Glut of repossessed houses could depress prices ‘by up to 25%’

jay0109

Ray Palmer wrote: »

If you actually read the thread you would see I am not anti-repossessions. You may also see that people are looking for property cheap not just value for money.

It is very clear my stance is repossessions will not give the windfall people hope for. Whether it is value for money or cheap they mean. It is wishful thing or telling people how it "should" be and ignoring the reality.

I agree that repossessions are'nt going to solve the current problems. I initially thought they would see a big supply come to the market, but this is Ireland and so a fudge will be found unfortunately.
People living in big houses that they simply could never afford/landlords with lots of BTL's under water....the majority will get a deal that will keep them happy and allow the Govt to say the problem is fixed. In the long run of course, the cost to the country will be much greater v's fixing the issue now

Gaius
I don't see Ulster Bank dumping their gaffs and running. As I said above a fudge will be found in classic Irish style. Concessions will be made to foreign banks (tax breaks etc) by the politicians and the can kicked down the road for the Govt 20 years from now to deal with

Villa05

Ray Palmer wrote: »

Just because the banks would prefer high demand area housing doesn't mean they will get it. This is the least likely to be in distress. They retained more of their value,are easier to rent and situated in areas close to employment.



Oh it isn't being inferred it is what people are hoping for and obvious. People post up threads asking how to buy reposed houses all the time. People make statements like they are waiting for all the repossessions to happen so they can get a cheap house. There were people planning this before the bubble burst completely unaware that the country would be in a terrible state as a result, yes truly misguided.

According to CSO Dublin property prices have fallen by more and from a much higher price point than the rest of the country. In many cases the rent would not cover the interest on the mortgage.

NAMA was created as lenny said to put a floor on house prices. The bailing out of the banks was for the same purpose, therefore the state has gambled generations futures to prevent housing from falling to its true value in a time of severe economic correction. The gamble, by its nature, is doomed to failure.

Those generations (that choose to stay here) will have to pay up for the greed of the past 15 years, the very least this generation can give them back is affordable housing as their taxes rise to pay for the sins of an elite.

Rising house prices only benefit small cohort of professions who were instrumental in bringing this country and its economy to its knees. Many have retired on massive pensions courtesy of the states incredible kindness in a period deep austerity. I do not think they deserve to be further rewarded for what they have done to this Country and its people. Do you?

Villa05

jay0109 wrote: »

Gaius
I don't see Ulster Bank dumping their gaffs and running. As I said above a fudge will be found in classic Irish style. Concessions will be made to foreign banks (tax breaks etc) by the politicians and the can kicked down the road for the Govt 20 years from now to deal with

What is happening in the market at the moment is a classic "dead cat bounce". No asset ever falls in a straight line. Ulster Bank will capitalise on this and use it to exit the market as smoothly as possible. There parent company left as quickly as they could, I'm pretty sure they will be instructing Ulster to use this opportunity to exit.

They have attempted to swap Ulster Bank for assets NAMA have in the UK. This gives you an indication of how stupid they feel the Irish Authorities are and they are pushing to see if that stupidity has boundaries, fortunately Fianna Fail are not in power, had they been, they may have taken the bait.

This move gives you an indication of Ulster Banks future direction. I would be very shocked if they were not to take advantage of the current little bounce, the IMF pressure to tackle both the mortgage arrears and the high legal costs of repossession. It may take a little while yet but I'm sure they are preparing as we type.

jay0109

Villa05 wrote: »

What is happening in the market at the moment is a classic "dead cat bounce". No asset ever falls in a straight line. Ulster Bank will capitalise on this and use it to exit the market as smoothly as possible. There parent company left as quickly as they could, I'm pretty sure they will be instructing Ulster to use this opportunity to exit.

They have attempted to swap Ulster Bank for assets NAMA have in the UK. This gives you an indication of how stupid they feel the Irish Authorities are and they are pushing to see if that stupidity has boundaries, fortunately Fianna Fail are not in power, had they been, they may have taken the bait.

This move gives you an indication of Ulster Banks future direction. I would be very shocked if they were not to take advantage of the current little bounce, the IMF pressure to tackle both the mortgage arrears and the high legal costs of repossession. It may take a little while yet but I'm sure they are preparing as we type.

Well if it is a dead cat bounce, it's being going on for over 18 months in SCD....is that a new record for a dead cat bounce?

Villa05

One of Bertie's buddies has just won a nice jackpot in the NAMA Lottery. Not a bad return for a company in trouble financially and allegations of fraud. They were lucky the state were paying extortionate rents for some of their properties. It sure came in handy to fund the lawyers to extract the winning numbers for this jackpot. What a country

http://www.independent.ie/irish-news/courts/treasury-holdings-cofounders-in-line-to-get-5million-each-from-nama-29451805.html

Villa05

jay0109 wrote: »

Well if it is a dead cat bounce, it's being going on for over 18 months in SCD....is that a new record for a dead cat bounce?

Time period is proportionate to the cycle, The bubble lasted 11 years, 96 to 07, the collapse lasts about half that length, can be longer (e.g. Japan, our housing bubble was bigger than theirs, and we do not have the tools to stimulate the economy that they had)

To 99.5% of the Irish Population SCD is as relevant as Donegal is to Ray Palmer. The people bailed out by NAMA and those receiving massive pensions from the state after they screwed up need an outlet to spend all that mula. The rest of us are too busy working to pay the extra taxes to pay for it.
The austerity disproportionately affects the lower/average paid and the gap between rich and poor has grown significantly.

These factors, in my opinion would explain the length of the dead cat bounce in SCD

murphaph

Villa05 wrote: »

According to CSO Dublin property prices have fallen by more and from a much higher price point than the rest of the country. In many cases the rent would not cover the interest on the mortgage.

Rents have not fallen in a linear relationship to the fall in property prices in Dublin though. A house might now be worth half the peak price but rent on that house is not 50% of what it was at peak, so although the landlord will not be happy about his negative equity, he will generally still be able to manage the mortgage with some restructuring. People who bought before peak are not likely to be in any real risk. There are lots of strategic defaults going on IMO. These folks need to be punished for this financially at least through bankruptcy.

StillWaters

Villa05 wrote: »

Time period is proportionate to the cycle, The bubble lasted 11 years, 96 to 07, the collapse lasts about half that length

the bubble didn't start in 96!
We had real sustainable growth in 1996. The bubble was much shorter than that 2001-07 or thereabouts.

The_Conductor

Villa05 wrote: »

NAMA was created as lenny said to put a floor on house prices.

If anything- NAMA has a far wider remit in the commerical sector, than it does in the residential sector. The value of its commercial portfolio is almost 18 times that of its residential portfolio, and the loans tend to be performing loans, albeit at the book values they were transferred across at.

xper

StillWaters wrote: »

the bubble didn't start in 96!
We had real sustainable growth in 1996. The bubble was much shorter than that 2001-07 or thereabouts.

I think it probably depends on what you are referring to as a 'bubble'. Yes, there was real economic growth in Ireland in the second half of the nineties, that was the true Celtic Tiger. I take it that what you are referring to as the bubble, is when this economic growth became more and more and eventually almost entirely dependent on the construction activity and property transactions.

However, it is also vividly clear that, on the back of the original economic surge, and after years of relative stability, the steady, rapid rise of residential property prices toward their 2007 peak began in 1996, interrupted only briefly by the 2001 dot com crash. Any graph you care to look at shows this clearly. After a three or four years of this, even when our economy was still thriving overall, the trend should have been spotted and would have been addressed by any prudent government but our short-sighted, self-serving gob****es just threw petrol on the fire and ordered another round in the Galway Races tent.

Frank Lee Midere

Villa05 wrote: »

One of Bertie's buddies has just won a nice jackpot in the NAMA Lottery. Not a bad return for a company in trouble financially and allegations of fraud. They were lucky the state were paying extortionate rents for some of their properties. It sure came in handy to fund the lawyers to extract the winning numbers for this jackpot. What a country

http://www.independent.ie/irish-news/courts/treasury-holdings-cofounders-in-line-to-get-5million-each-from-nama-29451805.html

Thats utterly the most sickening thing I have seen in this country. Basically NAMA are making sweet heart deals with crooks. In most countries they would be arrested.

Villa05

StillWaters wrote: »

the bubble didn't start in 96!
We had real sustainable growth in 1996. The bubble was much shorter than that 2001-07 or thereabouts.

What has caused the house price boom - the inflow of immigrants? Our speculative greed? Well what? The longevity and degree of the price boom have baffled economists and politicians - and thwarted those trying to get on the bottom rung of the fabled ladder. NCB senior economist Eunan King charts the history of the boom since 1996 and predicts a soft landing.
http://www.businessandfinance.com/index.jsp?p=450&n=453&a=2101
The recent era of double-digit new house price inflation began in 1996 when prices rose by almost 12% following five years in which house price inflation had averaged not much above 3%. The four years following 1996 saw house price inflation in a range of between 14% and 23% per annum, based on Department of the Environment data. Since 2000 house price inflation has averaged 10% per annum. Over the whole period since 1995 new house price inflation has averaged 14% per annum, a three fold rise in the level of prices.

3% = sustainable
between 14 and 23% = lunatics have taken over the asylum

The rises from 96 to 2000 were greater than the rises 01 to 07. The bubble should have burst in 2001 but was prevented from doing so by the then Government. The rest is history and the cost will be borne by multiple future generations. There won't be sufficient disposable income in this country for a long, long time to support price rises

We as a country are still spending considerably more than we are taking in (equivalent to the cost of Anglo every 2 years) just to keep the lights on. The cost of the mortgage arrears crisis and loans to small businesses has yet to be added to that tab. The interest on this debt is getting more and more significant by the day. We are passing a horror show on to our children.

Villa05

murphaph wrote: »

Rents have not fallen in a linear relationship to the fall in property prices in Dublin though. A house might now be worth half the peak price but rent on that house is not 50% of what it was at peak, so although the landlord will not be happy about his negative equity, he will generally still be able to manage the mortgage with some restructuring. People who bought before peak are not likely to be in any real risk. There are lots of strategic defaults going on IMO. These folks need to be punished for this financially at least through bankruptcy.

Define the peak, as, if I remember correctly rents did not rise at the same pace as property prices. Any purchase between 2000 and 2010 would be in serious danger in my opinion

Investors piled in to Dublin property based on future capital appreciation, tax breaks that have been removed, extra taxes have now been added. Yields would have struggled to reach 2% on peak rent. This return would barely cover rental costs, not to mind the BTL interest rates.

If the priority is to keep people in their homes, why would you consider restructuring a BTL mortgage, surely the priority for this treatment would be residential. If the BTL is in a high demand area, great for the bank

The accidental landlord, those that kept their first home, while they purchased their second would want to prioritise the 2nd and get rid of the first. They may be in a situation where both would need to be repossessed.

Singletons that got together and kept both their properties, would probably want to get rid of both properties as they have outgrown them

Mark Spilane

Villa05 wrote: »

Define the peak, as, if I remember correctly rents did not rise at the same pace as property prices. Any purchase between 2000 and 2010 would be in serious danger in my opinion

Investors piled in to Dublin property based on future capital appreciation, tax breaks that have been removed, extra taxes have now been added. Yields would have struggled to reach 2% on peak rent. This return would barely cover rental costs, not to mind the BTL interest rates.

If the priority is to keep people in their homes, why would you consider restructuring a BTL mortgage, surely the priority for this treatment would be residential. If the BTL is in a high demand area, great for the bank

The accidental landlord, those that kept their first home, while they purchased their second would want to prioritise the 2nd and get rid of the first. They may be in a situation where both would need to be repossessed.

Singletons that got together and kept both their properties, would probably want to get rid of both properties as they have outgrown them

I bought an apartment in 2002. I sold it since but at the time I sold it it was on a tracker and the mortgage now would be about €480 pm according to karls mortgage calculator.

Same apartments are getting advertised for €800 pm on daft.
When I sold it I was getting €1250 PM for it, but even so it still looks like there is still a healthy few bob to be made on them if i anyone had of kept one bought at the same time.

khards

http://www.davy.ie/davy/article.htm?id=mortgage20130729_29072013.htm

Owner-occupier mortgage arrears are set to exceed our forecast for a peak of 16.5% by value in mid-2013 despite rising employment. It appears that mortgage payment discipline has weakened. A growing culture of strategic non-payment of debt has followed a confused regulatory response, including inappropriate constraints in contacting delinquent borrowers and delays in new legislation to address the 2011 Dunne ruling that removed the credible threat of repossession.
...
...
A potential flood of repossessed properties has been described as a threat to the housing market and economic prospects. The US experience suggests these fears are overdone. Indeed, in those US states where the path to repossession is shorter, housing markets have typically found their floor more quickly and started to recover earlier. Ireland’s inert policy response to the mortgage arrears crisis is changing.

cookie1977

khards wrote: »

http://www.davy.ie/davy/article.htm?id=mortgage20130729_29072013.htm

Except you left out one thing. In the US there are non recourse mortgages. Big difference.

khards

Bankrupty + Repossession = non recourse.

cookie1977

khards wrote: »

Bankrupty + Repossession = non recourse.

The point being is that as there is non recourse mortgages in the US the situations are not the same as the document seems to state. Bancruptcy in America is also significantly different to here too. I will say at least they are saying that split mortgages are an important solution to our problems:

Split mortgages may offer a lengthy route to debt forgiveness
Our analysis of the standard financial statements data suggests that for one-third of stressed cases, temporary restructuring solutions such as an IO, term extension or arrears capitalisation may be an appropriate outcome. However, for the remaining two-thirds, the outcome will involve split mortgages, mortgage-to-rent schemes and repossessions, especially where borrowers are uncooperative.

cookie1977

Just happening now:
Developer Sean Dunne has been adjudicated a bankrupt by the High Court in Dublin

khards

I am not sure why you would choose a split mortgage over bankrupt, saving up and starting again.
Split mortgages are the most expensive route, especially banks are wither charging interest of the warehoused part or have provisions in the contract to charge interest on the warehoused part.

A lifetime of debt VS bankruptcy (debt write off) and buying another home at 1/2 price.

RATM

khards wrote: »

It is great to know that those 20,000+ people who are two years behind on payments just have the money tucked down the sofa.

Crisis avoided - there is no real arrears problem!

The fact of the matter is that people would rather be repossessed than pay back negative equity and that is why there are so many arrears.

This.

And as a friend said to me recently isn't it remarkable how the percentage of people in arrears on BTL's is closely tracked by the percentage of people in Ireland who would vote Fianna Fail if there were an election in the morning. He reckoned there was some sort of paraell , his point being that your average FF voter is more likely than others to try to wriggle their way out of their financial mistakes by not paying the mortgage.

Anyway this debate about whether or not BTL'ers have multiple properties is difficult to nail down. Personally I think it is 50/50 in that the older landlord who purchased in the 80's or 90's is more likely than not to only have one BTL. However during the credit boom those people were targetted by banks for additional mortgages - in some cases it was leaflets with their bank statements, in others it was constant phone calls badgering them to borrow more as their investment would be "as safe as houses". When put in the feeding frenzy of the Celtic Tiger when everyone was talking property, property, property it is difficult to see how a majority of them refused the extra line of credit.

For those who had their first foray into BTL in the 1999-2004 period there is a good chance that they also have more than one property. Once they were paying their mortgages on time for 2-3 years the banks were back onto them direct marketing to take more credit. The more conservative stayed away but many did take the bait. Although it is anecdotal in my own family two people have 3+ properties, both of them are professionals who were earning excellent salaries. Virtually all of their colleages are in a similar boat, in fact it was often the case that colleagues were the ones trying to convince them that it was the right thing to do, along with the banks pestering them and the media telling them that the investment was "as safe as houses".

Finally there is an article somewhere on independent.ie on the property tax and it reveals that there is one individual in the state who paid 400+ sets of property tax for his 400+ properties. There were several more with 100+ properties and a chunk of people will 20+. Whether or not people like this are in trouble is unknown but I think it is fair to assume that all of these people had the banks badgering them to buy more and in a majority of cases the banks succeeded. I also think it is fair to assume that the banks themselves didn't do any homework on weather or not the loans they were offering were sustainable in the event of interest rates rises and price falls.

cookie1977

khards wrote: »

I am not sure why you would choose a split mortgage over bankrupt, saving up and starting again.
Split mortgages are the most expensive route, especially banks are wither charging interest of the warehoused part or have provisions in the contract to charge interest on the warehoused part.

A lifetime of debt VS bankruptcy (debt write off) and buying another home at 1/2 price.

I dont know if you actually read the article you quoted but it talks of debt right downs on the split mortgages and small cure-rates to incentivise the banks. In other words they're not recommending what you're proposing but rather sustained manageable debts where in the long term following economic recovery the banks can make a profit from the warehoused part, long term.

borrowers require some element of a principal write-down (i.e. split mortgage) to adjust for their lower income thresholds

A recent speech by the Governor of the Central Bank focused on split mortgages – where a portion is warehoused to restore performance. Here the base loan must be sustainable over the life of the arrangement and not only at the onset. The Governor made explicit reference that the new payment schedule must leave the borrower with sufficient funds to at least equal minimum Reasonable Living Expenses, as set out by the Insolvency Service. The Governor emphasised conditionality with respect to the warehoused portion of a split mortgage. For example, where a borrower’s circumstances improved through wage increases, the claw-back mechanism should be limited to 50%. A higher claw-back percentage would provide a disincentive for borrowers to improve their income. Furthermore, recourse on the warehoused loan at maturity should, at the very least, be limited to the collateral value, and a sustainable arrangement should typically provide for lifetime security of tenure. That is, the borrower may remain in the property until death in exchange for reasonable rent payments.

Our interpretation of the Governor’s comments is that split mortgages will be a pathway towards debt write-downs for unsustainable mortgages, albeit with conditional arrangements based on future income prospects as a safeguard against moral hazard.

All the above to me points to limited (but valid/essential) repossessions going forward unless the economy takes another turn for the worse.

khards

Looks to be the case as it should, but ...

Since people do not tend to live in the same house all of their lives, what happens on the following schemes if you either want or need to move?

> Warehoused mortgage.
> Mortgage to rent.

Banks would need to provide a viable moving solution in these cases otherwise a percentage of the loans will default again when owners need to move and do not have equity.

There are many cases you may want or need to move:

> Change of job/job loss
> Children leaving home
> Disability
> Death of partner
> Family moved away
> Change in affordability/income.
> Retirement

In the case of a warehoused mortgage, assuming that inflation hovers around 2% it is going to be 35yrs before the negative equity is going to be wiped out. In many cases people will need to move in this period of time. Even assuming overall inflation (wage & CPI) at 5% (unlikely with Germany in control) then it is going to take 15 years until people are able to move.

cookie1977

khards wrote: »

Looks to be the case as it should, but ...

Since people do not tend to live in the same house all of their lives, what happens on the following schemes if you either want or need to move?

> Warehoused mortgage.
> Mortgage to rent.

Banks would need to provide a viable moving solution in these cases otherwise a percentage of the loans will default again when owners need to move and do not have equity.

There are many cases you may want or need to move:

> Change of job/job loss
> Children leaving home
> Disability
> Death of partner
> Family moved away
> Change in affordability/income.
> Retirement

In the case of a warehoused mortgage, assuming that inflation hovers around 2% it is going to be 35yrs before the negative equity is going to be wiped out. In many cases people will need to move in this period of time. Even assuming overall inflation (wage & CPI) at 5% (unlikely with Germany in control) then it is going to take 15 years until people are able to move.

I'm sorry I cant read the entire document for you but...

severely distressed borrowers where principal reduction is likely to have an insufficient impact and alternative methods such as mortgage to rent schemes, trade-downs and repossessions are the likely outcome

uberalles

Thousands of homes targeted for seizure by banks (The Stick for most)
http://www.independent.ie/business/personal-finance/property-mortgages/thousands-of-homes-targeted-for-seizure-by-banks-29458021.html

Banks finally give deals to ease mortgage pain (The carrot for a few)
http://www.independent.ie/business/personal-finance/property-mortgages/banks-finally-give-deals-to-ease-mortgage-pain-29440024.html

jay0109

uberalles wrote: »

Thousands of homes targeted for seizure by banks (The Stick for most)
http://www.independent.ie/business/personal-finance/property-mortgages/thousands-of-homes-targeted-for-seizure-by-banks-29458021.html

about bloody time.

The lack of property on the market is ridiculous. As is the amount of people living in houses they can no longer afford or have decided to stop paying their mortgage on.
Get on with the repossessions and don't drag this out for another 5+ years

uberalles

Homeowners 'dodge their mortgage bill'
http://www.herald.ie/news/homeowners-dodge-their-mortgage-bill-29460194.html

"Repossessions will have to rise, particularly in the buy-to-let sector, to provide a credible threat against strategic non-payment of arrears," he said.

More mortgage holders opt out of payments
http://www.irishexaminer.com/ireland/cwmhidmhcwcw/rss2/

Another problem is any changes to interest-only payments for buy-to-let investors may not be sustainable, given the older age profile of such borrowers, many of whom are retired.

gaius c

khards wrote: »

I am not sure why you would choose a split mortgage over bankrupt, saving up and starting again.
Split mortgages are the most expensive route, especially banks are wither charging interest of the warehoused part or have provisions in the contract to charge interest on the warehoused part.

A lifetime of debt VS bankruptcy (debt write off) and buying another home at 1/2 price.

I suspect it's because most people in arrears (deliberate or otherwise) think that "split mortgage" really means "write off" and that they won't ever have to pay off that part of the loan or that they'll simply get another deal on that when they can't pay it. After all, it's pretty much mirroring what Harry Crosbie said about his own loans on national TV.

Not being in that position myself so I can only speculate but it is highly possible that split mortgages are going to become a very unpleasant sting in the tail for a lot of people who don't understand that they need to stay on top of their debt obligations.

Speculation or conspiracy theory...you decide.
1. Mortgage of €500k.
2. House is now worth €350k.
3. Owner (through reduced income) can only pay a mortgage equivalent to €300k.
4. Mortgage is split with the "active" mortgage being €300k and the split being €200k.
5. Bank sells off the split mortgage part of the debt for 50c in the € as opposed to the 25c in the €, it would get for ordinary bad debt.
6. All this is hidden from public view by non-disclosure agreements and lack of rational public discussion about what we should do with arrears.
7. When the split mortgage term is up, the buyer of the debt comes looking for their money and if they can't get that, they repo the house they hold as security.

The reason I think something like this is coming down the tracks is because split mortgages offer no advantage to the bank. They are expected to effectively write off this debt as it is long-term and their own borrowing requirements are short term, which they have to keep refinancing. They could easily work a deal where their loan retains the house as security for the loan in case of future default but that security transfers to the debt buyer at the end of the term.

Outcome would be elderly people being repossessed after spending a lifetime living in that house or their children realising that there's going to be no inheritance windfall as the house needs to be sold to pay their parents' debts. I don't know about other people but I'd rather lose my home a bit earlier in life when I still have earning capacity and the ability to start again.

uberalles

gaius c wrote: »

I suspect it's because most people in arrears (deliberate or otherwise) think that "split mortgage" really means "write off" and that they won't ever have to pay off that part of the loan or that they'll simply get another deal on that when they can't pay it. After all, it's pretty much mirroring what Harry Crosbie said about his own loans on national TV.

Not being in that position myself so I can only speculate but it is highly possible that split mortgages are going to become a very unpleasant sting in the tail for a lot of people who don't understand that they need to stay on top of their debt obligations.

Speculation or conspiracy theory...you decide.
1. Mortgage of €500k.
2. House is now worth €350k.
3. Owner (through reduced income) can only pay a mortgage equivalent to €300k.
4. Mortgage is split with the "active" mortgage being €300k and the split being €200k.
5. Bank sells off the split mortgage part of the debt for 50c in the € as opposed to the 25c in the €, it would get for ordinary bad debt.
6. All this is hidden from public view by non-disclosure agreements and lack of rational public discussion about what we should do with arrears.
7. When the split mortgage term is up, the buyer of the debt comes looking for their money and if they can't get that, they repo the house they hold as security.

The reason I think something like this is coming down the tracks is because split mortgages offer no advantage to the bank. They are expected to effectively write off this debt as it is long-term and their own borrowing requirements are short term, which they have to keep refinancing. They could easily work a deal where their loan retains the house as security for the loan in case of future default but that security transfers to the debt buyer at the end of the term.

Outcome would be elderly people being repossessed after spending a lifetime living in that house or their children realising that there's going to be no inheritance windfall as the house needs to be sold to pay their parents' debts. I don't know about other people but I'd rather lose my home a bit earlier in life when I still have earning capacity and the ability to start again.

The gubberment is making the banks split 1/5 of distressed mortgages if I read right.
My guess is they will follow what has happened in other country's.

Group all of the worst neg equity properties in the land, say for example rural areas where prices have dived dramatically and even if repossessed would sell for less than 50% anyway. Split those. Keep the govt happy and it looks like the banks are helping some people, where as they are being cunning about who they are based on location and what they can get for the property.

Next go after the other 4/5 of valuable popular properties when a Repro will quickly sell for a good price.

Thats whats happened in other Countries.

Cuddlesworth

gaius c wrote: »

Speculation or conspiracy theory...you decide.
1. Mortgage of €500k.
2. House is now worth €350k.
3. Owner (through reduced income) can only pay a mortgage equivalent to €300k.
4. Mortgage is split with the "active" mortgage being €300k and the split being €200k.
5. Bank sells off the split mortgage part of the debt for 50c in the € as opposed to the 25c in the €, it would get for ordinary bad debt.
6. All this is hidden from public view by non-disclosure agreements and lack of rational public discussion about what we should do with arrears.
7. When the split mortgage term is up, the buyer of the debt comes looking for their money and if they can't get that, they repo the house they hold as security.

I just can't get my head around why any bank would want to "split" a morgage on those terms.

Assuming a 500k mortgage over 30 years, although in my head even a 300k mortgage is relatively unsustainable for most people.

A 500k mortgage at 5% is 2710 per month. Considered unsustainable in this case.

A 300k mortgage at 5% is 1626 per month.

If in 2-5 years interest rates rise to 10%, which as I understand it would not be unreasonable considering the state of our banks currently coupled with a minor economic jumpstart, the repayments would be 2650 per month. Which is pretty much back where we started, at a unsustainable level for a large portion of people.

If the bank did take the split mortgage and wipe 200k off the debt, it still owes money to its bondholders and has to realize the loss on its books. So it obviously needs that 100k sell off to a investor of the split. Only problem with that, is the exact problem that banks are facing right now.

You can't get at the capital held in family homes in Ireland, without huge cost and time invested. And since we are years into a depression, with the worst mortgage arrears in the world due to this very issue and every single step possible being taken by our government to avoid it, who in their right mind would buy that debt at 50%? I'd take a poke at it at maybe 20%, considering the above. I'd love to get a hold of some relevant stats to see what the average recovery period of debt could end up as. Would depend on the age profile of the owner occupiers. A stat that I understand only bank staff have at the moment(I'm aware of the MAB's survey and discount it for a number of reasons).