Given too big of a mortgage?

asdasd

Good point scofflaw. The banks didnt apply due diligence, and are now applying it. Therefore there was a kind of collusion ( and why not? The result is a bailout. There was no moral risk).

And most people seem to have missed the Op's second post. To repeat

When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

they could only have said it would be better, to show the previous four weeks only if they had already known that he had never earned more than 35k a year. So it seems to me they colluded.

Scofflaw

asdasd wrote: »

Good point scofflaw. The banks didnt apply due diligence, and are now applying it. Therefore there was a kind of collusion ( and why not? The result is a bailout. There was no moral risk).

And most people seem to have missed the Op's second post. To repeat

they could only have said it would be better, to show the previous four weeks only if they had already known that he had never earned more than 35k a year. So it seems to me they colluded.

In which case it partly becomes a question of trust. While the lendee has to take responsibility for taking on a commitment they couldn't sustain, they certainly have a degree of excuse if they trusted the bank to act responsibly in advising them as to what they would be able to sustain.

I think it's fairly clear that the banks have acted irresponsibly, and that where they made it possible through their collusion for people to take out loans the banks should have known were unsustainable they are undoubtedly culpable.

cordially,
Scofflaw

seclachi

Scofflaw wrote: »

In which case it partly becomes a question of trust. While the lendee has to take responsibility for taking on a commitment they couldn't sustain, they certainly have a degree of excuse if they trusted the bank to act responsibly in advising them as to what they would be able to sustain.

I think it's fairly clear that the banks have acted irresponsibly, and that where they made it possible through their collusion for people to take out loans the banks should have known were unsustainable they are undoubtedly culpable.

cordially,
Scofflaw

Theres defintely no denying the banks acted fast and loose with the law. But when I see countrys like canada that escaped alot of hurt because there government wasn't so sure about laissez faire banking I cant help but think the government just had lemmings syndrome ("well every other country is doing it..")

Iago

asdasd wrote: »

I totally agree with that. Bankers, and economists are supposed to be experts. In no other system where experts meet laymen are the laymen held to be responsible, and the experts left off with impunity.

In fairness if you can't work out that you're "sporadic" work on an "inflated" salary in an industry that is known for being "a little hit and miss" is going to cause you problems on a 20/25 year mortgage then what are you doing looking for a mortgage in the first place?

Stress testing is the first thing you do before you commit to a loan of that size, unfortunately the vast majority of the country was too busy counting the profit before even signing for the loan at the time!

baaaa

OMD wrote: »

I have a lot of sympathy for the situation you are in but you say you had work for 2 years and were looking like earning 70K a year. You work in construction and you felt the situation was pretty rosy. Why do you think someone working in the bank with no experience of construction should have known more about it than you? You had a letter from your employer guarenteeing 2 years and 2 months pay. Obviously that guarentee was rubbish. Again if you did not know it was rubbish how could someone working in the bank?

I think you're saying I should have forseen the crisis cause I was working as a chippie and that the bank couldn't forsee it cause they're bankers not construction workers??c'mon,that's bullcrap,I drove a hammer for a living,the banks run the markets,they knew what was up.

baaaa

waffleman wrote: »

I still dont get it - at the time you got approved even at 70k salary your mortgage would have been over half your take home for a 20 year mortgage. crazy.

Not sure what your options are at this point - do banks pursue debts if you leave the country? suppose it depends where you go. In commonwealth countries like Canada / Australia i would say yes - whos your mortgage with?

You're right it was about half my takehome,that's how it was at the time though,gaffs were expensive.
It's a 35 year with ICS.

Scofflaw

seclachi wrote: »

Theres defintely no denying the banks acted fast and loose with the law. But when I see countrys like canada that escaped alot of hurt because there government wasn't so sure about laissez faire banking I cant help but think the government just had lemmings syndrome ("well every other country is doing it..")

Yes, there's another layer of responsibility and culpability above the banks - Fianna Fáil spent a fair amount of effort deregulating the financial sector. After all, the market is always right, so what could go wrong?

However, anyone who walks into a bank knowing they've inflated their salary in order to get a larger mortgage is still culpable. Sometimes everyone involved is guilty.

cordially,
Scofflaw

baaaa

eamonnm79 wrote: »

You my friend have an excellent case against the bank.
This was gross negligence on their part.

There needs to be a test case in this area.
Are you the man to do it?

Looks like you have nothing to loose!

If it were an option I'd certainly do it.
I wonder how many others are in a similiar situation.

baaaa

Shelflife wrote: »

Noone forced him to take out the loan, did he take in a tenant like he was advised to do.

yes the bank was iresponsible in their dealings but at the end of the day it is the op that has to make sure that he (of his own free will) can make the repayments on the contract that he is entering.

It annoyed me watching the lls last week when turbidy didnt question the couple as to why the remortgaged their house and waht did they spend all the remortgage on.

you can blame the developers all you want but at the end of the day alot of people wanted all the goodies and wanted them now, put it all on the credit card , remortgage the house etc.

if you cant afford someting then you cant afford it period. puting it on the credit card or remortgaging the house so that you can go on holidays or upgrade your car was madness.

sorry op dont mean to be rude but you made your bed so you will have to lie in it, im not suggesting that you did the above but plenty of my friends did and are now all complaining that they have to pay it back.

Yeah nobody forced me to take out the loan but it seemed more economic at the time and why shouldn't I have a gaff if I worked hard.
I took in various tenants,had a 40k deposit and did not see the arse falling out of the world the way it did.

baaaa

seclachi wrote: »

A fair enough statement, but in light of the OP lets look at two contexts

1. Fella earning 30k walks into the bank cap in hand looking for a loan, discloses his real salary. The bank gives him 350k. This is the fault of the regulator and then the bank. People, organizatons and banks will do what ever is legal to make money, so in the end its the goverment who must keep them on a leash.

2.Fella earning 30k walks into the bank with doctored payslips that make him look like he earns 60k a year, bank gives him 350k. This seems to be similar to the OP`s case. This is fraud and is nobody but the individuals fault, the bank and regulator believe he can make the repayments.

Again I never falsified anything,just provided what I was instructed to.

Shelflife

I agree with scafflaws third option, yes the banks were lax, but at no stage did they drag people off the streets and force them to take out mortgages.

At the end of the day op you bought a house you couldnt afford and even with some basic calculations it should have been obvious that paying half your income on a mortgage over a 35 yr period was foolhardy esp seeing as you only had this job (the high paying one) for a few weeks.

in effect people wanted everything now and to hell with the consequences, sorry it doesnt work that way.

asdasd

If it were an option I'd certainly do it.
I wonder how many others are in a similiar situation.

Well, there may be ambulance chasing (cough) lawyers who would take your case, and others at the same time ( a class action suit) on a no win no fee basis.


I have no idea how you would go about getting in touch with someone like that. That kind of action is common in the US, but rare here.

Also, it is your word against theirs so i wonder if you have a record of any of this - i.e. email, or a witness.

i do wish you luck however.

baaaa

Scofflaw wrote: »

I'd add a third case:

3. Fella earning 30k walks into the bank with doctored payslips that make him look like he earns 60k a year. Bank doesn't ask too many questions, doesn't ask to see any better proof than a couple of payslips. Bank gives him 350k.

That seems to me to match much of what was happening - the banks colluded in giving people unsustainable loans. The proof is that if you try the same trick now, walking in with a couple of doctored pay-slips, it won't work, because the banks no longer want it to.

cordially,
Scofflaw

No Scofflaw I didn't doctor anything,acted in good faith.

baaaa

Iago wrote: »

In fairness if you can't work out that you're "sporadic" work on an "inflated" salary in an industry that is known for being "a little hit and miss" is going to cause you problems on a 20/25 year mortgage then what are you doing looking for a mortgage in the first place?

Stress testing is the first thing you do before you commit to a loan of that size, unfortunately the vast majority of the country was too busy counting the profit before even signing for the loan at the time!

What's stress testing?

asdasd

Again I never falsified anything,just provided what I was instructed to.

people dont seem to want to read what actually happened. You told the banks you had never earned more that 35K a year, they said that all you had to do was provide the last 4 weeks pay - which they encouraged - and they multiplied the 1,500 a week by 52. The payslips were genuine, you had earned that kind of money in the previous 4 weeks.

right?

baaaa

Shelflife wrote: »

I agree with scafflaws third option, yes the banks were lax, but at no stage did they drag people off the streets and force them to take out mortgages.

At the end of the day op you bought a house you couldnt afford and even with some basic calculations it should have been obvious that paying half your income on a mortgage over a 35 yr period was foolhardy esp seeing as you only had this job (the high paying one) for a few weeks.

in effect people wanted everything now and to hell with the consequences, sorry it doesnt work that way.

I had work promised for about 2 yrs which is about as good as you'll get in construction.
Again,who knew this crash was going to be so severe?

Shelflife

baaaa wrote: »

I had work promised for about 2 yrs which is about as good as you'll get in construction.
Again,who knew this crash was going to be so severe?

Thats fair enough baaaaa and i dont mean to be personal but even if the offer of work held up it would have been tough going to meet those repayments.

yes the banks should have told you no, but at the end of the day you have to do your own sums.

mikemac

baaaa wrote: »

What's stress testing?

You signed up to a mortgage and the bank officer never explained this to you?
Or you didn't take the time to learn?

They judge your ability to pay if interest rates increase, I think it's by 2%.
And since it's likely interest rates will rise next year, this applies to you

baaaa

Shelflife wrote: »

Thats fair enough baaaaa and i dont mean to be personal but even if the offer of work held up it would have been tough going to meet those repayments.

yes the banks should have told you no, but at the end of the day you have to do your own sums.

It was ok meeting the payments,I had zero other debt and am a cheap person.
I did my best sums and found that renting or commuting was dead money and buying a gaff was best way to spend money.
I feel like telling the bank they should have done their sums

Mad_Max

What is the general best principle multiplier for a mortgage by the way?

Someone here said they have 2.5x salary and some have mentioned up to 7 and I know someone with 10 times salary. Big range, just wondering whats the ideal.

Also surely them employers should be prosecuted for falsifying wage slips? Could an argument be made that actions like these helped keep the bubble alive?

waffleman

Mad_Max wrote: »

What is the general best principle multiplier for a mortgage by the way?

Someone here said they have 2.5x salary and some have mentioned up to 7 and I know someone with 10 times salary. Big range, just wondering whats the ideal.

best multiplier is 0x

depends on so many factors it's hard to answer. Personally I dont use multipliers of salary. I prefer not going over 1/3 of my net monthly income on repayments and no more than a 20 year term. I firmly believe you MUST be able to save AND pay your mortgage at the same time. Just in case sh!t happens.

Kicking myself now though - shouldve taken over 15 years - i think the interest paid on mortgage is crazy when you go above 20 years - usually more than half the original capital borrowed depending on the details of the mortgage.

Scofflaw

baaaa wrote: »

I had work promised for about 2 yrs which is about as good as you'll get in construction.
Again,who knew this crash was going to be so severe?

A fair number of people - I'd include myself - but I know what you're saying. I didn't even plan to buy a house in the last 6-7 years, because it was very clear it was a bubble, and while you can make money if you get out at the right time, you really don't know when the bubble is going to burst.

cordially,
Scofflaw

Scofflaw

baaaa wrote: »

No Scofflaw I didn't doctor anything,acted in good faith.

Apologies - I didn't mean to imply you had falsified your pay slips. Just that those pay-slips weren't representative of what you actually earned - and the bank clearly knew that, and presumably, so did you. If I recall correctly, you said as much - that you'd never earned over €35K, but the payslips you presented made it look like you earned €75K.

cordially,
Scofflaw

asdasd

They asked for 4 weeks payslips with gross of 1.5K per week and did the maths, presumably the OP mentioned that he had a two year contract ( at, I assume, 75K).

Diarmuid

mikemac wrote: »

You signed up to a mortgage and the bank officer never explained this to you?
Or you didn't take the time to learn?

They judge your ability to pay if interest rates increase, I think it's by 2%.
And since it's likely interest rates will rise next year, this applies to you

Check out this post. OP says that the stress test figures were presented to him but he didn't know that interest rates could increase!

Sorry OP but zero sympathy from me. You're explanation sounds like the "ask no questions" attitude. I can't for the life of me understand how you thought that on 35k you could ever afford to pay back €1500+/month. It seems pretty clear that you will lose your house. You clearly cannot afford it.

Ogham

baaaa wrote: »

My broker told me that I could afford it if I rented out a room to a tenant and in hindsight I had too little knowledge of interest rates.
.

I wouldn't be suprised if the broker had a lot to do with getting the size of the loan . If you went through a broker - did they also tell you about getting the payslips ? Did the broker say that the bank told you to get the 4 weeks payslips - or did you actually get told directly by the bank?
I think brokers in conjunction with estate agents - had a lot to do with getting people high mortgages on falsified applications . The borrowers were glad to get a mortgage and just went along with the brokers . The bigger the loan - the bigger the brokers commission.

nesf

Mad_Max wrote: »

What is the general best principle multiplier for a mortgage by the way?

The answer depends on two things. The expected rate of inflation/wage growth and the expected interest rate. If the former is consistently higher than the latter then higher multipliers are perfectly feasible. The thing is any spike in the latter will cripple those on high multipliers.

The other side of the coin is like I said earlier what part of the career path you are on. If you're starting out but have a good chance of getting high on the career ladder then you can take a seemingly crazily high multiplier because you'll very likely be on a much higher salary for the bulk of the mortgage.

People are throwing around 2.5 as if it's the perfect number but the reality is far more complicated than this.

baaaa

asdasd wrote: »

people dont seem to want to read what actually happened. You told the banks you had never earned more that 35K a year, they said that all you had to do was provide the last 4 weeks pay - which they encouraged - and they multiplied the 1,500 a week by 52. The payslips were genuine, you had earned that kind of money in the previous 4 weeks.

right?

That's it exactly,initially they asked the p60 and when I said that they only read 35k they then said ok,lets go the payslips route.

baaaa

Ok,I see here how bad I am at explaining.Here goes again.
I started labouring 4 years ago,earning about 35k p.a.
After 2 years I got trained up into a better construction job earning 70k p.a.
I was in this 70k p.a. job for about 2 months before getting the mortgage.
So,at the time of drawdown my p60's would have said 35k although this would not be representative of reality as I had just recently(2 months previously)moved up to a 70k position.

baaaa

Scofflaw wrote: »

A fair number of people - I'd include myself - but I know what you're saying. I didn't even plan to buy a house in the last 6-7 years, because it was very clear it was a bubble, and while you can make money if you get out at the right time, you really don't know when the bubble is going to burst.

cordially,
Scofflaw

Well,I hope you guys know how lucky you were to be able to sort the hype from the reality.
But look,even if people predicted a huge crash I don't think anone predicted the enormity of what happened.
I had money saved for stuff,enough to scrape by with a bit of luck and a few weeks work here and there,but I wasn't prepared for this.