Moral hazard

rodento

Anyone know why banks are not evicting thousands on deflauters from there homes and properties

http://www.independent.ie/national-news/number-of-evictions-plummets-as-banks-fear-getting-stuck-with-rows-of-empty-houses-3342634.html

THERE has been a dramatic fall in the number of evictions in the capital because banks are desperate to avoid being "left with empty properties", the Dublin sheriff has said

http://www.independent.ie/business/irish/banks-handing-back-worthless-sites-to-avoid-maintenance-costs-2944588.html

BANKS have begun handing back small numbers of worthless sites to bust developers so that they won't be stuck with the bill for carrying out remedial works on the sites

Surely the banks should be giving the land to other creditors to sell on, completely confused as to what is happenning

juan.kerr

NAMA?

chughes

Moral hazard is the elephant in the room as far as getting some sort of start to the economy. While people are stuck in a never ending mountain of debt that they can never pay off, then its hard to see how things can be moved forward.

I know people will say that it will be an excuse for everyone to default on mortgages but surely its possible to look at it on a case by case basis and right off debt that there is no chance of recouping.

At this stage we have to do something different. Nothing so far has worked so why not give debt right-off a chance.

uncle_sam_ie

"Standing down a receiver means the bank loses control of the assets -- but the bank also has no liability for spending significant sums bringing derelict sites up to scratch."

Could the banks also lose the property to squatters if they "stand down"?

rodento

Thats the problem

Dob74

rodento wrote: »

Anyone know why banks are not evicting thousands on deflauters from there homes and properties

http://www.independent.ie/national-news/number-of-evictions-plummets-as-banks-fear-getting-stuck-with-rows-of-empty-houses-3342634.html

THERE has been a dramatic fall in the number of evictions in the capital because banks are desperate to avoid being "left with empty properties", the Dublin sheriff has said

http://www.independent.ie/business/irish/banks-handing-back-worthless-sites-to-avoid-maintenance-costs-2944588.html

BANKS have begun handing back small numbers of worthless sites to bust developers so that they won't be stuck with the bill for carrying out remedial works on the sites

Surely the banks should be giving the land to other creditors to sell on, completely confused as to what is happenning

MORAL HAZARD doesn't apply to the banks. So why should it to its creditors.
If the banks went into receivership in 08 this mess may have been sorted. But it's been left drag out and won't be sorted til god know's when.
Moral hazard will begin when the banks pay for there sins.

KyussBishop

Moral hazard, is letting banks deliberately inflate the property market, destroy the economy thus decimating peoples wages (including people paying down their mortgages, making many previously sustainable mortgages unsustainable), and letting the banks put 100% of the burden of the inflated mortgage, on the mortgage holders (despite the banks being responsible for a sizable portion of that burden), thus profiting from the house prices that they, the banks, inflated.

hyperborean

And evicting people to give land to creditors (the people) is going to solve the problem how exactly?

rodento

And how will giving people homes they have no intention of paying solve the problem.

hyperborean

rodento wrote: »

And how will giving people homes they have no intention of paying solve the problem.

Are you guessing or have you proof to back this up? Are you saying that people in mortgage arrears have no intention of paying?

rodento

http://www.broadsheet.ie/2012/04/02/karl-deeter-up-to-25-in-mortgage-arrears-are-lying/

If someone isn't paying their mortgage and basically staying in a property for free, surely they at the very least should be paying benefit in kind to the revenue

monkeypants

rodento wrote: »

http://www.broadsheet.ie/2012/04/02/karl-deeter-up-to-25-in-mortgage-arrears-are-lying/

If someone isn't paying their mortgage and basically staying in a property for free, surely they at the very least should be paying benefit in kind to the revenue

And Mr Deeter is an impartial observer, so his opinion is completely without bias.

rodento

Just one example of can't pay won't pay that was delt with

http://gombeennation.blogspot.ie/2012/04/killiney-investor-evictees-new-darlings.html

hmmm

hyperborean wrote: »

And evicting people to give land to creditors (the people) is going to solve the problem how exactly?

Solve which problem? Eviction frees up the property for sale, so it solves a large part of the bank's problem with non paying mortgagees.

hyperborean

hmmm wrote: »

Solve which problem? Eviction frees up the property for sale, so it solves a large part of the bank's problem with non paying mortgagees.

There are socio-economic problems associated with increasing homelessness or preventing it that would have a much broader negative effect on the country than the "positive" attributes brought on by fixing the balance sheet of banks.

this is kind of obvious,

rodento

hyperborean wrote: »

There are socio-economic problems associated with increasing homelessness or preventing it that would have a much broader negative effect on the country than the "positive" attributes brought on by fixing the balance sheet of banks.

this is kind of obvious,

I wonder what would happen to a family if they stopped paying rent, how long would it take for the landlord to move them on.

Its simple, if someone refuses to pay anything they should be moved on and others let in who are willing to buy or let it, let in

As for the banks, if they folded do you think that the mortgage dept would have died with them, or would it have passed on to less caring institution overseas

hmmm

hyperborean wrote: »

There are socio-economic problems associated with increasing homelessness or preventing it that would have a much broader negative effect on the country than the "positive" attributes brought on by fixing the balance sheet of banks.

this is kind of obvious,

Homelessness? People can rent. If they're really stuck social welfare will even pay their rent.

I know some people see renting as beneath them, that's not my problem and the taxpayer shouldn't have to pay to give them the lifestyle they think they deserve.

Going Forward

We seem comfortable to use the moral hazard term only in relation to individuals, but the hazard, from what I can make out was an historically accepted risk factor to be considered by banking institutions before lending money.

Without raking over the coals of the sub prime and bad lending practices, the current moral hazard debate completely ignores this and focuses it on the ones who were served by the banks- the ones who in many cases should never have been given loans, or at least such huge loans, in the first place.

"Moral Hazard
The risk that a party to a transaction or activity is not acting in good faith, or that one party has perverse incentives to act in a manner detrimental to the counter party. Moral hazards may exist for almost anything. For example, a plan for a government to bail out delinquent mortgages has the moral hazard that it will encourage mortgage holders to refrain from making their home payment. Likewise, deregulation has the moral hazard that companies will use it as incentive for short-term, unsustainable profits, rather than proper economic growth.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved"

The moral hazard that Ireland should be concentrating on is the con job that the banks pulled on the country.

Voltex

Let the banks go..let them go bust...f*ck the bankers!!


What I say to people who come out with this sorta crap is to think back 6 months ago to how bad it got when 1 banks computers had a bug...now multiply that by about a million then you might get close to how bad it could have been if the Irish banking system was allowed to fail!!

Pottler

rodento wrote: »

And how will giving people homes they have no intention of paying solve the problem.

Stop them getting wet when they go to sleep? I doubt "intention" has much to do with it actually, more "capacity".

NAP123

Voltex wrote: »

Let the banks go..let them go bust...f*ck the bankers!!


What I say to people who come out with this sorta crap is to think back 6 months ago to how bad it got when 1 banks computers had a bug...now multiply that by about a million then you might get close to how bad it could have been if the Irish banking system was allowed to fail!!

Massive difference between the banking payment and savings, deposit system and the investment banking system.

Don,t confuse the two. One is where you save your money at a particular interest rate and they lend your savings to a vetted borrower at a superior interest rate.

The other is where they use your money to borrow multiples of the amount from bigger banks doing exactly the same on a much larger scale and therefore taking far bigger risks on people who are not even seen, never mind vetted, but in the knowledge that they have used this imaginary money to purchase the debt of sovereign countries, therefore making them to big to fail.

Banks do need to fail and until they do, nobody is going anywhere.

We do need Banks, but we do not need the greedy bastards that have been running them.

NAP123

hmmm wrote: »

Homelessness? People can rent. If they're really stuck social welfare will even pay their rent.

I know some people see renting as beneath them, that's not my problem and the taxpayer shouldn't have to pay to give them the lifestyle they think they deserve.

Who? Bankers or the homeless?

There is,nt a banker in Ireland that does,nt owe his/her livlihood to the Irish taxpayer. Yet nurses are being asked to work for 22k a year.

Why not ask all bankers to work for 22k a year instead?

They might say no and threaten to remove their labour, but would we miss them?

Would a cancer patient miss a tumour?

Imagine an industry that has cost a country 64 billion, 350,000 unemployed, 70,000 a year in emigration, 25 billion in annual income, a 300% increase in national debt, an increase in tax of over 10%, a decrease in service provision of 10% and a decrease in income of about 30%, telling that country that we need them.

Now imagine 166 eejits believing them.

Ireland.

Going Forward

Voltex wrote: »

Let the banks go..let them go bust...f*ck the bankers!!


What I say to people who come out with this sorta crap is to think back 6 months ago to how bad it got when 1 banks computers had a bug...now multiply that by about a million then you might get close to how bad it could have been if the Irish banking system was allowed to fail!!

Did they have their bonuses chopped for the screw up I wonder?

And we're happy to continue paying over half a million euros to "top bankers" in bailed out banks.

Lets do that; sounds like a good plan, no "moral hazard" for the big boys, just the stooges who took the loans, sorry, products, as advised by their professional personal banking advisers.

There has to be some balance here.

hyperborean

hyperborean wrote: »

There are socio-economic problems associated with increasing homelessness or preventing it that would have a much broader negative effect on the country than the "positive" attributes brought on by fixing the balance sheet of banks.

this is kind of obvious,

Do you really honestly believe that in Ireland, where we have a welfare state with council housing and rent paid for by the state to the unemployed and assistance given to lower paid, that these people will be homeless?

If by homeless you mean not "owning" their own home then you are right but this does not mean on the streets whatsoever.

Do you really think people are so appalled at the thought of renting that they would rather live on the streets....?

Going Forward

Going Forward wrote: »

We seem comfortable to use the moral hazard term only in relation to individuals, but the hazard, from what I can make out was an historically accepted risk factor to be considered by banking institutions before lending money.

Without raking over the coals of the sub prime and bad lending practices, the current moral hazard debate completely ignores this and focuses it on the ones who were served by the banks- the ones who in many cases should never have been given loans, or at least such huge loans, in the first place.

"Moral Hazard
The risk that a party to a transaction or activity is not acting in good faith, or that one party has perverse incentives to act in a manner detrimental to the counter party. Moral hazards may exist for almost anything. For example, a plan for a government to bail out delinquent mortgages has the moral hazard that it will encourage mortgage holders to refrain from making their home payment. Likewise, deregulation has the moral hazard that companies will use it as incentive for short-term, unsustainable profits, rather than proper economic growth.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved"

The moral hazard that Ireland should be concentrating on is the con job that the banks pulled on the country.

This is no reason to have the taxpayers subsidise people who took out ridiculous mortgages.

carpejugulum

NAP123 wrote: »

There is,nt a banker in Ireland that does,nt owe his/her livlihood to the Irish taxpayer.

Really? Even those from KBC, Danske Bank and Rabobank?

jased10s

Shame the Banks or Gorverment don't have any morels. Seems like it's easy to let them get away with what they are doing and at the same time judge a fellow man in trouble.

hyperborean

rodento wrote: »

I wonder what would happen to a family if they stopped paying rent, how long would it take for the landlord to move them on.

Its simple, if someone refuses to pay anything they should be moved on and others let in who are willing to buy or let it, let in

As for the banks, if they folded do you think that the mortgage dept would have died with them, or would it have passed on to less caring institution overseas

At last count there were 86,146 mortgages with 90 days or more owed on them

What you are you are saying is that the banks should move on these mortgages?

Do you think that there are 86,000 vacant rental properties, so you think that these properties are in the right locations?
For example if you kick a family out of there home and the kids are in school up the road, the family are local do you tell them to **** of to a rental property 100 miles away.
Now multiply this problem by 86,000.

Do you think there are 86,000 people waiting in the wings to buy these potentially vacant houses?

Going Forward

Deleted User wrote: »

This is no reason to have the taxpayers subsidise people who took out ridiculous mortgages.

The taxpayers will ultimately be subsidising the banks.

Ridiculous mortages as you call them? The banks were in charge of the purse strings and broke all previous lending criteria to shovel loans out their doors.

Each loan would make them a tidy profit.
And we are asked to accept that not one banker sat down and said, "Hey, there's something odd about this thing, it cant last. What happens when it all goes pear shaped? "

hmmm

hyperborean wrote: »

Do you think there are 86,000 people waiting in the wings to buy these potentially vacant houses?

Sure. Price is right and it will always be bought by someone. In many cases it will be bought by a family who didn't take out a huge mortgage, or re-mortgage to buy the fancy lifestyle, and will now justifiably be able to move into the house they deserve and can afford.

Farmer Pudsey

Deleted User wrote: »

This is no reason to have the taxpayers subsidise people who took out ridiculous mortgages.

You are right but there is also no reason to reposses house's and sell at a massive loss. Which is better in the longterm a family paying part of the loan maybe 60% and repossing the house and selling it for 40-50% of the loan.

The one thing these family's should be wary of longterm is that this has happened before I believe that in the building crash during the late eighties/early ninties in GB bank's left owners on the housed until prices started to recover ( as they would maintain them) then turfed them out and sold the houses as there was a market.

I wonder are banks playing a waiting game. Another thing that is on the horizon is the personnel insolvency legislation which is coming into force is it not amazing that now it is about to come in all the banks seem to be willing to increase there lending next year. Is this to make sure there will be a market for these properties. Also profession properties companies seem to be willing to start investing in Ireland.

Maybe some of the people who thing they will pink up really cheap houses in the next year or two will have a bit of competition.

monkeypants

hmmm wrote: »

the house they deserve

What criteria are used to determine this?

Going Forward

Farmer Pudsey wrote: »

I wonder are banks playing a waiting game.

I suspect they are, but for a number of reasons:

In 2011, a High Court decision was made which established that there are legal difficulties with getting orders for possession of certain properties. This decision was made in a number of cases where mortgage providers were applying to repossess mortgaged property.

Put simply, the decision means that, in the case of mortgages created before 1 December 2009, it is very difficult for a mortgage provider to get an order for possession unless the court proceedings were started before that date.

There are no such difficulties in the case of mortgages created after 1 December 2009.

This situation has arisen because the law was changed on 1 December 2009. An existing law governing repossessions was repealed and, therefore, can only apply to cases which arose before its repeal. The new law (the Land and Conveyancing Law Reform Act 2009) provides for repossessions but applies only to mortgages created after it came into effect.

The Government has said that it intends to change the law in Spring 2013 in order to remove the difficulties that exist.



And when/if the likes of the previously recklessly mismanaged BOI change into foreign hands it will be a different story.

NAP123

hmmm wrote: »

Sure. Price is right and it will always be bought by someone. In many cases it will be bought by a family who didn't take out a huge mortgage, or re-mortgage to buy the fancy lifestyle, and will now justifiably be able to move into the house they deserve and can afford.

Bull****.

Very few people in this country own their own house without a mortgage.

The banks own 90% of the properties in this country and 70% of them are loss making if sold now.

You must be the stupidist person in the country with all your big talk.

Who will buy all of these cheap houses, considering the banks are all insolvent?

Do you reckon there is more money on deposit than there is on loan?

When the banks go bust, what happens to all the money on deposit?

Wake up and smell the Sh1t.

[Jackass]

Simple answer to the OP question:

If you have someone tied into a EUR500,000 debt and they aren't meeting their full repayments or not even interest repayments, you can either move to repossess the property and sell it, which you might only get EUR150/200k for now at repo auction, and then have c.300k unsecured debt to try and hold the borrower to, who will ultimately declare bankrupcy when / if proper legislation comes in, or you can play the long game, keep the finance secured on the asset and give the borrower the fear of losing their home or the fight to keep their home as incentive to get as much money out of them as you can, pile on the interest and hope for either a sharp appreciation over time in the house value to make it worth your while to evict the borrower and recoup your loss, or essentially look to make your money back over 40 years with large interest payments.

Tl;DR There's no point in evicting and repossessing homes as they aren't worth anything, so it's better to keep the borrower attached to the assest and try to get blood from a stone than to liquidate and be left with the massive shortfall - trust me, it has absolutely nothing to do with morals.

moycullen14

[Jackass] wrote: »

Simple answer to the OP question:

If you have someone tied into a EUR500,000 debt and they aren't meeting their full repayments or not even interest repayments, you can either move to repossess the property and sell it, which you might only get EUR150/200k for now at repo auction, and then have c.300k unsecured debt to try and hold the borrower to, who will ultimately declare bankrupcy when / if proper legislation comes in, or you can play the long game, keep the finance secured on the asset and give the borrower the fear of losing their home or the fight to keep their home as incentive to get as much money out of them as you can, pile on the interest and hope for either a sharp appreciation over time in the house value to make it worth your while to evict the borrower and recoup your loss, or essentially look to make your money back over 40 years with large interest payments.

Tl;DR There's no point in evicting and repossessing homes as they aren't worth anything, so it's better to keep the borrower attached to the assest and try to get blood from a stone than to liquidate and be left with the massive shortfall - trust me, it has absolutely nothing to do with morals.

Fair play, Jackass, you've hit the nail on the head.

The banks choice is to crystallize the loss now and risk not getting a penny back on an unsecured loan or wait until inflation or the next property bubble lifts the market to a point where there are a) buyers b) finance and c) increased asset values. When that occurs you will see repossessions on a much larger scale.

The banks can afford to wait because they know for sure that the government will keep propping up their balance sheets. The real risk for the bank would be taking possession of thousands of properties for which there is no market or finance.

Maybe when people in NE realise that they will be on the hook for decades and in the end will have nothing to show for it, they might revolt. Strength in numbers, maybe?

Moral hazard? Don't make me laugh, that went out the window in Sept 08.

tenton

KyussBishop wrote: »

Moral hazard, is letting banks deliberately inflate the property market, destroy the economy thus decimating peoples wages (including people paying down their mortgages, making many previously sustainable mortgages unsustainable), and letting the banks put 100% of the burden of the inflated mortgage, on the mortgage holders (despite the banks being responsible for a sizable portion of that burden), thus profiting from the house prices that they, the banks, inflated.

+1. The greedy bankers who lent people money knowing they ( the borrower) could never pay them back are the ones in moral hazard. Bankers f***ed the economy just to get their bonuses. Shame on them, and shame on the politicians for bailing them out and letting them keep their pay and pensions.

ezra_pound

NAP123 wrote: »

Bull****.

Very few people in this country own their own house without a mortgage.

The banks own 90% of the properties in this country and 70% of them are loss making if sold now.

You must be the stupidist person in the country with all your big talk.

Who will buy all of these cheap houses, considering the banks are all insolvent?

Do you reckon there is more money on deposit than there is on loan?

When the banks go bust, what happens to all the money on deposit?

Wake up and smell the Sh1t.

Not true.More than half of the residential units in this country are not mortgaged.

NIMAN

I think I heard a couple of years ago that 60% of homes in Ireland have no mortgage on them. Found that figure staggering myself, but it was on something like Primetime so I assumed it was correct.

ezra_pound

NIMAN wrote: »

I think I heard a couple of years ago that 60% of homes in Ireland have no mortgage on them. Found that figure staggering myself, but it was on something like Primetime so I assumed it was correct.

Yeah thats about right. Previouis poster was talking out of a part of the body which is far from the brain I'm afraid.

Funny that he ends his post with the line 'wake up and smell the ****'.

NAP123

ezra_pound wrote: »

Not true.More than half of the residential units in this country are not mortgaged.

You are of course right.

But the majority of mortgaged properties belong to those of a certain age group and that age group is the biggest factor in an actual working economy.

If the majority of that age group are under water, we don,t have a working economy.

That was my point. Now that you are clear on the actual point. Debate it. That is of course if, you are capable.

BFDCH.

NAP123 wrote: »

You are of course right.

But the majority of mortgaged properties belong to those of a certain age group and that age group is the biggest factor in an actual working economy.

If the majority of that age group are under water, we don,t have a working economy.

That was my point. Now that you are clear on the actual point. Debate it. That is of course if, you are capable.

there's plenty of money in Ireland, people built and sold property for years here, there are people in negative equity and developers who have gone bust, but equally, they gave the money they got from their bank loans to someone when they were buying the property or land originally.

there are also hundreds of thousands of people working away in the country and paying rents that are far too high.
if these 86000 thousand properties came on the market and they went for a fair price, they would all find a buyer pretty quickly.
the people who are made homeless would then be able to rent a house like the rest of us, while they built up enough savings to purchase a house that they can afford- rather than being subsidised to live in a house they can't afford.