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

gaius c

I just pulled hypothetical numbers and you're welcome to pick at them but I'm looking at the overall picture and that scenario makes a hell of a lot more sense than:

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 "warehouses" the split mortgage but continues to refinance that (as well as the portion being serviced) over the full term of the mortgage.
6. At the end of the mortgage term, the bank comes looking for the amount of the split mortgage but they've been paying interest on it all along so even if they get the principal back, they are losing money hand over fist twenty years down the line when they are supposed to be "fixed" and they still stand the risk that they might not get their capital back.

It simply doesn't make any sense that a split mortgage would remain on the bank's books.

gaius c

A NEW law allowing banks to repossess homes and investment properties comes into operation today.

Now many of the more than 54,000 residential homeowners who are more than a year in arrears face the real threat of repossession.

Banks are likely to try to take ownership of around 30,000 buy-to-lets that are in arrears. Almost half of these mortgages are having only the interest payments made on them.

Davy Stockbrokers has estimated that up to 43,700 letters threatening repossession have been issued by banks, despite their being unable to pursue cases over the past two years.

http://www.independent.ie/business/personal-finance/property-mortgages/thousands-face-threat-of-repossession-under-new-law-29461533.html

khards

gaius c wrote: »

A NEW law ....

More rubbish from the independent.

They are trying to make out that it was never possible to have your property repossessed in the first place!
The only reason that the banks were not able to repossess is that the law was changed (deliberately, you decide) in 2009 as the market stated collapsing.

uberalles

khards wrote: »

More rubbish from the independent.

They are trying to make out that it was never possible to have your property repossessed in the first place!
The only reason that the banks were not able to repossess is that the law was changed (deliberately, you decide) in 2009 as the market stated collapsing.

From what I read and Im open to correction, It was near impossible for the Banks to distinguish between family homes and investment properties prior to this Law amendment. So a LL with 10 properties underwater was treated the same a family with 5 kids in residence.

While they were at it they made it easier to repro family homes as well.

Irish style, they really did drag their heals, but it is a real change and has given the banks teeth.

The low lying fruit will be the underwater BTL first.

The_Conductor

uberalles wrote: »

The low lying fruit will be the underwater BTL first.

The low lying fruit will be property in the Dublin/Cork/Galway areas, that the banks and other lending institutions won't have any difficulty in selling onwards. Its not in their interests to repossess property they can't shift.......

cookie1977

The_Conductor wrote: »

The low lying fruit will be property in the Dublin/Cork/Galway areas, that the banks and other lending institutions won't have any difficulty in selling onwards. Its not in their interests to repossess property they can't shift.......

Hence why we wont see this "glut of repossessions".

The_Conductor

cookie1977 wrote: »

Hence why we wont see this "glut of repossessions".

There could well be 30-40,000 properties (and a significantly smaller number of borrowers- as in the case of the BTL loans- a lot of the borrowers own more than one property) in these areas that are on their hit lists!

As they're already sending out letters- lets wait and see.......

cookie1977

The_Conductor wrote: »

There could well be 30-40,000 properties (and a significantly smaller number of borrowers- as in the case of the BTL loans- a lot of the borrowers own more than one property) in these areas that are on their hit lists!

As they're already sending out letters- lets wait and see.......

There's a total of about 95,000 PDH/PPR (about 12% of the 774,000 PDH/PPR) in arrears of 90 days or more and 29,000 BTL's (about 20% of the 149,000 BTL) in arrears of 90 days or more. I personally dont see your numbers of properties being repossessed (if that is in fact what you mean).
http://www.centralbank.ie/press-area/press-releases/Pages/MortgageArrearsandRepossessionsStatisticsQ12013.aspx

But if that is what's repossessed then 30-40,000 represents about 4-5% of total stock (total stock is about 923,000). Hardly a glut now?

The_Conductor

AIB and BOI released figures stating that they reckon there are between 40,000 and 50,000 strategic defaulters who expect a debt write-down. Even if this is on the high side- they represent those who should be pursued in the first instance. Plans need to be made for rehousing those who through no fault of their own are unable to repay their mortgages (but they shouldn't get to keep the properties). People will be moaning about special treatment for pensioners, or those with children- or whatever- and suggesting that at very least they be rehoused in the areas they're currently in- I don't see why any of this should be entertained though- especially in the cases of anyone who strategically default.

cookie1977

The_Conductor wrote: »

AIB and BOI released figures stating that they reckon there are between 40,000 and 50,000 strategic defaulters who expect a debt write-down. Even if this is on the high side- they represent those who should be pursued in the first instance. Plans need to be made for rehousing those who through no fault of their own are unable to repay their mortgages (but they shouldn't get to keep the properties). People will be moaning about special treatment for pensioners, or those with children- or whatever- and suggesting that at very least they be rehoused in the areas they're currently in- I don't see why any of this should be entertained though- especially in the cases of anyone who strategically default.

I agree but I would so love to see independent figures on strategic defaulters. They should be pursued but an independent CB analysis should be performed to find out the actual numbers.

Villa05

cookie1977 wrote: »

There's a total of about 95,000 PDH/PPR (about 12% of the 774,000 PDH/PPR) in arrears of 90 days or more and 29,000 BTL's (about 20% of the 149,000 BTL) in arrears of 90 days or more. I personally dont see your numbers of properties being repossessed (if that is in fact what you mean).
http://www.centralbank.ie/press-area/press-releases/Pages/MortgageArrearsandRepossessionsStatisticsQ12013.aspx

But if that is what's repossessed then 30-40,000 represents about 4-5% of total stock (total stock is about 923,000). Hardly a glut now?

> There were 25,000 sales in 2012 - It would take a year and a half to clear repossessed stock assuming no other housing stock sells.

> Repossession figures of 30 to 40k would double the stock currently for sale on Daft

> Repossessions would be priced to sell quickly, Most stock on Daft is priced to the max, with maybe 20% priced at realistic values. The psychological effect of so many lower priced homes on the market in a short space of time would put considerable downward pressure on prices.

> Ulster Bank attempted to offload itself to the Irish State in return for UK Assets NAMA hold. It seems such a ludicrous offer that I suspect there may have been a threat from Ulster to release substantial amount of repossession to the market, knowing that the Irish Gov would want to prevent this. They have shown that they are prepared to sell their children s futures to prevent property from falling to its true value.

stevedublin

Villa05 wrote: »

> knowing that the Irish Gov would want to prevent this. They have shown that they are prepared to sell their children s futures to prevent property from falling to its true value.

You are talking about the previous government, before the General election here, no?

Seanie_H

Tomorrow's Examiner -

http://cf.broadsheet.ie/wp-content/uploads/2013/08/BQnS5isCAAAPAbd.jpg

AIB to target a few thousand homes.

"20% of arrears are strategic defaulters"

Villa05

stevedublin wrote: »

You are talking about the previous government, before the General election here, no?

Correct the previous Gov made the bet, however, the present Gov have to play with that bet, they can't undo it

cookie1977

Villa05 wrote: »

> There were 25,000 sales in 2012 - It would take a year and a half to clear repossessed stock assuming no other housing stock sells.

> Repossession figures of 30 to 40k would double the stock currently for sale on Daft

> Repossessions would be priced to sell quickly, Most stock on Daft is priced to the max, with maybe 20% priced at realistic values. The psychological effect of so many lower priced homes on the market in a short space of time would put considerable downward pressure on prices.

> Ulster Bank attempted to offload itself to the Irish State in return for UK Assets NAMA hold. It seems such a ludicrous offer that I suspect there may have been a threat from Ulster to release substantial amount of repossession to the market, knowing that the Irish Gov would want to prevent this. They have shown that they are prepared to sell their children s futures to prevent property from falling to its true value.

You are making massive assumptions here. And it was the UK that attempted to offload UB to Ireland not UB itself.

Villa05

cookie1977 wrote: »

You are making massive assumptions here. And it was the UK that attempted to offload UB to Ireland not UB itself.

Same really, it indicates UB want to get out of the irish market
What assumptions r u questioning?

cookie1977

You don't know if repossessions will be priced to clear. Do you have any examples of that?

Do you have any proof UB threatened anyone? That utter hyperbole.

What do you mean 30-40k would double the stock in dublin. You don't know the full details of the locations of the arrears stock. Have you any evidence to support this?

D3PO

Villa05 wrote: »

What assumptions r u questioning?

well the most glaring one is the assumption that huge swathes of repos would come on the market at the same time. Each repossession requires a court hearing to grant the repossession there are a finite number of these that can take place any day / week / month / year.

This myth that huge chunks of tens of thousands of repossessions will appear on the market at any one time is exactly that a myth. So the assumption they will flood the market and cause massive price variations due to being firesold is a huge and incorrect assumption.

The_Conductor

Villa05 wrote: »

Same really, it indicates UB want to get out of the irish market
What assumptions r u questioning?

Wrong.
The UK government wanted RBS to offload loss making subsidiaries- of which UB is near the top of the list. An unnamed Treasury official suggested (in the same manner that politicians here have been floating balloons about the budget and other matters), that perhaps NAMA would be willing to swap UK property in exchange for taking a majority stake in UB, in the same manner that the Irish government has taken majority stakes in most of the Irish banks- and a minority stake in BOI (15%).

UB is rationalising its ROI operations- as are most of the other lenders- it doesn't 'want to get out of the Irish market' though- and its losses are now at a very reasonable level, with profitability forseen for perhaps Q1 2015.

This was some smart ass official in the UK- floating the idea of offloading UB on the Irish taxpayer- in a similar manner to the way we've been saddled with everything else.

cookie1977

I'm more than happy to discuss things but when people come out with unfounded hearsay and ridiculous statements it's hard to have a coherent conversation.

cookie1977

16% of UB's republic mortgage books is in 90 days arrears (I think someone earlier in this thread said significantly higher. Also:

Could the whole Dublin part of the bank, with its troublesome mortgages, be spun off into a "bad bank" while the Belfast bit remains in the RBS family?

The bank insists it remains committed to all its customers across the island and sees opportunities for future growth.

But whether those sentiments are shared by its main shareholder, the UK government, remains to be seen.

http://bbc.co.uk/news/uk-northern-ireland-23527615

I can't see the UK government turning it in to a bad bank. They're much more likely to see how repossessions and deals go with the existing book. There's still profit there in the long term if they manage it properly.

dloob

I don't see how it's in a banks interests to repossess a lot of properties and then throw them all on the market at once and priced as cheap as possible.
Unless the bank wants to get as little money as possible from the repo I suppose.
Would it not be more in their interests to drip them onto the market to keep prices up so they get more money?

Snakeblood

dloob wrote: »

I don't see how it's in a banks interests to repossess a lot of properties and then throw them all on the market at once and priced as cheap as possible.
Unless the bank wants to get as little money as possible from the repo I suppose.
Would it not be more in their interests to drip them onto the market to keep prices up so they get more money?

That would depend on whether it's one bank or many thinking about about repossessions.
Ulster bank are making noises about repossessions. They don't have the same ties to the Irish government that the other big banks do, so they may say 'Well, the stock of houses will have to be dumped on the market sooner or later, and if we can do it before other banks get round to it, we'll get more money, if we wait, everyone will dump and we'll get less money, because the market isn't going to recover and waiting is a fools game'.

Not that it will necessarily happen like that, but it's a possibility.

jmayo

The_Conductor wrote: »

AIB and BOI released figures stating that they reckon there are between 40,000 and 50,000 strategic defaulters who expect a debt write-down. Even if this is on the high side- they represent those who should be pursued in the first instance. Plans need to be made for rehousing those who through no fault of their own are unable to repay their mortgages (but they shouldn't get to keep the properties). People will be moaning about special treatment for pensioners, or those with children- or whatever- and suggesting that at very least they be rehoused in the areas they're currently in- I don't see why any of this should be entertained though- especially in the cases of anyone who strategically default.

The thing about some of these strategic defaulters is that when they realise there is no bailout for the little guy, because quelle surprise the magic money tree doesn't exist after all, they will make offers to pay up and be able to bring their mortgages back on line.
I bet some of these have been having a mortgage holiday, so to speak, just chancing their arm.

Some will probably not want to continue paying their mortgage because they don't see why they should honour their agreement to pay their full mrotgage amount since their loans now far outweigh their proeprty value.

So no one can say all strategic defaulters are going to be repossessed.

Likewise a fair chunk of the non strategic defaulters have no recourse, but to allow reposession and probably go for bankruptcy.

cookie1977 wrote: »

There's a total of about 95,000 PDH/PPR (about 12% of the 774,000 PDH/PPR) in arrears of 90 days or more and 29,000 BTL's (about 20% of the 149,000 BTL) in arrears of 90 days or more. I personally dont see your numbers of properties being repossessed (if that is in fact what you mean).
http://www.centralbank.ie/press-area/press-releases/Pages/MortgageArrearsandRepossessionsStatisticsQ12013.aspx

But if that is what's repossessed then 30-40,000 represents about 4-5% of total stock (total stock is about 923,000). Hardly a glut now?

And extra 4% or 5% added to supply can have an impact on the market and drive it down.
The effects will vary depending on location of course, but there has to be some effects.
There is also the big impact on sentiment.

There just has to be repossessions because the can has been kicked down the road long enough.
You can not indifinetly continue having people failing to repay their loans and yet continuing to enjoy the use of their assett.
The real world has to come into paly at some time.

The likes of NIB, KBC, Ulster are not beholden to the government, but have shareholders or other governments to please and thus shoudl be first to move.
Who were the first banks that went after the commerical loans and the developers.
It was the likes of Rabo/ACC.
Hell some of the Irish owned banks were even willing to try and keep one developer in business, until a wise judge called it delusion.

The foreign banks will lead the way and their management may have no option, but try and get as much money as fast as possible.
People can say they will drip feed onto the market, but why should one bank wait for another.
It will be get as much money in as fast as possible and make sure you are not the one left holding the crud.

Looking at the way we do things Irish style the last ones to get proactive and get their ars* in gear will be the Irish owned banks.
I expect IL&P to move before BOI, AIB, and what was formerly INBS and EBS.

As it is we have a property market that is in limbo with a threat hanging over it that there is a stockpile of property that can and should come onto the market at some stage.
We have banks that are in limbo because they have huge chunk of losses that are not being realised.

Something has to give.

RATM

Snakeblood wrote: »

That would depend on whether it's one bank or many thinking about about repossessions.
Ulster bank are making noises about repossessions. They don't have the same ties to the Irish government that the other big banks do, so they may say 'Well, the stock of houses will have to be dumped on the market sooner or later, and if we can do it before other banks get round to it, we'll get more money, if we wait, everyone will dump and we'll get less money, because the market isn't going to recover and waiting is a fools game'.

Not that it will necessarily happen like that, but it's a possibility.

If I were the CEO of Ulster Bank/RBS that is exactly the strategy I'd think is the most sensible in the current circumstances. No point in them holding onto properties which will decrease in value as other banks repossessions come on stream.

Otherwise AIB's news that 20% of all their mortgage holders are strategic defaulters is stunning- I always thought it it would high but not that high. There are a lot of dishonest people in this country, for once I am on the banks side in coming down on them like a ton of bricks, judges will also have no sympathy for their poor mouth stories and forensic accountants will get to the bottom of their finances. Rightly so too as if these people are not made to pay then we will all be paying for their mortgages through higher taxes and higher interest rates.

GetWithIt

RATM wrote: »

Otherwise AIB's news that 20% of all their mortgage holders are strategic defaulters is stunning

That's not what he said. He said 20% of those in arrears were strategic defaulters. So 20% of X% of their mortgage holders. A far smaller number,

cookie1977

Snakeblood wrote: »

That would depend on whether it's one bank or many thinking about about repossessions.
Ulster bank are making noises about repossessions. They don't have the same ties to the Irish government that the other big banks do, so they may say 'Well, the stock of houses will have to be dumped on the market sooner or later, and if we can do it before other banks get round to it, we'll get more money, if we wait, everyone will dump and we'll get less money, because the market isn't going to recover and waiting is a fools game'.

Not that it will necessarily happen like that, but it's a possibility.

You could just as equally say that when people see UB dumping houses they will hold off buying thinking that "wait until aib and BOI and PTSB etc... start dumping, then prices will really drop. we'll hold off until then".

cookie1977

RATM wrote: »

Otherwise AIB's news that 20% of all their mortgage holders are strategic defaulters is stunning- I always thought it it would high but not that high. There are a lot of dishonest people in this country, for once I am on the banks side in coming down on them like a ton of bricks, judges will also have no sympathy for their poor mouth stories and forensic accountants will get to the bottom of their finances. Rightly so too as if these people are not made to pay then we will all be paying for their mortgages through higher taxes and higher interest rates.

Sorry but can we please stop with this nonsens. It is not 20% of mortgage holders. AIB have said that they "think/estimate" that 20%of those in ARREARS with aib are strategic defaulters.


http://www.thejournal.ie/david-duffy-says-that-aib-customers-are-strategically-defaulting-1019119-Aug2013/

jay0109

I know of 1 good family gaff being sold off by a bank at the moment as a result of repossession. Good area (D6W) close to town with plenty of green area around it. Not a huge house but built in the past 15 years.
The price is on the high side given recent sales in the estate.

Perhaps the banks will have a different policy when there's a lot of repossessed gaffs hitting the markets but have to say I'm disappointed by the pricing on this particular one.

Snakeblood

cookie1977 wrote: »

You could just as equally say that when people see UB dumping houses they will hold off buying thinking that "wait until aib and BOI and PTSB etc... start dumping, then prices will really drop. we'll hold off until then".

Some will. Some won't. Some (very few) people are back paying stupid prices for houses now. If I were ulster bank, I'd be trying to lasso those people now. The people who are holding off because they know there's a huge property question mark probably won't do anything until the question is answered.