Ireland, where repaying your mortgage is optional

Anynama141

Remember all those people who told you (and continue to tell you) that moral hazard is not a problem? Well have a look at this graph that compares the level of mortgage arrears with that of other European countries (including Greece and Spain, where unemployment is well over 20%)...



That enormous debt, if not paid by the people who borrowed it, will largely be paid out of your taxes, that you would probably prefer to be spent on hospitals, schools, roads, policing and such, or left in your pocket for you to spend.

There's a good article here where the chart features heavily.

But the growing pile of defaulting home loans holds other risks for Ireland. For one, it’s choking off the flow of capital to the economy.

Let’s remember why we even bother putting up with banks. They’re supposed to be good at doling out capital efficiently. They take the unused savings of society and channel it toward productive uses—at least in theory. But if banks coming out of a financial crisis start practicing widespread forbearance and evergreening of loans, they become less and less efficient at their job, because so much of their capital is tied up in bad loans instead of getting put to good use.

That’s part of what’s happening in Ireland right now. You can see, mortgage lending has pretty much collapsed.



Now, lending would logically fall after a financial crisis triggered by too much debt. But it will have to stop falling before the domestic economy starts growing.

That’s why Ireland must overcome its anti-eviction tendencies and clear the backlog of bad loans. And it’s not just the homeowners that will feel the pain through necessary foreclosures and repossessions. Banks must fess up to their losses and restructure bad debts.

It won’t be pretty or easy. But for the Irish government—so often dominated by the European powers that bailed the country out—it’s one of the few areas where it can still act. As for the European officials who have built Ireland’s painful austerity push into the “model” response for troubled European countries? They’re going to have to admit even supposedly virtuous Ireland is having serious difficulties making austerity work.

Anynama141

By the way, for those of you looking to buy a place - why do you think it is so hard to find a good property? Could it be because there are over 100,000 properties occupied by people who aren't actually paying the mortgage?

RATM

I think that chart gives truth to the lie that strategic defaults in Ireland are not off the scale.

It makes you wonder what is it that is different here compared to the other countries who are facing just as much austerity as we are. Why are they still paying their mortgages and we are not ?

Blackjack

RATM wrote: »

I think that chart gives truth to the lie that strategic defaults in Ireland are not off the scale.

It makes you wonder what is it that is different here compared to the other countries who are facing just as much austerity as we are. Why are they still paying their mortgages and we are not ?

Personal responsibility. "The Bank made me borrow all this money".

keith16

RATM wrote: »

I think that chart gives truth to the lie that strategic defaults in Ireland are not off the scale.

It makes you wonder what is it that is different here compared to the other countries who are facing just as much austerity as we are. Why are they still paying their mortgages and we are not ?

It would hazard a guess that reposessions are happening in other countries - in other words, the data for the other countries are sustainable, because the unsustainable ones have been taken out of the equation.

Anynama141

Blackjack wrote: »

Personal responsibility. "The Bank made me borrow all this money".

Don't forget the meeja and Bertie.

yosser hughes

What's going on in this country is gombeenism and it's promoted daily by the likes of David Hall of New Beginnings who seems to have a residency in RTE.
The narrative of" it 's all the banks fault" has been relentless since 2007. Those who cheerled the property bubble are now cheerleading the debt forgiveness/strategic default. Except they are denying that strategic default is going on at all.
this country will remain screwed as long as rising property prices is greeted as good news and a sign of 'recovery' and also as long as supply is restricted by people being allowed live in their houses for free.
That's not to mention the vast vast amount of Buy - to -let investors who are pocketing the rent and not repaying their loans either.
It's an ongoing farce. The country will suffer, remain unsustainable and the taxpayer will pay for it.

Anynama141

Here's an example of what is going on with some of these mortgages, from Askaboutmoney...

Thread Title:

unsustainable mortgage in negativ equity - how best to proceed?

Details of the 'unsustainable mortgage'

property -
Lender: Bank of Ireland
Amount outstanding: 272,000
Value of home: 125,000
Interest rate: tracker,
Monthly repayment 1142 euro
Amount in arrears 0
Monthly rent received 750 (but currently tenant 2,200 in arrears) - trying to currently evict/ clear tenant and 'start again;

And the income of the borrower:

Sorry - current salary is £110,000 GBP. Apart from ongoing bills electric, gas, council tax, etc, No other current commitments

£110,000 = €130,000

Eric Cartman

this personal insolvency bill is the greatest load of rubbish to ever come along, It has caused people to actually hold off on payments to dump their unwanted houses back to the markets. These are the same people who will complain when taxes increase in every budget. You cannot get something for nothing, and these people are actually ruining our country.

Blackjack

Anynama141 wrote: »

Here's an example of what is going on with some of these mortgages, from Askaboutmoney...

Thread Title:

Details of the 'unsustainable mortgage'

And the income of the borrower:

£110,000 = €130,000

"Unsustainable" in the modern context means "worth less than I paid for it and I'm ticked off that its no longer the cash cow/golden cow I could boast to my mates about at dinner parties".

EricPraline

Blackjack wrote: »

"Unsustainable" in the modern context means "worth less than I paid for it and I'm ticked off that its no longer the cash cow/golden cow I could boast to my mates about at dinner parties".

Talk about stretching the term "unsustainable" to its limits. €130k gross is over €6000 net income per month, excluding the €750 gross rent per month. And they want to get out of paying €1142?

Unfortunately Sean Dunne's pending escape from his debts will inspire many savvy copycats to attempt likewise.

Joe Hart

Anynama141 wrote: »

Here's an example of what is going on with some of these mortgages, from Askaboutmoney...

Thread Title:

Details of the 'unsustainable mortgage'

And the income of the borrower:

£110,000 = €130,000

You get one of those every day on that site. That is reality, people suffering serious buyers remorse and they want to foist their problem on us.

Duckjob

Anynama141 wrote: »

Here's an example of what is going on with some of these mortgages, from Askaboutmoney...

Thread Title:

Details of the 'unsustainable mortgage'

And the income of the borrower:

£110,000 = €130,000

It's unsustainable if he wants to keep his golf membership and little Lucinda's pony farm.

lima

You are as rotten a scumbag as dunne if you are not paying your mortgage when you have the funds to do so and you should pay. those Irish who are choosing not to pay are as bad a scum as those out robbing iphones on the streets in Dublin.

I have cash in my hand waiting for housing stock to become released and it is incredibly frustrating that the smug feckers from the boom who caused this bubble (the Irish public) are trying to weasel their way out of their financial commitments. Shame on them. They are not Irish in my eyes.

Ray Palmer

Duckjob wrote: »

It's unsustainable if he wants to keep his golf membership and little Lucinda's pony farm.

If you read the thread the OP in it never suggested not paying back his loan. The "unsustainable" was probably misused by the OP in the thread title.
The OP wants to know how to carry his debt to the next property.

I am sure there are people out there who have chanced their arm to see if they will be able to get debt written off but could afford their loan. THe chart here is interesting but also not really saying very much. We have different laws here that pretty much stop repossesions hence we have a high figure. It will be addressed and should probably already been done but public opinion is a big deal on this issue.

The things is how many of these properties are in the areas with rising house prices? There are going to be a portion but it will likely be a smaller portion as the areas of high employement are likely to be areas people can afford to pay their mortgages.

frfintanstack

Anynama141 wrote: »

Here's an example of what is going on with some of these mortgages, from Askaboutmoney...

Thread Title:

Details of the 'unsustainable mortgage'

And the income of the borrower:

£110,000 = €130,000

Good work, you managed to leave out this pertinent detail...

What is your preferred realistic outcome?

The house will never regain full amount I paid for it and l do not anticipate ever be in a position to repay the loan fully. So I would prefer to sell the house and deal with the shortfall

Anynama141

frfintanstack wrote: »

Good work, you managed to leave out this pertinent detail...

What is your preferred realistic outcome?

The house will never regain full amount I paid for it and l do not anticipate ever be in a position to repay the loan fully. So I would prefer to sell the house and deal with the shortfall

He says he doesn't expect to pay the loan in full, and when he says 'deal with the shortfall', presumably he means dump it on the taxpayer - otherwise he IS repaying the debt in full, isn't he?

murphaph

lima wrote: »

You are as rotten a scumbag as dunne if you are not paying your mortgage when you have the funds to do so and you should pay. those Irish who are choosing not to pay are as bad a scum as those out robbing iphones on the streets in Dublin.

I have cash in my hand waiting for housing stock to become released and it is incredibly frustrating that the smug feckers from the boom who caused this bubble (the Irish public) are trying to weasel their way out of their financial commitments. Shame on them. They are not Irish in my eyes.

I don't get you. If this dude pays his mortgage, which he should, then his property won't "become available" (to you at a discount, which is really what you meant, right, because there are properties available right now).

I don't believe for a second that this sort of character should have one penny in debt forgiven, but you have other issues clearly.

murphaph

Anynama141 wrote: »

He says he doesn't expect to pay the loan in full, and when he says 'deal with the shortfall', presumably he means dump it on the taxpayer - otherwise he IS repaying the debt in full, isn't he?

Exactly. "Deal with the shortfall" does not mean "repay the shortfall in full" otherwise the solution is clear....continue as he is renting it out and subsidising the mortgage payment from his nice salary. Doing anything else if he intends paying the debt in full would be stupid as he'd be paying the same debt but be left with no asset at the end. He is also paying very little tax on that rent as most of his mortgage repayment will be interest at this stage.

lima

murphaph wrote: »

I don't get you. If this dude pays his mortgage, which he should, then his property won't "become available" (to you at a discount, which is really what you meant, right, because there are properties available right now).

I don't believe for a second that this sort of character should have one penny in debt forgiven, but you have other issues clearly.

I am responding to the original post. Do you get me now?

There are currently no discounts on property right now, they are still worth more than they should. This is because of people refusing to pay their debts because their houses are worth less than what they owe back.

As soon as repos happen then a more natural amount of stock will be available on the market, and there will be more choice for (first time) buyers like me.

I wasn't around for the 'boom', I chose to live abroad, but now I'm back and those people refusing to pay their dues are preventing property prices from reaching their true worth.

The_Morrigan

I think Ireland, and especially the Irish banks have always been adverse to repossessing houses. I used to work in one of the main retail banks and it was never on the list of priorities if someone got into trouble with their mortgage. My father for many many years also worked for one of the retail banks and it was the very very last resort for any of the branch managers (this was before everything was centralised and decisions were taken from the local networks) and even when the decisions were taken to the mortgage centres he still had powers to put a moratorium in place and provide alternative resolutions to people.

However, since the crash the one thing that both of us have encountered is that Joe Public has a hatred for the banks and a lot of people will now accept no responsibility for any loan they took out over the years with the accusations of the banks throwing money at them and it is all their fault yadda yadda yadda... these eejits are making it worse on those that are genuinely struggling and are attempting to make every payment they can.
I have no time for people who refuse to co-operate with the banks, they walk into the banks with a chip on their shoulder before any negotiations start, and just out right refuse to do anything other than hand back the keys and walk away expecting the outstanding debts to be written off. This behaviour is backing the banks into corners meaning they have less resources to be lenient with those that are trying to sort out their debt problems.

murphaph

lima wrote: »

I am responding to the original post. Do you get me now?

There are currently no discounts on property right now, they are still worth more than they should. This is because of people refusing to pay their debts because their houses are worth less than what they owe back.

As soon as repos happen then a more natural amount of stock will be available on the market, and there will be more choice for (first time) buyers like me.

I wasn't around for the 'boom', I chose to live abroad, but now I'm back and those people refusing to pay their dues are preventing property prices from reaching their true worth.

I admire your optimism, but I don't believe we're gonna see fire sales by the banks. You could waste your whole life waiting for something that may never happen.

lima

murphaph wrote: »

I admire your optimism, but I don't believe we're gonna see fire sales by the banks. You could waste your whole life waiting for something that may never happen.

I'm happy renting and I'm not going to get rushed into the biggest purchase of my life and that's the attitude every potential buyer should have, despite what EA's & Irish Independent try to push. I get a distinct feeling that a mini bubble is being invented and it needs to stop.

Ray Palmer

lima wrote: »

I'm happy renting and I'm not going to get rushed into the biggest purchase of my life and that's the attitude every potential buyer should have, despite what EA's & Irish Independent try to push. I get a distinct feeling that a mini bubble is being invented and it needs to stop.

I think it is hilarious the way people go on about vested interests creating a bubble and how they are able to be successful.

I was about as were many others here and that isn't how it happened. The EA's and the papers didn't spur on house prices people did. People buying forced up prices by offering more. They lied on applications, they decided houses within 100s metres of each other were worth massively different money.

You can argue the banks gave out more money to fuel it but it was always the people buying pushing. People insisting on more houses to be built, PP be relaxed etc... The banks and government did what people wanted. The papers responded to public desire and everybody talked property. It is like blaming recipes in the news paper make people fat when in actual fact not that many even are made and the same goes for property supplements info. Most were actually about design and lots of ads for houses for sale.

Many people didn't do basic maths on the purchase of their houses.

There are some interesting aspects to what people are buying now. It is 3 bed semis near employment. Nothing wrong with apartments but people have been burnt by them now so they will become the next slums in many areas. Planning permission was granted for many due to public pressure. It is too simplistic to blame banks, EA and the media because mostly they act on what is happening not cause it.

People like to disown their own involvement and blame what they don't understand.

The_Morrigan

Ray Palmer wrote: »

........You can argue the banks gave out more money to fuel it but it was always the people buying pushing. People insisting on more houses to be built, PP be relaxed etc... The banks and government did what people wanted....

This is important...the amount of people who lied on their applications was unbelievable. I know a lot of people who would have taken a loan from the credit union for their deposit because the credit union didn't show up on the credit reports, not disclose that amount in the mortgage application and then come back in a year or two later looking to renegotiate the repayments because they couldn't pay both. The banks could only work off what was being presented - if you presented information that supported a mortgage of X then you would have been granted it, and that is what was happening.

Also, the fecking mortgages required the consent of the borrower - the banks never threw money at people they offered a service and a range of products, there was no obligation on any customer to execute any loan documentation, they were free to pick and choose which bank they dealt with and what products they availed of.

jmayo

yosser hughes wrote: »

What's going on in this country is gombeenism and it's promoted daily by the likes of David Hall of New Beginnings who seems to have a residency in RTE.
The narrative of" it 's all the banks fault" has been relentless since 2007. Those who cheerled the property bubble are now cheerleading the debt forgiveness/strategic default. Except they are denying that strategic default is going on at all.
this country will remain screwed as long as rising property prices is greeted as good news and a sign of 'recovery' and also as long as supply is restricted by people being allowed live in their houses for free.
That's not to mention the vast vast amount of Buy - to -let investors who are pocketing the rent and not repaying their loans either.
It's an ongoing farce. The country will suffer, remain unsustainable and the taxpayer will pay for it.

there is a huge vested interest group pedalling debt forgiveness morning noon and night in the media.
How many fooking Frontlines have we had now where the audience has been stacked with ones looking for "help" with their mortgages ?

Joe Hart wrote: »

You get one of those every day on that site. That is reality, people suffering serious buyers remorse and they want to foist their problem on us.

Just remember who is running that site.

The_Morrigan wrote: »

This is important...the amount of people who lied on their applications was unbelievable. I know a lot of people who would have taken a loan from the credit union for their deposit because the credit union didn't show up on the credit reports, not disclose that amount in the mortgage application and then come back in a year or two later looking to renegotiate the repayments because they couldn't pay both. The banks could only work off what was being presented - if you presented information that supported a mortgage of X then you would have been granted it, and that is what was happening.

Also, the fecking mortgages required the consent of the borrower - the banks never threw money at people they offered a service and a range of products, there was no obligation on any customer to execute any loan documentation, they were free to pick and choose which bank they dealt with and what products they availed of.

You are being economical with the truth there.
Banks were sending out unsolicited mail to customers offering them 20k in personal loans and some eejits took them up on this.
I have personal experience of going into a now merged building society, no not INBS, and was told by mortgage borker that with my deposit I should have no problem getting mortgages for a few places and that is how I should proceed.
Bank employees and brokers were often incentivised through bonuses on volume of business and the more they lent out the higher were bonuses.

They actually helped people lie.

Now saying all of that, it does not absolve mary or mickie from paying off their debts and people need to take personal responsibility for their fooking actions :mad:

Anynama141

jmayo wrote: »

there is a huge vested interest group pedalling debt forgiveness morning noon and night in the media.

Just on a point of information, I believe that solicitors (and barristers?) can't practice if they are bankrupt. Also solicitors have been up to their necks in building property empires, presumably having seen their clients 'making money' hand over fist during the good times.

It's worth noting that New Beginning and Irish Mortgage Holders Association, two of the main lobbyists for debt forgiveness, are both founded and fronted by lawyers.

hmmm

If someone has a second property and isn't paying the mortgage in full, I cannot understand why that property should not be repossessed immediately. Yet there are 48,000 buy to let loans "in difficulty". 48,000. Property investors. 48,000. And taxpayers are effectively subsidising them by propping up the banks.

yosser hughes

Anynama141 wrote: »

Just on a point of information, I believe that solicitors (and barristers?) can't practice if they are bankrupt. Also solicitors have been up to their necks in building property empires, presumably having seen their clients 'making money' hand over fist during the good times.

It's worth noting that New Beginning and Irish Mortgage Holders Association, two of the main lobbyists for debt forgiveness, are both founded and fronted by lawyers.

David Hall of New beginnings is also a director of several casinos around Dublin. I doubt many of his customers get debt forgiveness at the roulette wheel.
Is he ever asked about his own situation regarding property or indeed how he applies debt forgiveness in his own business? Is he f**ck!
When the person interviewing him is also up to their necks because they bought a rock in Dalkey or a few apartments in the Ritz Carlton.
Good point about solicitors involved in property plays. I know quite a few who got heavily involved in mad schemes. Bogland in the midlands etc.

Duckjob

http://www.rte.ie/news/business/2013/0403/379597-imf-economy-assessment/

....

In its latest review of Ireland's bailout programme, the fund also raises concerns that banks are losing money even before putting cash aside to cover bad loans.

The IMF states that lenders are "only beginning to tackle non-performing loans".

It says repossessions are low at 0.3% of total mortgage arrears in 2012, compared to 3.25% in Britain and the United States.

The IMF suggested a need to strengthen the efficiency of the repossession regime.

It also said that the designation of specialist judges could concentrate expertise for handling a "potentially larger volume of repossession cases in an expedited manner", while maintaining protections for homeowners.

....

I wonder are the Gov. running out of road to kick this can down...

newby.204

Should the banks not be given powers to repossess homes in certain instances, I would have grave concerns with repossessing family homes, however anyone with a second property that is in financial difficulty should definitely have the property repossessed...... it could be offered to the occupants as their mortgage would probably be half or 2/3 of their rent payments!!

Also do we not have an opportunity here to drastically change the Irish property market, what is the obsession with a crippling mortgage for the purposes of "owning" ones home, if allowed to repossess could the banks not create a potential gold mine of rent controlled property?,a massive portfolio that could generate millions over the term of lifetime leases?

Eg a buy to let property with an outstanding mortgage of 125000

If the bank repossessed this property and let it at 500/month for example over 70 years is 420000

With controlled rents, and maintained properties they would almost certainly be profit generating properties

This is a simple example but now multiply 420000x48000 properties!!!!