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Negative Equity & Trade Up Mortgage solutions & ideas.
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21-08-2012 10:07am#1Many young families in Ireland are now facing a situation, whereby they bought apartments at the top of the Celtic tiger, and are now in six figures plus of negative equity debt and unable to move to a larger home to start a family, despite having two incomes and being able to meet their current repayments without difficulty.
These young families are facing the ticking of a biological clock which means they risk losing the chance to start a family if they don't act now. Given that a blanket debt forgiveness scheme or 100%+ mortgages are not likely to happen in Ireland as things stand at present, could there be a more pragmatic scheme which would involve a compromise to satisfy all sides?
Perhaps a new type of equity sharing trade-up mortgage with the current lender, where instead of increasing the monthly repayment, or financing additional debt, some percentage of the equity in the new home is retained by the bank, and upon the death of the mortgagee, the house is sold and the market price (presumingly haven risen from the current historic lows) is divided accordingly between the deceased's estate and the bank?
It's a compromise for the homeowner for a better standard of living with the same outgoing expenditure, and a business risk for the bank, but a good one that's likely to pay off, given that there is probably only one way the housing market can go over the next 20 years or so.
I'm not an expert in property, but this would look like a compromise that would be at least amenable to all sides (if the banks were to give their blessing) and would realistically only be necessary to offer to a subset of the market for the next few years while this problem works it's way through the system.
Is there something I'm missing here?0
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Yes. We are not at 'historic lows'.Deleted User wrote: »Is there something I'm missing here?
There are also no guarantees that house prices will increase at anything greater than the rate of inflation. It is in essence, bundling extra risk onto the banks, which is the last thing they need right now.0 -
If the family is comfortably meeting the current mortgage where is the benefit to the bank of taking on extra risk?
Can you provide some indicative numbers of the typical family you have in mind - outstanding existing mortgage, sale price of apartment, cost of new home and family savings to be contributed?
Between the negative equity being carried forward and the new loan to be extended I don't see how this would ever be a good investment for the bank.0 -
Yes. We are not at 'historic lows'.
There are also no guarantees that house prices will increase at anything greater than the rate of inflation. It is in essence, bundling extra risk onto the banks, which is the last thing they need right now.
I agree, it is subjecting banks to greater risk, but on the face of it, it would look like a solid risk, and also one which would force one of the key players in the whole debacle to bear some of the responsibility for their misdeeds in the past.
Also, the bank making it's money back just hinges on the market not dropping over a period of 20, 25 or even 30 years (the period most FTB mrtgages from the height of the boom have left to repay). Even in Ireland's property market, unless the country collapses completely and permanently, I'd say there's a good chance of not only that happening, but of them making a siginficant return on their cost of the share of the equity they would hold in the new property. They would look at it as a good long term speculation.
Prices may drop for another 5, even 10 years till we finally hit bottom, but they will rebound, and over 25-30 years they are bound to see some return on the refinanced NE debts.
Also there's the added benefit of improved security for them, as the asset the new loan would be secured against (a more desirable family residence) would be far more resaleable than the one the initial mortgage was secured against (a celtic tiger one bedroom apartment).0 -
Would it, however, be improving the quality of the risk?
2 Bed Apartment bought with a Celtic Tiger 100% mortgage of 250k, Current value 100k (being generous for round figures), lets say 25k of principal has been paid down to date.
So, the collateral held against the mortgage only accounts for approx 45% of the outstanding mortgage balance.
Assuming they can afford the increased mortgage payments (subject to all reasonable forecasts) allowing the family to carry their negative equity onto a new house, say a 4 bed semi in Swords for 300k. Total value of mortgage would now be 425k (250k -25k - 100k + 300k) against assets with a colatteral value of 300k or 70.5% of the mortgage value.
So, sure, the figures become higher but the quality of the collateral increases greatly, especially when you look at the market: the collapse of the Euro notwithstanding, can anyone really see as much of a drop in property prices as we've already seen? I can see further drops but I can't see them being a further 60% in all honesty.0 -
Deleted User wrote: »If the family is comfortably meeting the current mortgage where is the benefit to the bank of taking on extra risk?
Can you provide some indicative numbers of the typical family you have in mind.......
OK, just some round figures for the sake of simplicity. Again, all of this is open to criticism, i'm more trying to tease out whether this is viable or not. It may very well not be, but input would be welcome.
Take a property such as a 2 bed apartment, bought in 2005 for 275k, 25k deposit, mortgage was 250k for argument's sake.
25k has been paid against the principal sum since then, so the bank is owed 225k currently.
The market value of the home has dropped (again for the sake of round figures and simplicity) by 50-60% since 2005, and is now worth perhaps 125k
The bank gives permission to sell for the 125k, which is paid against the outstanding 225k debt, which leaves the owner with no assets and an outstanding debt of 100k
The bank now furnishes a loan to purchase the second, more suitable property, at a value of let's say 250k at current market values. No deposit necessary, as the couple have proven their ability to keep up repayments over the last 6-7 years. (this is in essence a 100% mortgage, but one in which the bank will automatically assume a share of the house immediately as it's foreclosure security).
For their 100k debt against the cost of the 250k house the bank then takes a 2/5 share of the house as their long term equity and the owners take 3/5 of it, while continuing to repay the same level of mortgage payment they have always been able to make, based on the same initial sum advanced by the bank. They will continue paying the same mortgage, same conditions, same term, but instead of mortgaging to by 100% of an apartment, they are now mortgaging to buy 60% of a house which was bought for the same amount.
It may be necessary to readjust the equity balance (say to 50/50, again for simplicity's sake), to take account of a shorter time available to the borrowers to repay before their retirement, or other administration costs, etc. The key difference is that their house will be legally required to fall to be sold once they have repaid and died, but until then it is their house, and their repayments will remain the same.
Upon their repayment and subsequent death, their house has reached a market value of 400k in 25 years time, of which the bank takes it's 50% share =200k to cover it's initial 100k debt plus a profit for it's speculation.
Depending on bank and political sentiment for the deal, a provision could be made that the bank is allowed to make a reserve that 100% of it's it's 100k debt be recoverable regardless of the sale price of the house.
I may be wrong here, but what i think this is doing is deferring a debt which is having a material effect on the living standard of a celtic tiger FTB young family who bought in the height of the boom to a time in the future, after the parents have died, which allows them to live in a home which suits their means and their needs based on current(post tiger) market values. Their estate and surviving family will lose out financially in inheritance versus the estate of a family who did not buy at the height of the boom, but this is of minor consequence versus the alternative, and can be better prepared for over the 20-30 years to come.0 -
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I agree that these people need some kind of a solution that will let them get on with their lives but this is a social problem. The banks couldn't give two hoots. If the mortgage holder is meeting their current repayments the bank see that as the end of the matter.
In many cases the negative equity is just to big. I know a young couple who bought 2 bed apartment in late 2006 who are sitting on €230,000 of negative equity. There are no schemes or products that can help with that. They will be in their early 50's by the time they clear the NE and have a deposit to buy a house (through a combination of saving and capital repayments). They are putting the ground work in to start the emigration process. People who are backed into a corner tend to react.
Why don't they rent the apartment out I hear you say? Because renting out the apartment means loosing their mortgage interest relief, paying tax, dealing with tenants, etc. What happens when the apartment has a void rental month or two? Then they will be paying rent and the full mortgage on the apartment, hardly a stable financial future for raising kids.0 -
Assuming they can afford the increased mortgage payments (subject to all reasonable forecasts) allowing the family to carry their negative equity onto a new house, say a 4 bed semi in Swords for 300k.
That's the key point, they don't carry the negative equity. They pay 100% of the mortgage for only 60% final ownership of the asset, the bank keeps the other 40% to cover the negative equity owed to them and recoups it when the house is sold after death. The NE isn't realised today and refinanced as part of the new mortgage, it's recouped after the house is paid off 100% and then sold.
The house has been repaid 100% in 25 years, but they (the bank) still get an additional 40% of it's sale value to cover the outstanding negative equity debt from the initial purchase during the tiger. They may have to wait 50 years for it, but the repayment of the toxic debt is effectively refinanced long term and is off the country's books.0 -
Thanks for the example MackDaddi.
When the new house is purchased the bank now has a 40% share in an asset that generates no income i.e. the banks share generates no income. The bank have to hope that when the property is sold they will make a profit. Am I missing something?0 -
Thanks for the example MackDaddi.
When the new house is purchased the bank now has a 40% share in an asset that generates no income i.e. the banks share generates no income. The bank have to hope that when the property is sold they will make a profit. Am I missing something?
Correct. It's an asset for which they obtained a 40% stake at what is likely to be close to the bottom of the property market, and you're correct, it's a speculation on their part, but would it be one that they would be likely to take (?) given that:
A)there's a pretty good chance the asset will mostly only appreciate in value
B)there are only a limited number of potential applicants, and all would be applying ASAP. This scheme would not need to be available long term.0 -
Deleted User wrote: »Correct. It's an asset for which they obtained a 40% stake at what is likely to be close to the bottom of the property market, and you're correct, it's a speculation on their part, but would it be one that they would be likely to take (?) given that:
A)there's a pretty good chance the asset will mostly only appreciate in value
B)there are only a limited number of potential applicants, and all would be applying ASAP. This scheme would not need to be available long term.
I just can't see the bank tying up capital in non performing assets no matter how limited the adoption of the scheme might be. I could be wrong of course.
Like I said, this is a social problem that requires government intervention. What form that intervention would take I'm not sure. People in this situation have been completely left out of the new insolvency legislation. The government seem to share the banks attitude of "you can afford your repayments so what's the problem?", completely ignoring the social consequences of thousands of young families stuck in apartments.
I actually don't think raising a child in an apartment is the end of the world but throwing money into a negative equity black hole for 20-30 years certainly is. The lack of action on this is financially sterilising people.0 -
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TBH, they did it to themselves when they took out the crazy loans.The lack of action on this is financially sterilising people.
I'm all in favour of accommodating people in negative equity to transfer that to another more suitable home where they have the financial ability to pay the new mortgage but I can't countenance any kind of debt forgiveness when it's to be borne by the tax payer.0 -
TBH, they did it to themselves when they took out the crazy loans.
I'm all in favour of accommodating people in negative equity to transfer that to another more suitable home where they have the financial ability to pay the new mortgage but I can't countenance any kind of debt forgiveness when it's to be borne by the tax payer.
I don't want to derail the thread (this argument has been done to death) but hindsight doesn't provide solutions for the future. Who do you think is going to pay when all the people who are in arrears on their mortgages file for bankruptcy? NE is a different side of the same coin.0 -
I just can't see the bank tying up capital in non performing assets no matter how limited the adoption of the scheme might be. I could be wrong of course. Like I said, this is a social problem that requires government intervention.
Don't forget that much of that capital was given to them by us, at great cost.
What if government intervened, and it was treated as a political solution to a social problem?
The state, either through a special purpose vehicle, or through one of it's already nationalised banks, in order to assist people in the below example, buys the existing mortgage contract out, allows the sale, and assumes the 100k debt on behalf of the mortgagee. It then acts as the new lender and carries on as per the example.
With the exception of buying out loans from the non-nationalised banks, the losses and gains will all default to the exchequer one way or another anyway. We've bought the banks, it's just moving the same money around between departments, so why not give the people who are stuck in NE but have been making a genuine effort to pay their mortgage a bit of assistance?I actually don't think raising a child in an apartment is the end of the world but throwing money into a negative equity black hole for 20-30 years certainly is. The lack of action on this is financially sterilising people.
To this cohort of people though, the negative equity black hole doesn't make that much difference to their everyday living conditions. They can afford their repayments, it's the inability to trade up that's killing them.
They have made their bed in terms of buying at the wrong time in the market, and are OK with lying in it. Many of them accept that they will be paying over the odds for the roof over their head for life, that's not great, but it's not as big an issue as being denied a suitable place to live, and even in some cases denied the ability to have as many kids as you'd hoped. That's a fundamental human right that people have been and are being denied because of political and financial inaction.
What if you are a young married couple who live in a 2 bedroom apartment, you're aged let's say 30 or so, and want to have 3 kids? Your plan was to buy, get on the property ladder, and trade up to a house, as all the best advice told you to do a few years ago. Now you've got one child, space is tight, you're stuck in a place that has enough room for maybe one more at a squash, and you're facing issues with storage, noise levels, safety concerns, etc. Do you have more kids, how do you raise them with only one bedroom, no storage, no room for bikes, toys, kiddy walkers, etc, what happens when they are teenagers, and so on...?
This couple's possibility to have the family they've always wanted and have worked hard for will be around for another 10 years at most, regardless of the ecomomic circumstances, and then after that it doesn't matter a damn what the politicians come out with in terms of trade up mortgage solutions, it will be too late.TBH, they did it to themselves when they took out the crazy loans...
Then why doesn't the same rationale apply to the greedy bankers who rubber stamped the same crazy loans? Billions of euros of taxpayers money goes to rescuing the banks who behaved worst out of all of this, yet the ordinary people who just wanted an ordinary life and to be able to pay for a roof over their family's head are left to the wolves?? These people who once represented the best, brightest hopes of our society, the upwardly mobile, career focused young people who were gazumped and pressurised by vested interests on all sides (most of whom came out of all this without a scratch), they just "did it to themselves"??
If Ireland ever reaches the point where that's representative of the prevailing thinking on this issue, i will be on the first 747 out of here.0 -
I don't want to derail the thread (this argument has been done to death) but hindsight doesn't provide solutions for the future. Who do you think is going to pay when all the people who are in arrears on their mortgages file for bankruptcy? NE is a different side of the same coin.
NE is not the same as arrears, so no, it's not the same coin - as much as I wish it was. You see I'm in NE of about 220K but I'm not in arrears. I'm crippled by it, but I'll continue to crawl along. And I won't be in arrears as long as I continue to make my mortgage payments.
But you are right, there is going to be no solution for me as long as I continue to pay my mortgage. I'm expected to crawl along, which I'll do as that's the bed I bought into.
I think the thing people need to consider is - what happens when people like me decide it's not worth crawling for anymore? I mean the banks got bailed out, which I'm paying for. They'll increase the taxes so I'll pay more for less services. If they don't give something back to these people, it'll no longer be worth their while to persist.
People will take a lot, probably a lot more tbh, but they will only take so much.0 -
The same rationale *should* have applied to the bankers. They, however, were well in with the people continuously elected by the very same population now struggling with their negative equity.Deleted User wrote: »Then why doesn't the same rationale apply to the greedy bankers who rubber stamped the same crazy loans? Billions of euros of taxpayers money goes to rescuing the banks who behaved worst out of all of this, yet the ordinary people who just wanted an ordinary life and to be able to pay for a roof over their family's head are left to the wolves?? These people who once represented the best, brightest hopes of our society, the upwardly mobile, career focused young people who were gazumped and pressurised by vested interests on all sides (most of whom came out of all this without a scratch), they just "did it to themselves"??
If Ireland ever reaches the point where that's representative of the prevailing thinking on this issue, i will be on the first 747 out of here.
I don't see how what's been done can be undone. Any debt forgiveness is simply burdening our children with the responsibility to pay back our generation's foolishness and with our current budget deficits and impending pension crisis do you not think we've already burdened them with enough?0 -
I don't see how what's been done can be undone. Any debt forgiveness is simply burdening our children with the responsibility to pay back our generation's foolishness and with our current budget deficits and impending pension crisis do you not think we've already burdened them with enough?
I honestly think the solution I've proposed has merit for all sides concerned. It's not debt forgiveness, 100% of the money borrowed gets paid back. Its probably not ideal for the banks, certainly not for the homeowner, but I honestly think that in a system where every side assumes risk, it's morally wrong of all sides but the one who can't to wash their hands of the matter and refuse to accept some of the consequences and shoulder some of the cost. I think it could form the basis for a political solution to some of the issues around negative equity trade ups, IF there were enough political will to push it through.
Like I said, the biggest losers are the homeowners who would pay up to 150% of the value of their homes (plus a considerable amount of interest on repayments over and above that) but at least they would be able to live in a suitable property for their needs. The least the banks could do is tie up a little capital (which they would likely be well repaid for) suck it up and get on board, even if just as an act of contrition for their behaviour in the boom.0 -
NE is not the same as arrears, so no, it's not the same coin - as much as I wish it was. You see I'm in NE of about 220K but I'm not in arrears. I'm crippled by it, but I'll continue to crawl along. And I won't be in arrears as long as I continue to make my mortgage payments.
But you are right, there is going to be no solution for me as long as I continue to pay my mortgage. I'm expected to crawl along, which I'll do as that's the bed I bought into.
I think the thing people need to consider is - what happens when people like me decide it's not worth crawling for anymore? I mean the banks got bailed out, which I'm paying for. They'll increase the taxes so I'll pay more for less services. If they don't give something back to these people, it'll no longer be worth their while to persist.
People will take a lot, probably a lot more tbh, but they will only take so much.
I guess the point I was trying to make (badly) is that someone in extreme NE should be able to press the reset button just like someone in arrears. Expecting people to "crawl" along is just cruel and unusual punishment.
Bankruptcy legislation is supposed to be designed to let people admit their mistake, attempt to rectify it and to start their life over. You are absolutely correct when you say people will only take so much until they walk away.0 -
But they shouldn't, they signed the deal; they bought in, they should be made to pay.I guess the point I was trying to make (badly) is that someone in extreme NE should be able to press the reset button just like someone in arrears.
Well that's capitalism.Expecting people to "crawl" along is just cruel and unusual punishment.
Where it become unpalatable is when "some" people are allowed to be forgiven. Bailing out the banks was the problem. Allowing the rich to "reset" at the cost of the rest was unfair. Just as allowing the NE to "reset" is unfair. But as Sleepy said - what is done is done. We shouldn't compound the problem. So we make this generation suffer. Suffer badly. It's not fair, but thats how it goes.
Unless we tear down the whole system & start again - and I'll be honest, it's an idea I've been beginning to warm to. Iceland seem to do ok.0 -
Perhaps I missed the discussion on this. What's wrong with raising a child in an apartment? Is having a house and a garden now a requirement for raising children?Deleted User wrote: »and unable to move to a larger home to start a family0 -
If i bought an apartment for 300k in 06 and now it was worth about 100K i'd hand back the keys and leave the country or declare bankrupt.
Those sort of people need help just like people who lose their job get help by way of welfare. They made a bad decision and that was it. They don't deserve to carry that amount of debt forever. The best solution is to hand back the property and move on. They could be banned from buying property for 20 years or so as part of a deal.0 -
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Nothing, assuming your apartment is big enough & the associated area has suitable resources (similar to say Sweden or other European countries). However thats a MASSIVE assumption that doesn't apply to the vast majority of "apartments" built in Ireland during the boom years.Perhaps I missed the discussion on this. What's wrong with raising a child in an apartment?
And please don't forget all the unfinished developments. Sadly we can't compare our apartments to those abroad.
Firstly handing back the keys means nothing. Secondly you'd be taking a financial dump on all your friends and family. Thirdly bankruptcy is, as it stands, not any better.If i bought an apartment for 300k in 06 and now it was worth about 100K i'd hand back the keys and leave the country or declare bankrupt.
All in all your solution stresses the lack of knowledge you have for real peoples real situations.
Besides, I don't want to leave my country - why should I be drummed out by incompetent and corrupt politicians?
I appreciated your compassion & I agree, but sadly I don't see any solutions.Those sort of people need help just like people who lose their job get help by way of welfare. They made a bad decision and that was it. They don't deserve to carry that amount of debt forever.
Currently, in the real world, it's not.The best solution is to hand back the property and move on.0 -
Perhaps I missed the discussion on this. What's wrong with raising a child in an apartment? Is having a house and a garden now a requirement for raising children?
Of course not. It's not a question of house versus apartment, that was just the example I gave. It's a question of whether a property is suitable for your particular family situation as it has developed or not, and whether it can accommodate your family's needs as it grows over the long term. It could equally be a case of trading up to a larger apartment for a couple of crucial extra bedrooms for example. Houses don't suit everybody.
Apartments are not unsuitable for family life just by virtue of the fact that they're apartments.Nothing, assuming your apartment is big enough & the associated area has suitable resources (similar to say Sweden or other European countries). However thats a MASSIVE assumption that doesn't apply to the vast majority of "apartments" built in Ireland during the boom years.
And please don't forget all the unfinished developments. Sadly we can't compare our apartments to those abroad.
Yes, exactly. Irish apartments by and large don't have facilities which are up to the standard of European and American apartments. No rubbish management systems, service lifts, laundry rooms, drying facilities, storage facilities, and much much more, and crucially, our property management sector is entirely unregulated, and is a boon for unscrupulous management companies and developers looking to shirk their responsibilities and overcharge their residents.
All of this will probably be addressed in future planning legislation, but our lawmakers have bigger fish to fry right now, and I wouldn't hold my breath.0 -
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It's a bad situation that wont get any better with the way the country has and is being run ( or lack of)
Personally i would suggest looking after yourself .
1 Pay minimun towards the morgage ( 200 a month as they have to accept something and you seem compliant and will take years to finally repocess ).
2 save as much as you can that you would have spent on said on morgage.
3 get the feck out of this cess pool just before baliffes come a knocking.
The gouverment has let you down , europe wants you to pay bankers debts so we make europe look stable and a good bet.
Or stay here and pay USC + quinnes levy + untold stealth taxes + no real health care or dentists + i could go on.
At least jesus threw the money lenders out of the temple because he knew the real deal.
The morgage holders are living in a prison but they are allowed out to work. Well aint that great.
You people had fight in you against the brits but seem to have lost your balls of late.
The country is rotten and only benifets the scammers .
And tourists are not coming back because you can only see raping profits now rarther investing and keeping a steady stream of vistors year after year.
RIP Ireland.0 -
Personally i would suggest looking after yourself...
While i can understand your point of view, i think people like you, with attitudes like that, are part of the problem here. Everybody "looking after number one" without any regard to social consequences, moral justice, or long term societal issues, is what got us into this mess, and what's keeping us in it.
I've read your posts in other threads, whingeing about the state of Ireland, and Bertie this and Bertie that, and then you come out with this "looking after yourself" rubbish? Greedy people on the take, "looking after themselves" is what Bertie and Co thrived on. It's what got him in power, and kept him there all through. It's what bought him and FF their last term in power (the one in which they arguably did the worst of their long term damage to Ireland) even when it was plain as day that he was utterly crooked and his party was filthily corrupt. He knew that in Ireland, you can buy power and elections, and that if you give everybody a grubby little taste of the spoils they will look after you when the time comes, regardless of the level of impropriety you're up to elsewhere.
"Ah sure that doesn't affect me", or "i don't care as long as it doesn't take money out of my pocket", or "i would suggest looking after yourself". All of these phrases are the anthems of the cancerous "look the other way" culture that ate the Ireland i grew up in away. It's unrecognisable from the country it was only a decade or two ago, because of people with that attitude, who bleed things dry with their selfishness and their indifference to the damage they cause elsewhere and then wash their hands of the consequences when it suits them later on.
You say "the country is rotten and only benefits the scammers"? Well i say we have people with attitudes like yours to thank for it.0 -
Spoken like a person who doesn't have a mortgage.Personally i would suggest looking after yourself .
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RIP Ireland.
You're little plan is fine if:- you have no family
- you have no friends
- you have no ties
- you have no sense of patriotism
- you have no concern for the future of your country
- and ultimately you couldn't care less about any of the people in Ireland you leave behind to pay for cleaning up your mess
So in short, your plan is fine, if you are a sociopath.0 -
It's a bad situation that wont get any better with the way the country has and is being run ( or lack of)
Personally i would suggest looking after yourself .
1 Pay minimun towards the morgage ( 200 a month as they have to accept something and you seem compliant and will take years to finally repocess ).
2 save as much as you can that you would have spent on said on morgage.
3 get the feck out of this cess pool just before baliffes come a knocking.
The gouverment has let you down , europe wants you to pay bankers debts so we make europe look stable and a good bet.
Or stay here and pay USC + quinnes levy + untold stealth taxes + no real health care or dentists + i could go on.
At least jesus threw the money lenders out of the temple because he knew the real deal.
The morgage holders are living in a prison but they are allowed out to work. Well aint that great.
You people had fight in you against the brits but seem to have lost your balls of late.
The country is rotten and only benifets the scammers .
And tourists are not coming back because you can only see raping profits now rarther investing and keeping a steady stream of vistors year after year.
RIP Ireland.
The banks must stamp down hard on this activity. Why should one mortgage holder decide he is more worthy that another mortgage holder. Because they/you are worth it? Who decides which mortgage holders have been left down/are in prison and which are not? Fair play to them/you for considering your position more important that all the other mortgage holders who continue to pay their way as they commited themselved to.
The unfortunate thing is that there are opportunists who are already at this game in the anticipation of a debt write down. Its time for this issue to be resolved asap to ensure that the scammers are brought to book. There has been enough scamming of the general population of this country already without another cohort taking the p1ss. Surely it is possible for the banks to request income details from mortgage holders who are 'unable' to afford their repayments and to throw the book at people who are pursuing this strategy?0 -
The unfortunate thing is that there are opportunists who are already at this game in the anticipation of a debt write down. Its time for this issue to be resolved asap to ensure that the scammers are brought to book....
Unfortunately, successive mortgage foreclosure moratoria have been very publicly announced to let mortgage holders know that no matter what they do their home won't be taken from them by banks. It was a way of politicians kicking the can down the road rather than dealing with the issue properly at the time, and now it's grown into a situation where strategic default, and "can pay but can't be bothered" are becoming more common. Do we ever think anything through long term in Ireland?:mad:
My own feeling from a purely idealistic point of view is that by right, banks should be made to atone for their misdeeds by writing down the value of ALL negative equity mortgages on their books to reflect the maximum amounts they SHOULD have been lending to each individual borrower as per the rules, and based on the income disclosures at the time of application. Everybody, across the board, would only get held accountable for the maximum amounts they should have been lent, and over and above that, you're on your own. Either pay your mortgage, or you're fair game, and if you "inflated" your income at the time to get a bigger loan, tough.
But then, that's idealism. This is not an ideal situation, and we own the majority of these banks now, so the losses come straight back on us, and everybody pays for them one way or another. Socialising the disastrous financial consequenses of the banks actions to every Irish tax payer, regardless of how prudent each of us individually were or weren't during the boom is not a just solution here, but then neither is letting one particularly unfortunate group who played a part (but only a part) in signing themselves into slavery bear all the cost of it for decades to come.
It's an incredibly difficult problem which is being made more difficult by people at every level of involvement trying to wash their hands of their responsibility, from individual borrowers, to banks, to politicians, to other european countries and financial and political institutions. Nobody wants to carry their part of the can, and anybody with a get-out clause is using it, all the way up the chain. The only people who are bearing their responsibility here are the ordinary people who are NOT trying to strategically default, who believe that honesty, and living up to your commitments (however foolishly they were entered into) is the right thing to do. Ironically, they are the ones being hit by far the hardest in financial terms for their honesty...0 -
Deleted User wrote: »Ironically, they are the ones being hit by far the hardest in financial terms for their honesty...
Actually they are not! People who lived within their means and purchased (or rented) appropriately are the ones who are being hit the hardest. We are being asked to contintually pay more taxes/service charges to facility the poor economic decisions of others.0 -
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Actually they are not! People who lived within their means and purchased (or rented) appropriately are the ones who are being hit the hardest. We are being asked to contintually pay more taxes/service charges to facility the poor economic decisions of others.
But so are they, and they have higher mortgage costs to service too.
???0
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