wants to allow live in the house, you are out on your ear, looking for somewhere else to live.

There is very poor security of tenure for renters in Ireland compared to continental Europe where renting is more common.
Also after 25 years you will still be paying rent.