Writing off mortgage debt

Monty Burnz

balducci wrote: »

That only becomes an issue if they want to sell the house, which they won't be able to do for a long time anyway. At which point, the equity will have (hopefully) returned. What you are creating is viable mortgage repayments based on what the mortgage holder can afford to pay. The shortfall is made up by the bank having a permanent stake in the property. Negative equity isn't most people's issue, it's the ability to pay their mortgages.

I gotta go work back later though

It's not an ideal solution, but it certainly isn't the worst.

golden lane

Unrealistic wrote: »

That isn't a necessarily a barrier. If you have a €300k mortgage on a €200k home you are in negative equity. But if you can still fund a €200k mortgage you could give half of the equity in the house to the bank for a €100k writedown and then continue to pay down a €200k mortgage although you'll only own half a house at the end.

why would the ban want to own half the house.......that is not what banks are about.....there would be no interest coming back on their investment....banks survive on interest......

Unrealistic

golden lane wrote: »

why would the ban want to own half the house.......that is not what banks are about.....there would be no interest coming back on their investment....banks survive on interest......

There would presumably have to be some rental component involved as well and an option for the homeowner to buy back that equity if/when his circumstances improved.

daltonmd

Monty Burnz wrote: »

Because for some reason you mentioned the loans that are the banks' assets?

Future equity? So, something that doesn't exist and may never exist?

Yes but I was quoting you, the property has fallen in value but the loan hasn't, so this is the "asset", if the banks protect this asset then it looks better on their loan books, a performing asset looks better than a non performing one.

Future Equity - I am pretty pessimistic but I do see a time (around 2050 ) when house prices may recover a little. This is a long term solution Monty, because that is how long it will take to unravel this mess.

Farmer Pudsey

All this all go'es back to what happened in England in the late 80's early 90's the banks knew that if they repossed the properties that they had to secure and maintain the properties. After as little as 6 months houses that are empty become unhabitable if someone is not watching them
The banks left the owners in them paying as much of the mortgage as possible when the property prices recovered in the mid 90's the banks repossessed the houses turfed the owners and sold on the houses

Are Irish banks carrying on with the same game waiting for property prices to recover in 2-5 years and then will they begin to evict and recover as much money as possible

If they evicted now they would have to sell straight away in a poor market where prices would collapse so now they can wait and sell in the medium term. All that people that cannot pay there mortgage's in full are doing is looking after the banks property

Monty Burnz

Farmer Pudsey wrote: »

All this all go'es back to what happened in England in the late 80's early 90's the banks knew that if they repossed the properties that they had to secure and maintain the properties. After as little as 6 months houses that are empty become unhabitable if someone is not watching them
The banks left the owners in them paying as much of the mortgage as possible when the property prices recovered in the mid 90's the banks repossessed the houses turfed the owners and sold on the houses

FP, do you have any references to that practice that you might link to? I'm curious to read about it if you do.

Tigerandahalf

Interesting reading the last few pages. I was trying to read up a bit about the property bubble in the 80s. Btw I know a lad who was in London then. He left the keys in the letterbox and went to America. That is the worst case scenario for the banks. No mortgage being paid plus a property that is not secure and not being maintained. We have all seen what has happened to some of the unoccupied apartments and houses around the country. Copper tanks and piping and fitted kitchens ripped out of the properties. An unoccupied house would cost twice as much to insure if even. Also a house left unoccupied over the winter with no heating on would result in mould forming on walls etc. Squatters could take it over. Youths drinking in it and perhaps set it on fire. A real disaster from the banks point of view.

Some sort of scheme will have to be arranged to ensure people pay a fair amount of the mortgage but still leave people with a certain amount to spend in the local economy. Taking an equity in the house would help to prevent people from not paying their way. The writeoff would have to be taken off the banks' hands. It would be no good to the bank. It could be put with a gov body. This would also stop the bank from repossessing in the future when prices would improve. Their only concern would be the new revised mortgage. Thus they would be clean to lend. However, this would only be possible to start until you could be sure that no more paycuts would follow for workers. No point in arranging a writedown/new mortgage if a year later a lot of workers have their pay cut again.

Monty Burnz

Tigerandahalf wrote: »

Thus they would be clean to lend. However, this would only be possible to start until you could be sure that no more paycuts would follow for workers. No point in arranging a writedown/new mortgage if a year later a lot of workers have their pay cut again.

One question: what are they going to lend? It seems that Irish mortgages are more or less unsecured loans, so how are they going to securitise them?

Tigerandahalf

Well again everybody is waiting/hoping that the economy settles. Otherwise nothing much will happen. The real problem at the moment is the domestic economy. People don't have confidence/ability to spend in fear of more charges/taxes.
However, if the banks loan books are tidied up they are more likely to receive investment. This would provide money to lend. Again though you need the economy to stabilise for investors to come in. Given the improving Chinese/Irish connections Chinese investors may be encouraged to invest.

Monty Burnz

Tigerandahalf wrote: »

However, if the banks loan books are tidied up they are more likely to receive investment. This would provide money to lend..

But this is my point - who would invest in Ireland to lend against property where you can't enforce the 'security' on your loan?

Irish Bank: "Well Chinese businessman - here's how it works: we lend them hundreds of thousands to buy a place, and if they don't feel like paying it back, we let them stay in the house and give us half as much money back as they were supposed to. Are you in?"

Sum Ting Wong: "Uh...no thanks."

Tigerandahalf

Well the banks were always willing to lend before with unsecured mortgages. They were secured in a sense by the worker having a secure job with gradual pay increases. Again this can only come about when the economy has settled and people aren't losing their jobs or taking paycuts. The gov stakes in the banks will be sold at some stage. They will make a huge profit for some investor in the long run.

Tigerandahalf

This is why it is strange to hear about the gov bringing in new bankruptcy laws. If people are allowed to be free after 3/4 years of bankruptcy we would have chaos.

Monty Burnz

Tigerandahalf wrote: »

Well the banks were always willing to lend before with unsecured mortgages.

No they were not - the mortgages were secured against the properties, but now we learn that it is more or less impossible to enforce this security.

Monty Burnz

Tigerandahalf wrote: »

This is why it is strange to hear about the gov bringing in new bankruptcy laws. If people are allowed to be free after 3/4 years of bankruptcy we would have chaos.

Why?

Godge

Monty Burnz wrote: »

No they were not - the mortgages were secured against the properties, but now we learn that it is more or less impossible to enforce this security.

What a lot of people are forgetting is that if we let one generation of people off their mortgages, what is to stop it from happening again? you might say it is a one-off situation but banks will have to price the risk of it happening again into their margins (once bitten, twice shy etc.).

What that means is that the interest rates available to future generations to buy property will be higher but there will inevitably be a knock-on to business loans as well. Helping with mortgage defaulters may not have the positive effect that the popular economists think it will - it may have the opposite effect of making it impossible for businesses to grow us out of the recession.

Tigerandahalf

Monty Burnz wrote: »

No they were not - the mortgages were secured against the properties, but now we learn that it is more or less impossible to enforce this security.

Yes against the property but a bank never wants to take the option of foreclosing as it will cost them money. That is why the greatest security is job/pay security. It is why people in permanent positions have always been more likely to get a mortgage. Foreclosing is always the very last option.

Tigerandahalf

Godge wrote: »

What a lot of people are forgetting is that if we let one generation of people off their mortgages, what is to stop it from happening again? you might say it is a one-off situation but banks will have to price the risk of it happening again into their margins (once bitten, twice shy etc.).

What that means is that the interest rates available to future generations to buy property will be higher but there will inevitably be a knock-on to business loans as well. Helping with mortgage defaulters may not have the positive effect that the popular economists think it will - it may have the opposite effect of making it impossible for businesses to grow us out of the recession.

I think you are forgetting about the hopeless gov, banks and regulators.

daltonmd

Godge wrote: »

What a lot of people are forgetting is that if we let one generation of people off their mortgages, what is to stop it from happening again? you might say it is a one-off situation but banks will have to price the risk of it happening again into their margins (once bitten, twice shy etc.).

Well if we want more resonsible borrowers then we need more responsible lenders - if you look at what happened in this country, light touch regulation, reckless lending - all backed up with archaic bankruptcy laws, it really all was in favour of the lender. I think that it's time to even that.

Godge wrote: »

What that means is that the interest rates available to future generations to buy property will be higher but there will inevitably be a knock-on to business loans as well. Helping with mortgage defaulters may not have the positive effect that the popular economists think it will - it may have the opposite effect of making it impossible for businesses to grow us out of the recession.

If the banks clear their books of the bad/toxic/unsustainable debt then they will be able to seek outside investment and if we have better regulation and a healthier economy then this will attract overseas banks.

Going the way things are investors are scared sh**tless, not because of the state of the economy, but because of the state of the banks.

The big question the markets are asking is - How big is this problem. It's the don't know that scares them.

Tigerandahalf

No matter what proposal is agreed it will not be perfect. Some people will benefit more than others. But every proposal would be the same in that regard.
Some people will seek to default no matter what. Thus bringing in bankruptcy laws is very risky. Even if debt for equity was brought in some people will still seek to default. They will much prefer to start afresh, maybe go work abroad who knows. Some will want to start again here.
If you bought a 1 bed apartment for 200,000 but it is now only worth 100,000 would it be worth your while holding on? You would be better to default. Especially if you now have a young family and could buy a 3 bed for 150,000 - 250,000. Will some families have to stay in a 1 bed apartment?

The ultimate responsibility is with gov/banks/regulator and not with the person who took out the loan, as that person can always just flee the country anyway. When the above fail to do their job, the taxpayer unfortunately has to pick up the tab.

Also if bankruptcy laws are changed to 3/4 years the banks will up their interest rates in a major way. Then more people are unable to afford their mortgage and the situation is even worse.

I think once the economy settles the bank's loans will be deleveraged by the gov so that they have good performing loan assets and can get on with doing their job. A NAMA for the people looks likely.

Unrealistic

Tigerandahalf wrote: »

Monty Burnz wrote: »

No they were not - the mortgages were secured against the properties, but now we learn that it is more or less impossible to enforce this security.

Yes against the property but a bank never wants to take the option of foreclosing as it will cost them money. That is why the greatest security is job/pay security. It is why people in permanent positions have always been more likely to get a mortgage. Foreclosing is always the very last option.

The banks were quite handy at foreclosing until five years ago. In fact they even made money from it rather than it costing them money. It gave them an opportunity to load on excessive fees and costs to eat into the excess that should have gone to the evicted borrower. Sure the bank would prefer a smooth mortgage paid down over time but they also had the comfort of being able to repossess if that didn't happen. That has all changed over the last couple of years and, if the situation is allowed to continue open ended then no one will lend in the Irish mortgage market.

moycullen14

This thread is gas. Everyone postulating what will happen. What's fair, what's not. Moral hazard and all that it entails. It's like a load of fleas arguing over what they're going to do with the dog. Don't people get it?, the banks will decide and they will decide what is going to happen based purely on what is in their best interest, nothing else.

Their plan - as far as I can see it - is to get rid of as much systemic debt as possible - they've already managed it with jumbo property debt to NAMA. The next thing to be jettisoned is tracker mortgages - that's already started. After that - and I guarantee you'll see this in the next few months - is low-level non PPR debt (buy to let, etc) which will be shunted off to IBRC or NAMA-lite or whatever. What they'll be left with - and they'll be very comfortable with this - is PPR mortgages. With those, they have the whip hand and can scare, bully and cajole people into almost any sort of crazy commitment.

They're will be do debt forgiveness - at least no PUBLIC policy in that regard. Banks survive on fear and the country survives on Banks. Debt forgiveness would be like the Church saying gay weddings are OK or the GAA promoting Soccer. Can't happen, won't happen.

Shared equity, debt write-down, burden easing? Don't make me laugh, It will never happen. Meanwhile the banks will build their balance sheets by sucking the life-blood out of the economy.

In time it will be seen that the biggest mistake ever made in this country was not letting the banks collapse in Sept 2008.

Monty Burnz

moycullen14 wrote: »

Shared equity, debt write-down, burden easing? Don't make me laugh, It will never happen. Meanwhile the banks will build their balance sheets by sucking the life-blood out of the economy.

In time it will be seen that the biggest mistake ever made in this country was not letting the banks collapse in Sept 2008.

If you believe this scenario, then I strongly suggest you put everything you have into shares in AIB/BOI. You will make a killing.

Oh, and I agree re. letting the banks collapse. I think that was already evident a year or two ago.

Tigerandahalf

moycullen14 wrote: »

This thread is gas. Everyone postulating what will happen. What's fair, what's not. Moral hazard and all that it entails. It's like a load of fleas arguing over what they're going to do with the dog. Don't people get it?, the banks will decide and they will decide what is going to happen based purely on what is in their best interest, nothing else.

Their plan - as far as I can see it - is to get rid of as much systemic debt as possible - they've already managed it with jumbo property debt to NAMA. The next thing to be jettisoned is tracker mortgages - that's already started. After that - and I guarantee you'll see this in the next few months - is low-level non PPR debt (buy to let, etc) which will be shunted off to IBRC or NAMA-lite or whatever. What they'll be left with - and they'll be very comfortable with this - is PPR mortgages. With those, they have the whip hand and can scare, bully and cajole people into almost any sort of crazy commitment.

They're will be do debt forgiveness - at least no PUBLIC policy in that regard. Banks survive on fear and the country survives on Banks. Debt forgiveness would be like the Church saying gay weddings are OK or the GAA promoting Soccer. Can't happen, won't happen.

Shared equity, debt write-down, burden easing? Don't make me laugh, It will never happen. Meanwhile the banks will build their balance sheets by sucking the life-blood out of the economy.

In time it will be seen that the biggest mistake ever made in this country was not letting the banks collapse in Sept 2008.

I think you are presuming here that the decision was in the gov's hands. It wasn't. The EU told them what to do. If they gov decided to let the banks collapse overnight no money/loans would have been forwarded to the gov to cover public spending. Chaos would have ensued. The country would have had to pull out of the euro and print the punt. Petrol/diesel would have gone through the roof as the punt deflated to pieces.
Of course the politicians pay and pensions would have gone down the gutter as well. That would never happen.

daltonmd

moycullen14 wrote: »

In time it will be seen that the biggest mistake ever made in this country was not letting the banks collapse in Sept 2008.

I think it's already dawning on a lot of people now - but it's almost like the "Stockholm Syndrome" has struck people - better to pour good money after bad regardless of the financial and social cost - because "we need banks".

It reminds me of the mistake people make when they say "Money is the root of all evil" when the full saying is "The pursuit of money is the root of all money"...

Tigerandahalf

It wouldn't have been good for the people now but for the future generations it would have been best. Now the youth face unemployment, €100 dole and increasing college fees blocking their access to a 3rd level education. Without that education how many of them would get decent jobs abroad? How long will the youth put up with it? I don't think the penny has dropped yet. Funny how so many young people across Europe are without work yet no youth protest yet. They could easily be persuaded to follow the wrong kind of people preaching radical ideas.

Monty Burnz

Tigerandahalf wrote: »

I think you are presuming here that the decision was in the gov's hands. It wasn't. The EU told them what to do. If they gov decided to let the banks collapse overnight no money/loans would have been forwarded to the gov to cover public spending. Chaos would have ensued. The country would have had to pull out of the euro and print the punt. Petrol/diesel would have gone through the roof as the punt deflated to pieces.
Of course the politicians pay and pensions would have gone down the gutter as well. That would never happen.

Well, a bank collapse in 2008 would have been very bad in the short-term, but we'd probably already be well on the way to recovery without trebling our national debt. But no government - and certainly not a populist government like FFail - were ever, ever going to let a bank go bust...at any cost. They must have known there was a chance this would go spectacularly wrong - but hopefully, by then, it would be someone else's problem.

Farmer Pudsey

Monty Burnz wrote: »

FP, do you have any references to that practice that you might link to? I'm curious to read about it if you do.

History-An elephant's memory, I am ancient, remember details from newspapers at time there were some articles about it.

daltonmd

Monty Burnz wrote: »

Well, a bank collapse in 2008 would have been very bad in the short-term, but we'd probably already be well on the way to recovery without trebling our national debt. But no government - and certainly not a populist government like FFail - were ever, ever going to let a bank go bust...at any cost. They must have known there was a chance this would go spectacularly wrong - but hopefully, by then, it would be someone else's problem.

100% agree with you here. Instead of the plaster being ripped off we are peeling it off slowly and painfully.

daltonmd

Farmer Pudsey wrote: »

All this all go'es back to what happened in England in the late 80's early 90's the banks knew that if they repossed the properties that they had to secure and maintain the properties. After as little as 6 months houses that are empty become unhabitable if someone is not watching them
The banks left the owners in them paying as much of the mortgage as possible when the property prices recovered in the mid 90's the banks repossessed the houses turfed the owners and sold on the houses

Are Irish banks carrying on with the same game waiting for property prices to recover in 2-5 years and then will they begin to evict and recover as much money as possible

If they evicted now they would have to sell straight away in a poor market where prices would collapse so now they can wait and sell in the medium term. All that people that cannot pay there mortgage's in full are doing is looking after the banks property

Been reading up on this and this link is very interesting. The british goernment are doing everything not to make the same mistake as they did. http://www.google.ie/url?sa=t&rct=j&q=uk%20repossession%20in%201991&source=web&cd=4&sqi=2&ved=0CFgQFjAD&url=http%3A%2F%2Fwww.communities.gov.uk%2Fdocuments%2Fhousing%2Fpdf%2F1380862.pdf&ei=SU-YT8_mD4KohAfT2cHiBQ&usg=AFQjCNHti1RIP8YLlV6CDPB_utneAp_m_A


In 1991 repossessions peaked to a staggering 75,000.

jmayo

daltonmd wrote: »

Who is saying that? This is the same old drum that you bang time and time again. As soon as you hear "restructure" you take this leap and ignore what people are saying.

This isn;t a choice and in time you will see that it has to be done.

I know your opinion on this matter.
I have seen it often enough over on Acommodation & Property at this stage.
Nice to see you take the fight to here.

That comment was aimed at others that actually do think people in nageative equity should have their mortgages partially written off and they be allowed stay in their properties.
And there are a hell of a lot of like minded people out there.

daltonmd wrote: »

I suppose that's part of my point. Rightly or wrongly if someone took out a mortgage that they could afford in 2006, then the likliehood is that they have at best taken cuts, at worse lost their jobs and the more squeeze put on disposable income the more people who fall over the edge.

But you see the problem is as I said you had a hell of an amount of people involved in construction taking out crazy mortgages based on the crazy abnormal money they were earning in a bubble.
For example you had brickies and plasterers taking out mortgages that an accountant or doctor would be normally taking out.
Now these people are screwed.

moycullen14 wrote: »

'fair' has nothing to do with it. It is practical realities. The banks don't want to repossess because it will inevitably lead to crystalizing of loses. The government don't want it because it looks awful and the state is burdened with looking after the fallout.

If, as a group - and this is they key, overborrowed people decide can't pay, won't pay, there's not a damn thing anyone can do about it.

The longer this goes on with no resolution, the more likely it is that there will be a revolt.

Arguing about who deserves or doesn't deserve a write-down/off of debt is completely irrelevant and pointless.

What about the taxpayers who were prudent deciding to revolve when they see their neighbour who lived way beyond their means now get their mortgage cut all the while they themselves have to continue paying their own with increased taxes to help the neighbour.

There is a huge moral hazard here.
If someone sees their neighbour not alone get something for nothing, but they ultimately pay for it, then why should they continue to tow the line.

Monty Burnz wrote: »

Indeed, but isn't that what the huge recaps were for? To set against future losses?

Will there be more of them than there are people who are refusing to pay the household charge?

The problem with the revolt idea is that if it goes that far, why would it stop with mortgage defaulters? Why would anyone else bother paying a mortgage that they can afford? Or rent? Or for anything?

Exactly.
What will happen is that people who are repaying their mortgages will see it as grossly unfair.
The next tranch of FTBs, who will be made jump through hoops to buy, will just emigrate because they can't afford to buy and a huge chunk of people are in homes that they are helping to pay for.

Monty Burnz wrote: »

I don't know, but if mortgagors try to steal houses, all bets are off. Failed state, perhaps? It's going to be very hard to persuade other borrowers or renters to pay their way if tens of thousands of mortgagors decide that they won't bother.

I think we are seeing this to a degree with the household tax.
Why should someone who is trying their best to repay their mortgage, pay their taxes continue to do so when they see others be allowed escape from their duties unscathed.

We could be on the slippery slope to a failed state.

creedp wrote: »

Why are you equating what a borrowers owes a bank (which is a matter between a borrower and the bank) with want a tenant owes a landlord. So because a borrower doesn't pay back the bank a tenant can give the landlord the 2 fingers. What society have we've just moved into ... Mad Max? Sure we'll all just go into the shops but not bother paying for what we 'buy'.

Why should a renter pay a high rent to a landlord he is totally subsidising with his taxes ?

And I wish people would stop comparing us to the UK in the 80s.
One poster keeps alluding to how UK property prices recovered and then the banks repossessed.
That poster is working on the assumption that this is just a blip we have to get over and prices will recover in a few years.
That aint going to happen.
We are not an economy the size of the UK and we had the mother of all bubbles that makes the one in the UK look like a minor price rise.

daltonmd

jmayo wrote: »

I know your opinion on this matter.
I have seen it often enough over on Acommodation & Property at this stage.
Nice to see you take the fight to here.

And I know yours - am I not entitled to take my opinion here? You'll note that you were here before I was. The title of the thread after all is "Writing off mortgage debt".

jmayo wrote: »

That comment was aimed at others that actually do think people in nageative equity should have their mortgages partially written off and they be allowed stay in their properties.
And there are a hell of a lot of like minded people out there.

Here you go again, taking an imaginary ball and running up the imaginary field with it. You simply refuse to see and absorb what is being written. Many scenarios have been given and many possible solutions - but you simply cover your ears (eyes) and hear "blah blah blah" someone is getting something for nothing.

Your way, which is the way things are being treated now - is NOT working and destroying this entire economy.

jmayo wrote: »

But you see the problem is as I said you had a hell of an amount of people involved in construction taking out crazy mortgages based on the crazy abnormal money they were earning in a bubble.
For example you had brickies and plasterers taking out mortgages that an accountant or doctor would be normally taking out.
Now these people are screwed.

Yes- key thing here is they were EARNING that and the other key thing is that the banks LOANED that money - so if they should have known better and take responsibility then why should the LENDER not share that?

jmayo wrote: »

What about the taxpayers who were prudent deciding to revolve when they see their neighbour who lived way beyond their means now get their mortgage cut all the while they themselves have to continue paying their own with increased taxes to help the neighbour.

But who do you think the taxpayers are? Are they aliens of some type? In your mind they appear to be the prudent, those who did not buy, those who said NO to paycuts. those who never sold property. Who are these prudent taxpayers? If there are so many of them then how the hell did we get here?


What about the "prudent" who went as guarentor for their children> What about the pudent who decided to invest their pensions in property/bank stocks and shares. Your prudent pool is very small jmayp.

jmayo wrote: »

There is a huge moral hazard here.
If someone sees their neighbour not alone get something for nothing, but they ultimately pay for it, then why should they continue to tow the line.

Let me give you the definition for moral hazard:

"Moral hazard occurs when a party insulated from risk behaves differently than it would behave if it were fully exposed to the risk."

Now where would the banks moral hazard fall here? Or is it just normal people that this applies to?

jmayo wrote: »

Exactly.
What will happen is that people who are repaying their mortgages will see it as grossly unfair.
The next tranch of FTBs, who will be made jump through hoops to buy, will just emigrate because they can't afford to buy and a huge chunk of people are in homes that they are helping to pay for.

As opposed to whats happening now?

jmayo wrote: »

We could be on the slippery slope to a failed state.

We are a failed state - we're mid way down the slope.

jmayo wrote: »

Why should a renter pay a high rent to a landlord he is totally subsidising with his taxes ?

My rent is high because my landlord is repaying the banks on a mortgage he can't afford. If the banks took this off him and restructured his debt then my rent would fall lower - can you not see this? And please I said RESTRUCURE - but I do mean force him into bankruptcy if he doesn't play ball. Trust me I absolutely agree 100% that BTL's should be the first target.

jmayo wrote: »

And I wish people would stop comparing us to the UK in the 80s.
One poster keeps alluding to how UK property prices recovered and then the banks repossessed.
That poster is working on the assumption that this is just a blip we have to get over and prices will recover in a few years.
That aint going to happen.
We are not an economy the size of the UK and we had the mother of all bubbles that makes the one in the UK look like a minor price rise.

The comparison is not about house prices jmayo- it's about tactics and the result of the tactics in the UK in the 80'/90's was devestating for the economy, deestatiing for the banks and left thousamds of properties idle. The UK recognised that the best way was to avoid repossession and try to get as mch money back as possible.

Re: Underlined - and here in a nutshell is exactly why debt restructuring has to happen.

Farmer Pudsey

jmayo wrote: »

That comment was aimed at others that actually do think people in And I wish people would stop comparing us to the UK in the 80s.
One poster keeps alluding to how UK property prices recovered and then the banks repossessed.
That poster is working on the assumption that this is just a blip we have to get over and prices will recover in a few years.
That aint going to happen.
We are not an economy the size of the UK and we had the mother of all bubbles that makes the one in the UK look like a minor price rise.

So we are all ment to accept your view and not challenge it.
I do not think it is a blip however I also relise that at some stage houses will stop falling in price. If tomorrow the Banks started to repsosses alot of property they would have to sell it straight away, house prices fall another 30-50% maybe. They have factored this into their thinking so they will not reposses for the moment.
The Economy recovers houses bottom out at another 10-15%? Banks begin to reposses and sell over 2-5 years which makes most sence to the banks and if they decide to opt for second choice they are better off having an owner in the house keeping it secure and maintaining it. 2+2 = 4.
If you look back history tells a lot during the boom people that were warning about the impending crash were compareing with other bubble like the Dotcom in 2000 and the Southsea bubble in the 17th centuary. When the crash people compare it to what happened in Japan and Sweden

I do not know the average house price now but a rough rule of tumb for a morgtage is 3X Main Income and 1X second income should be the max of any morgtage and idealy they should average about 3 time main income before tax. How far are we away from that. Houses can be under valued as well as overvalued. At present it is nearly more expensive to build a house than buy an already build house. Also banks are giving out virtually no morgtage's even though people may have 20% deposit

golden lane

daltonmd wrote: »

And I know yours - am I not entitled to take my opinion here? You'll note that you were here long before I was. The title of the thread after all is "Writing off mortgage debt".



Here you go again, taking an imaginary ball and running up the imaginary field with it. You simply refuse to see and absorb what is being written. Many scenarios have been given and many possible solutions - but you simply cover your ears (eyes) and hear "blah blah blah" someone is getting something for nothing.

Your way, which is the way things are being treated now - is NOT working and destroying this entire economy.





Yes- key thing here is they were EARNING that and the other key thing is that the banks LOANED that money - so if they should have known better and take responsibility then why should the LENDER not share that?





But who do you think the taxpayers are? Are they aliens of some type? In your mind they appear to be the prudent, those who did not buy, those who said NO to paycuts. those who never sold property. Who are these prudent taxpayers? If there are so many of them then how the hell did we get here?


What about the "prudent" who went as guarentor for their children> What about the pudent who decided to invest their pensions in property/bank stocks and shares. Your prudent pool is very small jmayp.



Let me give you the definition for moral hazard:

"Moral hazard occurs when a party insulated from risk behaves differently than it would behave if it were fully exposed to the risk."

Now where would the banks moral hazard fall here? Or is it just normal people that this applies to?




As opposed to whats happening now?





We are a failed state - we're mid way down the slope.




My rent is high because my landlord is repaying the banks on a mortgage he can't afford. If the banks took this off him and restructured his debt then my rent would fall lower - can you not see this? And please I said RESTRUCURE - but I do mean force him into bankruptcy if he doesn't play ball. Trust me I absolutely agree 100% that BTL's should be the first target.





The comparison is not about house prices jmayo- it's about tactics and the result of the tactics in the UK in the 80'/90's was devestating for the economy, deestatiing for the banks and left thousamds of properties idle. The UK recognised that the best way was to avoid repossession and try to get as mch money back as possible.

the uk is was in a different position.....the economy was not based on house prices in the eighties and nineties.....

it was to a small degree between 2003 andb 2009...they are now suffering for that.........

the irish economy was based on borrowing money to keep the economy going...that money was spent......now it is being payed back....

just like the uk....but in the uk to a lesser degree.....

daltonmd

golden lane wrote: »

the uk is was in a different position.....the economy was not based on house prices in the eighties and nineties.....

it was to a small degree between 2003 andb 2009...they are now suffering for that.........

the irish economy was based on borrowing money to keep the economy going...that money was spent......now it is being payed back....

just like the uk....but in the uk to a lesser degree.....

Yes but the tactics and the problems caused using those tactics are the same.

The whole point is that a lot of people cannot repay these debts, as each year passes the debt gets higher. Repossessing these homes will bust the banks and ultimately cost the taxpayer more money. It won't mean cheap homes for all - because if you can't get funding then you can't buy the house. If you do succeed in getting a loan for it then you will still pay through the nose because the hole in the bank still has to be filled.

Monty Burnz

daltonmd wrote: »

Your way, which is the way things are being treated now - is NOT working and destroying this entire economy.

To be fair, this isn't true. What we have at the moment is paralysis and "extend and pretend". Repossessions are barely happening at all.

From a poster on The Property Pin:

The arrears v repossessions figures for Ireland are a complete scandal. I've been saying it for ages.

A comparison of Arrears to Repossesions in UK v Ireland as of Q4 2011 is startling.

The UK arrears rate per 100,000 mortgages is just 2,069, whereas in Ireland at the end of Q4, 2011 it was 9,222.

The UK have 353 repossessions per 100,000 mortgages. In Ireland our repossession rate is approximately 79 per 100,000 mortgages.

So we have 4.5 times the arrears but 1/5 of the repossessions!

Note that our arrears rate is up to about 12% now, so the difference with the UK is even bigger.

So the problem is not being dealt with in any way, shape or form - neither by allowing the market to work and deliver a short, sharp shock, nor any sort of managed resolution like banks taking writedowns in exchange for equity stakes.

daltonmd

Monty Burnz wrote: »

To be fair, this isn't true. What we have at the moment is paralysis and "extend and pretend". Repossessions are barely happening at all.

From a poster on The Property Pin:

Note that our arrears rate is up to about 12% now, so the difference with the UK is even bigger.

So the problem is not being dealt with in any way, shape or form - neither by allowing the market to work and deliver a short, sharp shock, nor any sort of managed resolution like banks taking writedowns in exchange for equity stakes.

It is true Monty - this extend and pretend is simply putting more and more people into more and more debt. You and jmayo believe that repossessing these people is the solution when it will simply make the problem worse.

The UK have a more humane bankruptcy law - after one year you are discharged from all debt - this is why their repossession rate is higher - because you can walk away.

Monty Burnz

daltonmd wrote: »

The whole point is that a lot of people cannot repay these debts, as each year passes the debt gets higher. Repossessing these homes will bust the banks and ultimately cost the taxpayer more money. It won't mean cheap homes for all - because if you can't get funding then you can't buy the house. If you do succeed in getting a loan for it then you will still pay through the nose because the hole in the bank still has to be filled.

There are a few things I disagree with here. Firstly, we don't know yet whether the level of repossessions required will bankrupt the banks again - this is of course possible. But I'd suggest if it does, the banks be allowed to go bust this time. Some international banks will spot the opportunity and buy the wreckage for a song and we'll have a bank network again in no time. This is what should have happened first time around.

Secondly, if you can only borrow small amounts or at high interest rates, then house prices for all will fall. This is the most basic economics of supply and demand.

Thirdly, if Irish banks have to charge massive interest to make lending worthwhile, international lenders will again step in to prevent them making supernormal profits.

Monty Burnz

daltonmd wrote: »

It is true Monty - this extend and pretend is simply putting more and more people into more and more debt. You and jmayo believe that repossessing these people is the solution when it will simply make the problem worse.

Which problem will it make worse? Let's be sure we are talking about the same thing. My position is that low property prices are of themselves a good thing - it makes for a more competitive economy, and allows us to spend more of our disposable income on other things.

daltonmd wrote: »

The UK have a more humane bankruptcy law - after one year you are discharged from all debt - this is why their repossession rate is higher - because you can walk away.

Bankruptcy reform is on the way here as I'm sure you know.

daltonmd

Monty Burnz wrote: »

Which problem will it make worse? Let's be sure we are talking about the same thing. My position is that low property prices are of themselves a good thing - it makes for a more competitive economy, and allows us to spend more of our disposable income on other things.

Bankruptcy reform is on the way here as I'm sure you know.

So you feel that this is the best solution? If people opt for this and get all their debt written off then where is the moral hazard argument there? We'll still pay for this because if they do so in droves then it will destroy the banks.

Monty Burnz

daltonmd wrote: »

So you feel that this is the best solution? If people opt for this and get all their debt written off then where is the moral hazard argument there? We'll still pay for this because if they do so in droves then it will destroy the banks.

If they can't pay, they can't pay and they go bankrupt. Bankruptcy is not painless. There's no risk of moral hazard there.

daltonmd

Monty Burnz wrote: »

If they can't pay, they can't pay and they go bankrupt. Bankruptcy is not painless. There's no risk of moral hazard there.

Nor is it free - So again, who pays? Who has to fill the gap created in the banks?

If people opt for bankruptcy then where does the debt go?

Monty Burnz

daltonmd wrote: »

Nor is it free - So again, who pays? Who has to fill the gap created in the banks?

Haven't we been over this a dozen times in the last 24 hours? The banks have been massively recapitalised. This may tide them over depending on the level of defaults. If the capital they have is insufficient, they go bust. Simple enough.

Joe 90

Monty Burnz wrote: »

One question: what are they going to lend? It seems that Irish mortgages are more or less unsecured loans, so how are they going to securitise them?

Yes, the logical ultimate outcome of mortgage debt forgiveness is no more mortgages, cash only house purchase. How would house prices be then?

golden lane

daltonmd wrote: »

Yes but the tactics and the problems caused using those tactics are the same.

The whole point is that a lot of people cannot repay these debts, as each year passes the debt gets higher. Repossessing these homes will bust the banks and ultimately cost the taxpayer more money. It won't mean cheap homes for all - because if you can't get funding then you can't buy the house. If you do succeed in getting a loan for it then you will still pay through the nose because the hole in the bank still has to be filled.

the irish government guarenteed the banks.....if they hadn't, there would not have been the money to sustain the economy and the housing boom....they gambled it would continue (god knows what made them think that)...

everybodyb was happy, getting richer on borrowed money.....now it is payback time.....most of the country turned into gamblers....that is the way it goes....while you are winning all is great......now it is losing time....and everybody is looking for scapegoats........

a lesson there for the future.....but it will be forgotten again, and again....

Monty Burnz

Joe 90 wrote: »

Yes, the logical ultimate outcome of mortgage debt forgiveness is no more mortgages, cash only house purchase. How would house prices be then?

Much lower, one would assume.

daltonmd

Monty Burnz wrote: »

Haven't we been over this a dozen times in the last 24 hours? The banks have been massively recapitalised. This may tide them over depending on the level of defaults. If the capital they have is insufficient, they go bust. Simple enough.

And who exactly own these banks?

Monty Burnz

daltonmd wrote: »

And who exactly own these banks?

It doesn't matter who owns them if they are PLCs. Your liability is limited to the capital you have in the company. That's what the 'L' stands for.

Edit: apologies if that comes across as sarky, but I am getting genuinely frustrated at having to restate the same couple of things again and again.

daltonmd

Monty Burnz wrote: »

It doesn't matter who owns them if they are PLCs. Your liability is limited to the capital you have in the company. That's what the 'L' stands for.

Ah please, you see this is where your argument falls flat on it's face.

The taxpayer own them Monty. And the one they don't got a multi billion euro injection.

Farmer Pudsey

Every body assumes that houses will collapse another 20-50%. What is the average house price now nation wide what was it in 2007/8 at peak. What is avg national income now.
We are led to believe that there is 80 billion in savings in the country. 12% of morgtages are in trouble what amount of houses is this. Money borrowed is supposed to be 80 billion lets assume that 75% is morgtage debt. so 12% of 60 billion is 7.2 billion. But the value of the houses is now half peak value so let's assume 3.6 million if sold at present value.

If you double the value due to higher repossion rate and assuming it is higher value houses we still are at only 7.2 billion. I believe that if there is massive repossions it will not be Joe Soap that will benfit but rather well off people with access to cash who can fund total purchasse from cash resources at short notice. If you look at the allsop auctions these are the people that are benfiting.

You also have to remember that there are only a limited no of people who bought muliple units in the 2000-2008 period alot of professional landlords have cheap stock from the 1990 and have limited stock from the peak period and are able to serrvice debt it is only professionals doctors, dentists and solicitors who invested at the peak and did not manage there own porfolio that have a huge issue I know a lot of people with 2-5 houses rented of them i only know of one that is activly intrested in selling and they have other issue's while I know two more intrested in buying and are actively looking at present.

Monty Burnz

daltonmd wrote: »

Ah please, you see this is where your argument falls flat on it's face.

The taxpayer own them Monty. And the one they don't got a multi billion euro injection.

I'm afraid this is where your claim that our banks didn't receive a multi-billion euro recapitalisation falls flat on its face:

THE Central Bank's controversial emergency liquidity scheme will soon be used solely to fund Anglo Irish Bank and Irish Nationwide, the Irish Independent has learnt.

The news will come as a relief to the taxpayer, who was once on the hook for some €70bn of government-guaranteed emer-gency support extended by the Central Bank to AIB, Bank of Ireland (BoI), EBS, Anglo, Nationwide and Permanent TSB.

Well-placed sources last night confirmed that this week's recapitalisation, which will put close to €20bn into the four 'continuing banks', is likely to see the quartet eased off emergency liquidity assistance or ELA within months.

AIB has already confirmed that it stopped drawing ELA in April, when the Government put €11bn of cash on deposit with the bank ahead of its July 31 bailout.

BoI and Irish Life & Permanent (IL&P) have already submitted plans to the Central Bank showing how they will get off ELA over the coming months, sources confirmed last night. BoI was believed to have reduced its reliance on ELA when it took in deposits of €3bn from the State in April.

IL&P, which is set for a €4bn recapitalisation at the weekend, would have seen a "very significant rise" in ELA had the High Court not forced the cash on the bank, the Department of Finance said in an affidavit this week.

This happened less than a year ago. And I know who owns the banks. I mentioned it yesterday in this thread.