Negative equity-Whats the big deal?

The Corinthian make a point that a lot of people are missing in this debate, its an example of the law of unintended consequences.

The fact that we have not had large scale repossessions has changed the mind set of a lot of Irish people in regrades to mortgage debt and debt in general.

We use to be the sort of people who would live on porridge in order to pay our mortgage, but now there has been a subtle but noticeable change in attitude to paying debt.

clairefontaine

MadsL wrote: »

I had some shares I paid $50 for that were bought back by the company at $2

Annoying, yeah. Did I get a dig out? No.

Yeah well you see, unfortunately you are not a big bank in the pockets of politicians who can then tax your people to pay for your massive cock up.

And not only will the people who took out the shares being paying in massive taxes, but the people who were cautious and did not take the risks will also be paying for the cocked up risks you took.

KELTICKNIGHTT

im always amused here when i see certain posts. specially when i can see the poster who started this thread has no idea lol ,

most people just bought a house or built it as i did ,, didn't build a big place as some did, was average by what some did in ireland
when things where ok, a mortgage was about the same or less than renting a place per month , hence built a house,, even doe about 40% was my own money i put into it, right now even with taking it to current value , its 57% less value now that it was in high of so called celtic tiger which i didn't see personally.

So with loss in value, the mortgage is more than the value of the house which is funny when you see i have 40% of my money it too, so i guess it could be worse But can't sell it as i need certain amount to clear my mortgage and work is down 60% so less income, so for now I'm stuck

till such time maybe if ever when things might get better,
With new property taxes etc coming, there's not much difference anymore to owning a house or renting, In some ways , specially now, maybe depending on circumstances
So maybe the idea of owning a house in Ireland is not as good a prospect as once was , so maybe renting will take the lead
As far a getting a loan for a car is totally different thing all together , house use to hold value and car never did and a house is the biggest commitment any person will ever take in there lifes
normal people didn't cause the mess we have today , banks and developers and others did

SBWife

KELTICKNIGHTT wrote: »

normal people didn't cause the mess we have today , banks and developers and others did

Maybe they did. They bought the houses the developers were building and selling, they agreed the loan terms for 100% mortgages over 30 and 35 years. If "normal" people had said in 2003-2004 for fecks sake Dublin is a small city on the periphery of Europe I shouldn't be paying more for an apartment then I would in
NYC then it would have been more difficult for the bubble to continue to inflate.

I'll admit there was disinformation circulated by so called experts but it didn't take a rocket scientist to read the name of the bank or estate agency on the screen and maybe discount the information/opinion based on the fact they had skin in the game. But at the end of the day whether it was because of greed, a herd mentality, wanting to adhere to cultural/societal norms or just stupidity "normal people" played a huge part in causing the mess.

I'd hope that by taking some responsibility for this mess and its horrific human cost, in terms of stress, fear and devastated lives, "normal" people could help prevent a similar situation from recurring.

I do feel sorry for SOME people, however I was listening to Joe Duffy yesterday and the discussion was about people not being able to pay the mortgage etc the usual very sad stories.

BUT

This guy phones in and says after numerous adjustments form the bank the bank has now advised him to sell his house he was not happy with this because he wanted either debt write off or part of his mortgage parked and then written off!!! i.e he wanted to keep his house while the bank take a 50% write down on the loan they gave him. Then there was the woman who is not happy because she lives too far from her work/parents and some how wants her mortgage to disappear so she can buy where she grew up!!

The Corinthian

KELTICKNIGHTT wrote: »

So with loss in value, the mortgage is more than the value of the house which is funny when you see i have 40% of my money it too, so i guess it could be worse But can't sell it as i need certain amount to clear my mortgage and work is down 60% so less income, so for now I'm stuck

With all due respect, if your home is now worth 43% of the original price and you already were able to pay of 40%, it's not as if that "certain amount" to clear your mortgage is going to be gigantic. If so, you've lost the money you put into the property personally but it would appear that negative equity is not really your problem.

More importantly, it sounds as if you didn't account for the possibility of losing employment, or seeing a big decrease in income from your employment. Did you think that the good times would never end? That you could never lose your job or work dry up? How long is your mortgage for? Ten years? Twenty? And it never occurred to you that economies and circumstances can drastically change over the lifespan of the debt?

I'm curious to know because it's not as if you needed the benefit of hindsight to consider these things, at the time.

The Corinthian

The Corinthian wrote: »

With all due respect, if your home is now worth 43% of the original price and you already were able to pay of 40%, it's not as if that "certain amount" to clear your mortgage is going to be gigantic. If so, you've lost the money you put into the property personally but it would appear that negative equity is not really your problem.

More importantly, it sounds as if you didn't account for the possibility of losing employment, or seeing a big decrease in income from your employment. Did you think that the good times would never end? That you could never lose your job or work dry up? How long is your mortgage for? Ten years? Twenty? And it never occurred to you that economies and circumstances can drastically change over the lifespan of the debt?

I'm curious to know because it's not as if you needed the benefit of hindsight to consider these things, at the time.

I do not agree with that sort of reasoning if everyone behaved like that, nobody would ever take out a mortgage because they would be too many unknows, nobody can say that they will never be unemployed or that the circumstances will never change, you can make a certain amount of preparation for the future, but you will never account for every eventuality.

The people I have issue with are those who are paying their mortgage with a struggle but are still paying it, yet somehow think they should get debt write down because they are struggling/in negative equity. Its as if people have forgotten that for the vast majority of family's balancing finances is a struggle and that is NORMAL.

The Corinthian

mariaalice wrote: »

I do not agree with that sort of reasoning if that was the way everyone thinks nobody would ever take out a mortgage because they would be too many unknowings, nobody can say that they will never be unemployed or that the circumstances will never change, you can make a certain amount of preparation for the future, but you will never account for every eventuality.

I'm not suggesting people should take the extreme road of zero risk - thus never investing, as zero risk is unattainable. However, there is a difference between getting a mortgage that stretches you to the limit in even a best-case scenario and one that contains margins of error, considering that you may end up in negative equity or that your income (especially if self-employed) could end up a fraction of what it is during a boom.

According to KELTICKNIGHTT, (s)he isn't even in negative equity; sure, they've lost the money they invested directly into it, but that's not a debt (I presume) and once you calculate the drop in value you actually find they are nominally 3% in positive equity - I say nominally as once you consider interest and other costs, they're probably running at a loss overall.

However, that loss isn't likely to be very big, so you have to ask questions as to why they to were so tight on their calculations when getting the mortgage in the first place that the 'certain amount' to clear their debt is unattainable, even though it's likely not that large (based on what we've been told).

I get and, and when this was going on, got the impression that people were seriously overextending themselves. They could afford a three-bed apartment comfortably, but instead went for a four-bed house that they could just about afford at the time - we all came across such people during the boom. There was no margin of error, no contingency plan, nothing to fall back on.

You will never account for every eventuality, but a lot of people didn't seem to account for any eventuality.

The people I have issue with are those who are paying their mortgage with a struggle but are still paying it, yet somehow think they should get debt write down because they are struggling/in negative equity. Its as if people have forgotten that for the vast majority of family's balancing finances is a struggle and that is NORMAL.

The World owes us a living; we have a long tradition of that philosophy in Ireland.

wonder88

Do people think that high house prices is a good thing for the country? If you can pay your mortgage negative equity should not matter to you, unless you considered your house as an investment. Now you have a problem, just like the person who purchased shares in the Irish banks, a problem for you but not for society as the state can't compensate people for investments that go wrong.
There is something wrong with a country that has a population density to size of Ireland, having it citizens spending such a high % of their income on housing. But it seems that people can't accept this, especially after so much resources having been spent on supporting high property prices, from rent allowance to mortgage interest relief and numerous other financial supports from the state. It seems now that we are going to reward people who refusing to pay back loans that they freely sign up for. This is not to say that there are people who are in genuine difficulty, but write downs on their loans should be the very last resort and only for a tiny few.

clairefontaine

'Im not a homeowner so forgive my ignorance, but is there insurance you can buy in case you lose your job, get very ill and cant work, or the government imposes a gigantic universal social charge on your paycheck which makes it really hard or impossible to pay your mortgage?

While unemployment or illness maybe a reasonable risk calculation, crazy over inflated confiscation of funds by the government for corporate welfare is not a reasonable risk consideration.

Ryder

wonder88 wrote: »

Do people think that high house prices is a good thing for the country? If you can pay your mortgage negative equity should not matter to you, unless you considered your house as an investment. Now you have a problem, just like the person who purchased shares in the Irish banks, a problem for you but not for society as the state can't compensate people for investments that go wrong.
There is something wrong with a country that has a population density to size of Ireland, having it citizens spending such a high % of their income on housing. But it seems that people can't accept this, especially after so much resources having been spent on supporting high property prices, from rent allowance to mortgage interest relief and numerous other financial supports from the state. It seems now that we are going to reward people who refusing to pay back loans that they freely sign up for. This is not to say that there are people who are in genuine difficulty, but write downs on their loans should be the very last resort and only for a tiny few.

can you name a bank that extends loans to buy shares? are there many examples of people taking out loans to buy 200,000+ worth of shares?...any examples?

comparing negative equity AND inability to pay, due to loss of income, to gampling on stocks is revisionism at its best. mainstream advice in the boom was that property investment (not speculation) was prudent. a lot of the arguements against this now are from a minority who saw the bubble and a majority who could not get a mortgage.

in any event i think the horse has bolted and gone out of sight on this one...if you were in distress, you would need to be crazy to surrender your house and spend the rest of your life throwing a percentage into the banking hole considering the secret write downs and tourist defaults that have already gone down

faceman

An issue with negative equity and discussions about it is that people look at it in exclusivity without considering other factors. There are always reasons why negative equity occurs and generally, its because of a recession. Nobody wants a recession, even punters who don't own a house

Another issue with discussions on negative equity is the 'me vs you'debate, the 'why should i pay for your sins' argument which is pointless as it has no relevance to the cause or solution for the problem. If my neighbour gets cancer as the result of smoking, I don't begrudge tax payers money being used to help him.

The tabled insolvency solution that the government is going to sign into law is weak, unbalanced and won't address the issue. I expect that we are going to see further bailing out of the banks in the years to come.

wonder88

In reply to Ryder, an example of loans to buy shares would be Anglo-Irish bank to Séan Quinn and an even better deal to a group of 10 of their most trusted borrowers know as the "golden circle". They even got a better deal than the Quinns, in that their loans were only backed by the value of the shares; in other words non-recourse. Whatever you say about Quinn it seems that he was never an insider in the Irish elite. It seems that a lot of people who borrowed and speculated to accumulate by buying houses now want their loans to be non-recourse as well. It looks like some will be sucessful, but it is only going to maintain housing at such an expensive level in Ireland. My opinion is that expensive housing is not good for any society.

Ryder

wonder88 wrote: »

In reply to Ryder, an example of loans to buy shares would be Anglo-Irish bank to Séan Quinn and an even better deal to a group of 10 of their most trusted borrowers know as the "golden circle". They even got a better deal than the Quinns, in that their loans were only backed by the value of the shares; in other words non-recourse. Whatever you say about Quinn it seems that he was never an insider in the Irish elite. It seems that a lot of people who borrowed and speculated to accumulate by buying houses now want their loans to be non-recourse as well. It looks like some will be sucessful, but it is only going to maintain housing at such an expensive level in Ireland. My opinion is that expensive housing is not good for any society.

that's your example? Seriously?

There's undoubtedly people who speculated as opposed to simply bought a home - really easy to separate the two,,,,if there's a will

Moral hazard and strategic default are the new buzz words, with little evidence for their existence, but are used to manipulate public opinion. Bottom line is that sticking plaster solutions to the problem are destined to fail

K-9

clairefontaine wrote: »

'Im not a homeowner so forgive my ignorance, but is there insurance you can buy in case you lose your job, get very ill and cant work, or the government imposes a gigantic universal social charge on your paycheck which makes it really hard or impossible to pay your mortgage?

While unemployment or illness maybe a reasonable risk calculation, crazy over inflated confiscation of funds by the government for corporate welfare is not a reasonable risk consideration.

My understanding is they usually last a year, come with the usual T & C's and if I'm correct, cover interest only. Could be wrong on the interest part though.

KELTICKNIGHTT

The Corinthian wrote: »

With all due respect, if your home is now worth 43% of the original price and you already were able to pay of 40%, it's not as if that "certain amount" to clear your mortgage is going to be gigantic. If so, you've lost the money you put into the property personally but it would appear that negative equity is not really your problem.

More importantly, it sounds as if you didn't account for the possibility of losing employment, or seeing a big decrease in income from your employment. Did you think that the good times would never end? That you could never lose your job or work dry up? How long is your mortgage for? Ten years? Twenty? And it never occurred to you that economies and circumstances can drastically change over the lifespan of the debt?

I'm curious to know because it's not as if you needed the benefit of hindsight to consider these things, at the time.

you seem to have got this wrong very much

i said i put 40 % of my money into the house which included the price of site which at time sites where very over priced , but which then i lose more than 40% , and as of now my house is 54% worth less sinse 2009, as now my house in negative , , i wouldn't get enough to pay off mortgage , so my 40% gain was lost.

as far as you comment about hindsight , a bit of a silly comment to make to be realistic when you don't know all the facts and figures which i'm defo not going to put on a public forum.
my house in negative due to downturn of property prices , i know some are in worse negative value , as far as putting in if employment was less , i did put that in ,, but a huge drop in value wasn't foreseen and no did unless you have a crystal ball lol

no one situations are as easy as you like to portray

theres lots of negatives to consider and alot things happened the biggest is the negative equity specially by a large amount
regards

KELTICKNIGHTT

The Corinthian wrote: »

I'm not suggesting people should take the extreme road of zero risk - thus never investing, as zero risk is unattainable. However, there is a difference between getting a mortgage that stretches you to the limit in even a best-case scenario and one that contains margins of error, considering that you may end up in negative equity or that your income (especially if self-employed) could end up a fraction of what it is during a boom.

According to KELTICKNIGHTT, (s)he isn't even in negative equity; sure, they've lost the money they invested directly into it, but that's not a debt (I presume) and once you calculate the drop in value you actually find they are nominally 3% in positive equity - I say nominally as once you consider interest and other costs, they're probably running at a loss overall.

However, that loss isn't likely to be very big, so you have to ask questions as to why they to were so tight on their calculations when getting the mortgage in the first place that the 'certain amount' to clear their debt is unattainable, even though it's likely not that large (based on what we've been told).

I get and, and when this was going on, got the impression that people were seriously overextending themselves. They could afford a three-bed apartment comfortably, but instead went for a four-bed house that they could just about afford at the time - we all came across such people during the boom. There was no margin of error, no contingency plan, nothing to fall back on.

You will never account for every eventuality, but a lot of people didn't seem to account for any eventuality.

The World owes us a living; we have a long tradition of that philosophy in Ireland.

Some people did live beyond there means , but most didn't , so shouldn't paint everyone with same brush ?.. plus hindsight is a great but too many negative things caught most people out .
Also property was very over priced which was fueled by developers and banks , then some people went beyond there means but a lot didn't .
I did state i lost 54-57 % which means im in negative, the 40% was taken up with buying the sites and other negatives , specially when i said the house is worth less than i owe than the mortgage and not worth selling currently I I see others lose more than me ..
I also said we fractured in loss in employment but no one could fact in the huge negative loss every property lost sense .

I also said there not much difference between renting or paying a mortgage now specially when you consider all the new taxes and charges coming . so seem to rent might be a better option now
most people in this country who are trying to keep and pay for there family home , between recession and negative value on there home and employment , There's no easy solution here and this new insolvency solution don't see it as being better , Only worse option the government thought up, and looks like the government is helping look after the banks interest more than the home owners who really don't own there homes any ways ,
And even with the new insolvency solution the government is bringing out , the bank has last word .

Ryder

Ryder wrote: »

can you name a bank that extends loans to buy shares? are there many examples of people taking out loans to buy 200,000+ worth of shares?...any examples?

comparing negative equity AND inability to pay, due to loss of income, to gambling on stocks is revisionism at its best. mainstream advice in the boom was that property investment (not speculation) was prudent. a lot of the arguments against this now are from a minority who saw the bubble and a majority who could not get a mortgage.

in any event i think the horse has bolted and gone out of sight on this one...if you were in distress, you would need to be crazy to surrender your house and spend the rest of your life throwing a percentage into the banking hole considering the secret write downs and tourist defaults that have already gone down

I do not think it just a question of why should some one else pay for your "sins" as you put it.

It is always going to be the tax payer who funds it one way or another, it is not going to come out of the banks profit (if they are making any ). Thus you have someone who is paying their mortgage ( with a struggle ) looking at someone else getting a large write down on the mortgage.

They are being hit twice because they won't get the write down on their own mortgage and their tax's will got up to fund the write down of someone else's mortgage.

If people are given a write down on their mortgages there should be consequences for them, such as severely restricting their access to credit for a very long time. I think in that way you could avoid the moral hazard argument.

faceman

mariaalice wrote: »

If people are given a write down on their mortgages there should be consequences for them, such as severely restricting their access to credit for a very long time. I think in that way you could avoid the moral hazard argument.

Why? Under existing bankruptcy laws you'd do less time in prison for committing a bank robbery.

Penalising people for "a very long time" has wider implications for the economy, consumer spending and bankruptcy tourism. That's why other countries don't penalise people as harsh.

Moral hazard is only an issue if someone goes out with the intention of not paying and getting debt relief. That's more a fraud issue (although its not defined as fraud) in my opinion. The equivalent of a what reckless trading is to a company director.

SBWife

I'd consider the 6 years under the proposed personal insolvency regime a long time.

How do you propose to avoid the moral hazard argument while you are helping people. I mean seriously why should I pay my mortgage if someone else is getting a write down with no consequences, for example.

Two couples x and y buy beside each, they both buy a small two bed houses, move on a few years and they both have children, in house x both are still working and in house y only one is working because of the recession, the houses are in negative equity.

Couple y go to the bank and say we can't pay our full mortgage, the bank after a lot of negotiation and periods of interest only etc, offer to write off a portation of the mortgage loan,( with no consequences )
Mean while couple x are trudging on as best they can.

Because of the write down couple y are no longer in negative equity and decide to sell and buy a 3 bed semi,( because houses have come down by 50% ) thus they have been rewarded while couple x are stuck because they are paying their mortgage fully with no write down.

SBWife

SBWife wrote: »

I'd consider the 6 years under the proposed personal insolvency regime a long time.

I agree with that, but apparently your name will on the PIP register for ever and that bound to effect you credit rating. I do not think the consequences should last for life, plus another thing I noticed as I listened to the news and prime time there seemed to be no mention of college fees are you allowed to pay college fees for your children if you enter a PIP?

The Corinthian

Ryder wrote: »

Moral hazard and strategic default are the new buzz words, with little evidence for their existence, but are used to manipulate public opinion.

Moral hazard certainly exists; it is where one is rewarded or fails to pay the consequences of irresponsible or anti-social behaviour. It's not limited to the property bubble, but is as often discussed in relation to the social welfare system in Ireland - which is an excellent example of where moral hazard was ignored for decades, leading to generations of welfare dependant citizens.

Strategic default is also in evidence, with increasing numbers actively avoiding payment of their mortgages or, as we even see here on Boards, some going so far as to abandon their properties and leaving Ireland never to return.

KELTICKNIGHTT wrote: »

you seem to have got this wrong very much

i said i put 40 % of my money into the house which included the price of site which at time sites where very over priced , but which then i lose more than 40% , and as of now my house is 54% worth less sinse 2009, as now my house in negative , , i wouldn't get enough to pay off mortgage , so my 40% gain was lost.

as far as you comment about hindsight , a bit of a silly comment to make to be realistic when you don't know all the facts and figures which i'm defo not going to put on a public forum.

Fair enough, but you hardly made it clear, nor if you refuse to elaborate on your predicament do you allow the possibility for others to assess and question your example. Unless you just want us to accept that you're a victim and question nothing.

my house in negative due to downturn of property prices , i know some are in worse negative value , as far as putting in if employment was less , i did put that in ,, but a huge drop in value wasn't foreseen and no did unless you have a crystal ball lol

Actually a huge drop in value was foreseen by many. Many others decided not to include such 'worst case scenarios' in their calculations and instead chose to believe in the 'soft landing' fantasy.

KELTICKNIGHTT wrote: »

Some people did live beyond there means , but most didn't , so shouldn't paint everyone with same brush ?

Who's painting everyone with the same brush? I've repeatedly pointed out that I'm not, that I have sympathy for anyone caught by the collapse in prices, but that I have little sympathy for those who leveraged themselves far beyond what was wise and are now 'trapped'.

I mean seriously; from what you've written, I get the impression you're self employed and it never occurred to you that you could see a serious drop in revenue in the event of a recession? Between Q3 2001 and Q2 2002, inclusive, I saw an 80% drop in my revenue following the burst of the dotcom bubble. Even if I hadn't I'd done my homework and realized that those are the kind of levels you can often expect when you're self-employed during the lean times.

Why did you not consider that?

I also said we fractured in loss in employment but no one could fact in the huge negative loss every property lost sense .

I did. Lots of others did. Nothing special about us. All you had to do was read a few articles on past property bubbles (which incidentally would have also informed you that there has never been a 'soft landing' from one).

I also said there not much difference between renting or paying a mortgage now specially when you consider all the new taxes and charges coming . so seem to rent might be a better option now

Property prices will eventually climb up, although this could take decades (look at how stagnant they were during the eighties and much of the nineties). So you may be 'trapped' but ultimately that will eventually pass.

Cold comfort, I know, but when you roll the dice and it doesn't work out for you, that is the price you pay, just as the profits are the rewards when it does.

faceman wrote: »

Why? Under existing bankruptcy laws you'd do less time in prison for committing a bank robbery.

By all means then go rob a bank and let us know how being in Mountjoy is better to being 'trapped' in your home in negative equity, because it's a shorter sentence.

SBWife

mariaalice wrote: »

I agree with that, but apparently your name will on the PIP register for ever and that bound to effect you credit rating. I do not think the consequences should last for life, plus another thing I noticed as I listened to the news and prime time there seemed to be no mention of college fees are you allowed to pay college fees for your children if you enter a PIP?

A adult child at 3rd level is specifically mentioned as a special circumstance in the guideline document published yesterday.

clairefontaine

mariaalice wrote: »

How do you propose to avoid the moral hazard argument while you are helping people. I mean seriously why should I pay my mortgage if someone else is getting a write down with no consequences, for example.

Two couples x and y buy beside each, they both buy a small two bed houses, move on a few years and they both have children, in house x both are still working and in house y only one is working because of the recession, the houses are in negative equity.

Couple y go to the bank and say we can't pay our full mortgage, the bank after a lot of negotiation and periods of interest only etc, offer to write off a portation of the mortgage loan,( with no consequences )
Mean while couple x are trudging on as best they can.

Because of the write down couple y are no longer in negative equity and decide to sell and buy a 3 bed semi,( because houses have come down by 50% ) thus they have been rewarded while couple x are stuck because they are paying their mortgage fully with no write down.

That is one way of looking at it.

The other way of looking at it, is that if you don't offer a write off of some sort, you will increase house reposessions, flood the market with more supply of cheap housing, and bring down the value of homes even further into negative equity.

KELTICKNIGHTT

Fair enough, but you hardly made it clear, nor if you refuse to elaborate on your predicament do you allow the possibility for others to assess and question your example. Unless you just want us to accept that you're a victim and question nothing.


as you well should know, you don't give your personal info on a forum , i would not consider you as good adviser to advise
weather you accept what i say is not my problem , nor do i care,,
i give enough info to give you a idea.

Actually a huge drop in value was foreseen by many. Many others decided not to include such 'worst case scenarios' in their calculations and instead chose to believe in the 'soft landing' fantasy.


you say that now, which is easy to say now, but most didn't see most property too fall as much as they did plus the rescission made finances worse for all

Who's painting everyone with the same brush? I've repeatedly pointed out that I'm not, that I have sympathy for anyone caught by the collapse in prices, but that I have little sympathy for those who leveraged themselves far beyond what was wise and are now 'trapped'.

not everyone leveraged themselves , most didn't , I didn't

I mean seriously; from what you've written, I get the impression you're self employed and it never occurred to you that you could see a serious drop in revenue in the event of a recession? Between Q3 2001 and Q2 2002, inclusive, I saw an 80% drop in my revenue following the burst of the dotcom bubble. Even if I hadn't I'd done my homework and realized that those are the kind of levels you can often expect when you're self-employed during the lean times.

Why did you not consider that?

during period of my mortgage till now , i was paye and self-employed, not at same time of course,, most people got hit after 2007 onwards, me included

I did. Lots of others did. Nothing special about us. All you had to do was read a few articles on past property bubbles (which incidentally would have also informed you that there has never been a 'soft landing' from one).

Property prices will eventually climb up, although this could take decades (look at how stagnant they were during the eighties and much of the nineties). So you may be 'trapped' but ultimately that will eventually pass.

Cold comfort, I know, but when you roll the dice and it doesn't work out for you, that is the price you pay, just as the profits are the rewards when it does.

Time will tell ,, most won't be able to get mortgages for long time,
i know of family's who left there house and gave keys to bank , both lost there jobs, and banks didn't help them , they left in 2010

jmayo

Dicky Pride wrote: »

Also, it's kind of annoying when you pay 250k for a house and your new neighbours pay 95k for the exact same property.

It may be annoying, but it shouldn't mean you get other people to pay for it.

clairefontaine wrote: »

That is one way of looking at it.

The other way of looking at it, is that if you don't offer a write off of some sort, you will increase house reposessions, flood the market with more supply of cheap housing, and bring down the value of homes even further into negative equity.

Ah perish the thought the price of fooking property would fall in Ireland. :rolleyes:

There are some old sayings, which appear to have gone out the window of modern Ireland.
If you can't afford something you shouldn't have it.
and
You cut your cloth to meet your measure.

As others have said negative equity is only a problem if you need to sell.
If someone can pay the mortgage they agreed to, and which they had absolutely no problem with when things were rosey in the garden, the only thing that needs to happen is that they be allowed move that debt onto another house if they so chose to move.
Then where is the problem ?

There is no way someone in negative equity should get a write down of their debts whilst they continue to enjoy the property which is subject to that debt.

I am fooking sick and tired of the agenda of debt writedowns being pedalled morning noon and night by certain vested interests.

It is more than evident that some people in positions of power in the likes of RTE got either themselves or close family members/colleagues badly burnt in the great Celtic bubble.
Now they are pedalling a line which would absolve them of those debts and dump them onto the rest of us.
Somebody ends up paying and I don't see why it should be those of us who didn't benefit or won't benefit.

The ultimate was last weekend, on the business show I beleive, when we had to listen to some woman lament how she had to cut her spending by 50,000 and how she had make do with spending 70 odd euro a week on food for family of four.

Yes she had tough luck that her and her husbands business(es) went, but wtf are we meant to do about it ?
Are we supposed to fund her lifestyle ?

Our license fee is paying for this drivel to be aired.

Foreign owned banks will do whatever is necessary whereas our own taxpayer sponsored ones are toeing the line set by vested interests (the government which through the joke of NAMA is the states biggest property owner) and are hoping for miracles.

If the banks start offering debt writedowns then that cost ends up with someone.
If the banks need another, as sometimes mooted, 15 odd billion then where do people think that will come from.
Think Cyprus and imagine deposits being raided to fund johnny and mary's mortgage down the road.

Sconsey

clairefontaine wrote: »

That is one way of looking at it.

The other way of looking at it, is that if you don't offer a write off of some sort, you will increase house reposessions, flood the market with more supply of cheap housing, and bring down the value of homes even further into negative equity.

You mean let the market find it's natural level, like most every other functioning economy, instead of interfering and making things worse and ultimately extending the problem?

And lets be clear, they can call it debt 'write off', 'write down', whatever...it is a debt transfer from private debt to public, the debt does not disappear, the debt is transferred to the public, you and I and everone else must pay this debt.

jester77

clairefontaine wrote: »

'Im not a homeowner so forgive my ignorance, but is there insurance you can buy in case you lose your job, get very ill and cant work, or the government imposes a gigantic universal social charge on your paycheck which makes it really hard or impossible to pay your mortgage?

While unemployment or illness maybe a reasonable risk calculation, crazy over inflated confiscation of funds by the government for corporate welfare is not a reasonable risk consideration.

There are insurances for everything. I have an insurance that if I die then over half the mortgage is paid off, I have another insurance that I can not work due to accident/illness they will pay out my current wage and my unemployment will pay over 60% of my salary for 12 months.

You would want to be a serious fool to take out a mortgage and not cover your angles. 20-35 years is a long time for something not to happen and something most likely will happen in that time. Myself and my partner can both cover our costs on our own and we can together cover the costs if we were both unemployed at the same time.

The Corinthian

KELTICKNIGHTT wrote: »

i give enough info to give you a idea.

And then clarify when enough leads to false conclusions; fair enough.

you say that now, which is easy to say now, but most didn't see most property too fall as much as they did plus the rescission made finances worse for all

Most chose not to see most property too fall as much as they did nor the possibility that it might (naturally, or do you think bubbles burst usher in bigger boom periods?) coincide with a recession, is the reality.

Honestly, was it that difficult to consider that it was a bubble? Or that sooner or later we'd end up in a recession again? As I asked, had you not considered that you may end up unemployed or that your income would otherwise drop substantially? Or that if the bubble did burst, that a recession might oddly follow?

not everyone leveraged themselves , most didn't , I didn't

Actually, you did - the moment you bought more than you could afford in the long term you leveraged yourself. That you failed to predict (or chose not to predict) this, does not mean you didn't do so.

during period of my mortgage till now , i was paye and self-employed, not at same time of course,, most people got hit after 2007 onwards, me included

Sorry, but that doesn't mean you you didn't fail to really consider it.

Time will tell ,, most won't be able to get mortgages for long time,
i know of family's who left there house and gave keys to bank , both lost there jobs, and banks didn't help them , they left in 2010

Yes and ultimately left the banks and, ultimately, the tax payer to pick up the bill on their failed investments. All I can see now is that many who haven't are simply looking for a legal way to do this.

clairefontaine

Sconsey wrote: »

You mean let the market find it's natural level, like most every other functioning economy, instead of interfering and making things worse and ultimately extending the problem?

And lets be clear, they can call it debt 'write off', 'write down', whatever...it is a debt transfer from private debt to public, the debt does not disappear, the debt is transferred to the public, you and I and everone else must pay this debt.

Well isnt that what they did for the banks themselves? Nationalise private debt?

Sconsey

clairefontaine wrote: »

Well isnt that what they did for the banks themselves? Nationalise private debt?

Yep, hardly a reason to do it for individuals too...two wrongs don't make a right.

Plus one could argue that the act of nationalising the banks was for the benefit of the nation not the individual (I would not really argue that point!), to keep the economy afloat, not to keep individuals in houses they can't afford (or even one step further, not just keep individuals in houses they can't afford, feck it we will pay for the houses for them altogther).

jmayo

clairefontaine wrote: »

Well isnt that what they did for the banks themselves? Nationalise private debt?

Where do you want the madness to end ?

Perhaps you would like the debt srun up by gamblers at Cheltenham covered next ? :rolleyes:

Instead of offering to bailout yet more people, through saddling yet more debt on ordinary normal taxpayers, the government, the state and all it's institutions should be chasing the likes of the quinns, the dunnes, the ronans and all the other leeches.

And if you really want an answer why banks, or at least a few of them(*), needed to be bailed out look up the definition of systemic.

(*) one can make a fairly legitimate argument about how systemic some banks were and one can argue a couple of them, the most unethically if not corruptly run, should have been wiped from the face of the earth along with those who ran them.
That of course is another argument for another day.

clairefontaine

jmayo wrote: »

Where do you want the madness to end ?

Perhaps you would like the debt srun up by gamblers at Cheltenham covered next ? :rolleyes:

Instead of offering to bailout yet more people, through saddling yet more debt on ordinary normal taxpayers, the government, the state and all it's institutions should be chasing the likes of the quinns, the dunnes, the ronans and all the other leeches.

And if you really want an answer why banks, or at least a few of them(*), needed to be bailed out look up the definition of systemic.

(*) one can make a fairly legitimate argument about how systemic some banks were and one can argue a couple of them, the most unethically if not corruptly run, should have been wiped from the face of the earth along with those who ran them.
That of course is another argument for another day.

Look, maybe some did go overboard, but many didn't. At the time they could have afforded it easily, but now they are getting E700 a month slashed out of their wages, they can no longer afford it.

The government, using taxes to subsidise the bank bailouts, has made a vicious circle now, where people cannot pay their mortgages and are even more likely to default.

When you gamble, whether the lotto or the horses, the wise thing to do, is set an amount aside that you are willing to lose, just accept you are going to lose it.

Very different from putting a roof over your and your family's head. Yes some risk, but you dont assume you are going to lose the amount people have lost. If you assume that, then no one would ever invest in anything or buy property.

Can someone point out an insurance company that covers sudden government taxes and imposed deductions at source?

I dislike the moralising and the wise after the event comments that you get when debt write down is mentioned, plus some of it is very nasty, on the other had you have understand how people would feel if they see their neighbours getting debt write down with no consequences. Thats why the PIP is a good idea providing it dose not cripple them for life, 6 years of living with in your means wont kill anyone.

jmayo

clairefontaine wrote: »

Look, maybe some did go overboard, but many didn't.

In this we differ.
My definition of going overboard was in signing up for a collosal mortgage that was more than 4/5 times the annual salary, that had to be strung out over 30 plus years and had to cover over 80%-90% of the purchase price.
Lets face it a lot of the mortgages taken out in the boom/bubble were probably in one of these categories.

Also paying massive amounts for a property, and by extension borrowing massive amounts for a property, that anyone with an ounce of common sense could see was vastly overpriced was going overboard in my book.

It was a bubble and there were people out there who could see it and who even forewarned others.
Of course the property ladder had to be gotten on, prices had always gone up and wasn't there going to be a soft landing.

And trust me I am not just being smart in hindsight.
When property in Ireland was working out to be more expensive than places like the UK, etc then there is something wrong.
When people are paying 300,000-400,000 for a two bed apartment not near one of the major city centres or 400,000 to 600,000 for a 3/4 bedroom semi D in certain areas then there is something wrong.

clairefontaine wrote: »

At the time they could have afforded it easily, but now they are getting E700 a month slashed out of their wages, they can no longer afford it.

If interest rates had gone up to 8%-10% could they have afforded it.
I bet if we didn't have tax hikes, wage cuts, job losses, etc and interest rates had rocketed then we would also see a fair amount of people in trouble.
Too many people had borrowed too much right on the limit.
Added to that people, with help of banks/brokers had massaged their earnings to get mortgages.
It was always a house of cards.

clairefontaine wrote: »

The government, using taxes to subsidise the bank bailouts, has made a vicious circle now, where people cannot pay their mortgages and are even more likely to default.

When you gamble, whether the lotto or the horses, the wise thing to do, is set an amount aside that you are willing to lose, just accept you are going to lose it.

Very different from putting a roof over your and your family's head. Yes some risk, but you dont assume you are going to lose the amount people have lost. If you assume that, then no one would ever invest in anything or buy property.

Ehhh again it was a bubble.
If you buy in a bubble, especially near the top, there is a damm good chance
you are going to lose.
A house is still a commodity which can rise or decrease in value.

jmayo

mariaalice wrote: »

I dislike the moralising and the wise after the event comments that you get when debt write down is mentioned, plus some of it is very nasty, on the other had you have understand how people would feel if they see their neighbours getting debt write down with no consequences. Thats why the PIP is a good idea providing it dose not cripple them for life, 6 years of living with in your means wont kill anyone.

Eh excuse me some of use were wise at the time, so stop this sh**e about being wise after the fact or being wise in hindsight.
Check out some of the old posts in forums such as Accomodation and Property for evidence.

An idiot could have seen that the prices of property in most of Ireland was overinflated and that the whole thing was being kept afloat by wads of cheap credit.

You may claim that some of us are getting nasty, but I tend to get pis*ed
off if I am expected to pay for some other fookers house, lifestyle or greedy screw ups.
Everytime there is debate about writeoffs or writedowns it turns out one of those interviewees proposing it has often gotten a serious of properties that are in trouble.
There are a hell of a lot of people like the edlerly couple from Dalkey/Kiliney.

Too many people in this country have a sense of entitlement.
Some people feel they are entitled to a certain lifestyle, a certain salary, and a home that they can no longer afford or even worse a rebate because it is no longer worth what they paid for it.
That basically what a debt writedown for negative equity amounts to, a bloody rebate.

There is a big chunk of people in this country who are now more than happy to share their losses.
Were these same people willing to share their paper gains when times were rosey and their property had increased by x percent ?
Were they fook.

I always paid my mortgage, did not over extend myself, did not buy an investment property, pay my debts, yet I don't feel the need to rant and get nasty or look smugly at people who are in trouble with their mortgage, undoubtedly their are people who live/lived beyond their means but that catches up with them eventually. Its a very complex problem and I am not sure how it could be sorted. There are lots of chancers out there, but the majority were only trying to provide a home for themselves.

jmayo

mariaalice wrote: »

I always paid my mortgage, did not over extend myself, did not buy an investment property, pay my debts, yet I don't feel the need to rant and get nasty or look smugly at people who are in trouble with their mortgage, undoubtedly their are people who live/lived beyond their means but that catches up with them eventually. Its a very complex problem and I am not sure how it could be sorted. There are lots of chancers out their, but the majority were only trying to provide a home for themselves.

I rant, as you would say, because all I ever hear is about doing something for all the ones caught with problems paying off their mortgages, or are in terrible negative equity and whose property is now worth a faction of what they originally paid.

Rarely in these media assualts do we hear about the one who massively overborrowed, who remortgaged to buy more property, who remortgaged to fund their lifestyles, who have refused to deal with their lenders or are trying to engage in a strategic default.

All of the above is glossed over and no one wants to mention these.
Ocassionaly thankfully someone does mention these subsets who want some of this debt writeoffs.

In all this no one seems to care about the ones who are doing their best to pay their mortgages, not whinging their property is no longer a path to riches, but who will be expected to stump up so that the ones above get a benefit.

The solutions are to try and help those who have some hope of repaying their mortgages by giving extensions, interest free periods, lower rates, etc.
It is not a solution to just say lets writeoff a chunk of their debt and let them continue to have ownership of the property.

Likewise if someone has no hope of repaying the mortgage then the solution is personal insolvency/bankruptcy with what that entails and the loss of the
property.

Instead too many fookers in this country want it both ways.
They want someone else to cough up for their debts whilst they carry on "owning" the property and lets not forget enjoying their sky packages, multiple cars, etc.
And trust me there are a fair chunk of those types of people out there.

In fact the subject of this thread would point to the same where some people think they should not have to pay back all their mortgage since the property is no longer worth as much as it.

You can label me smug, but don't expect me to be willing to cough up for people who made unsound financial decisions.
Likewise I wouldn't expect people to have pity for me or cough up for me if and when I make financial mistakes.

It is a thing called personal responsibility.

With the growth of the sense of entitlement has come a corresponding massive decrease in personal responsibility.

clairefontaine

jmayo wrote: »

In this we differ.
My definition of going overboard was in signing up for a collosal mortgage that was more than 4/5 times the annual salary, that had to be strung out over 30 plus years and had to cover over 80%-90% of the purchase price.
Lets face it a lot of the mortgages taken out in the boom/bubble were probably in one of these categories.

Also paying massive amounts for a property, and by extension borrowing massive amounts for a property, that anyone with an ounce of common sense could see was vastly overpriced was going overboard in my book.

It was a bubble and there were people out there who could see it and who even forewarned others.
Of course the property ladder had to be gotten on, prices had always gone up and wasn't there going to be a soft landing.

And trust me I am not just being smart in hindsight.
When property in Ireland was working out to be more expensive than places like the UK, etc then there is something wrong.
When people are paying 300,000-400,000 for a two bed apartment not near one of the major city centres or 400,000 to 600,000 for a 3/4 bedroom semi D in certain areas then there is something wrong.



If interest rates had gone up to 8%-10% could they have afforded it.
I bet if we didn't have tax hikes, wage cuts, job losses, etc and interest rates had rocketed then we would also see a fair amount of people in trouble.
Too many people had borrowed too much right on the limit.
Added to that people, with help of banks/brokers had massaged their earnings to get mortgages.
It was always a house of cards.



Ehhh again it was a bubble.
If you buy in a bubble, especially near the top, there is a damm good chance
you are going to lose.
A house is still a commodity which can rise or decrease in value.

I happen to agree with you on a lot of fronts. I saw it coming too. I never had an interest or hunger for buying a home either. It wasn't just housing, there was an across the board frenzied greed with over inflated prices on everything. I boiled this down to consumer ignorance and the Irish having no economics or fiscal education along side their school curriculums and the first time they had economic prosperity and lost the run of themselves, like a 16 year old handed a platinum credit card.

However, what I don't seeing is the dousing of shaming and blaming of people who are paying punitive universal social charges and who just wanted a roof over their heads for their families. Nor do I like seeing the citizens of this country taking out their resentments for paying out for their debts when their grievances and anger [justified imo] should be directed at a government which nationalised private debt and bailed out the banks with tax payer money. Needless to say with the universal social charge, the government isn't "borrowing" the money from its people, paying it back later with interest, it is just taking it so to lend it out at a profit to the banks who took massive risks, committed fraud and cocked it all up with no return to the people it is taking it from.

While Tom Dick or Harry might resent their neighbours for getting debt relief while they are paying the full course of their debts unaided, they might feel alot worse if a flood of home repossessions available on the market pushes their home into further negative equity.

jased10s

I wounder how many people only started having issues paying the mortgage's due to USC ?

skafish

As others on the thread have stated, NE is only an issue for people trying to sell their house.

While this is an issue for many, in my opinion, it shouldn't allow them to walk away and leave me and the rest of the country to pick up the tab.

As another poster has asked, why in the name of all thats holy should I be expected to pay the mortgage of somebody else who was foolish enough to take on more debt than they can afford?

There are a number of potential solutions that I can see, and I am no financial expert.

99 year morgages are common in countries like Japan; why not introduce them here? Yes, it means the person/couple who bought the house will probably never see it paid off, but the child they leave it to will, and isn't that what most parents do anyway... leave the family home to one child?

Some people, for example, those who bought an apartment during the boom and now need more room due to expanding families etc, might be better off renting out their apartment and renting a larger house to live in. I agree, not an ideal solution, but they will still own the property they bought, and may be able to sell it for a profit in the future.

These are just 2 of a number of potential solutions. I don't think there is a simple one size fits all solution, but there are options out there, if people and the banks are prepared to work at it. They may not be ideal, but they are a better solution than the mass repossessions or massive write downs that appear to be suggested currently

clairefontaine

jased10s wrote: »

I wounder how many people only started having issues paying the mortgage's due to USC ?

I wonder that too. I have one friend who's USC is the total amount of her mortgage.

Another whose amounts to half his rent.

KELTICKNIGHTT

The Corinthian wrote: »

Moral hazard certainly exists; it is where one is rewarded or fails to pay the consequences of irresponsible or anti-social behaviour. It's not limited to the property bubble, but is as often discussed in relation to the social welfare system in Ireland - which is an excellent example of where moral hazard was ignored for decades, leading to generations of welfare dependant citizens.

Strategic default is also in evidence, with increasing numbers actively avoiding payment of their mortgages or, as we even see here on Boards, some going so far as to abandon their properties and leaving Ireland never to return.

Fair enough, but you hardly made it clear, nor if you refuse to elaborate on your predicament do you allow the possibility for others to assess and question your example. Unless you just want us to accept that you're a victim and question nothing.

Actually a huge drop in value was foreseen by many. Many others decided not to include such 'worst case scenarios' in their calculations and instead chose to believe in the 'soft landing' fantasy.

Who's painting everyone with the same brush? I've repeatedly pointed out that I'm not, that I have sympathy for anyone caught by the collapse in prices, but that I have little sympathy for those who leveraged themselves far beyond what was wise and are now 'trapped'.

I mean seriously; from what you've written, I get the impression you're self employed and it never occurred to you that you could see a serious drop in revenue in the event of a recession? Between Q3 2001 and Q2 2002, inclusive, I saw an 80% drop in my revenue following the burst of the dotcom bubble. Even if I hadn't I'd done my homework and realized that those are the kind of levels you can often expect when you're self-employed during the lean times.

Why did you not consider that?

I did. Lots of others did. Nothing special about us. All you had to do was read a few articles on past property bubbles (which incidentally would have also informed you that there has never been a 'soft landing' from one).

Property prices will eventually climb up, although this could take decades (look at how stagnant they were during the eighties and much of the nineties). So you may be 'trapped' but ultimately that will eventually pass.

Cold comfort, I know, but when you roll the dice and it doesn't work out for you, that is the price you pay, just as the profits are the rewards when it does.

By all means then go rob a bank and let us know how being in Mountjoy is better to being 'trapped' in your home in negative equity, because it's a shorter sentence.

The Corinthian wrote: »

And then clarify when enough leads to false conclusions; fair enough.

Most chose not to see most property too fall as much as they did nor the possibility that it might (naturally, or do you think bubbles burst usher in bigger boom periods?) coincide with a recession, is the reality.

Honestly, was it that difficult to consider that it was a bubble? Or that sooner or later we'd end up in a recession again? As I asked, had you not considered that you may end up unemployed or that your income would otherwise drop substantially? Or that if the bubble did burst, that a recession might oddly follow?

Actually, you did - the moment you bought more than you could afford in the long term you leveraged yourself. That you failed to predict (or chose not to predict) this, does not mean you didn't do so.

Sorry, but that doesn't mean you you didn't fail to really consider it.

Yes and ultimately left the banks and, ultimately, the tax payer to pick up the bill on their failed investments. All I can see now is that many who haven't are simply looking for a legal way to do this.

Do you work for bank or something because what you say makes no sense

are you saying people who got mortgages should have predicted the recession and falls in value of there house between 50-60 % ?????

The Corinthian

KELTICKNIGHTT wrote: »

Do you work for bank or something because what you say makes no sense

are you saying people who got mortgages should have predicted the recession and falls in value of there house between 50-60 % ?????

Should people who took out 20+ year mortgages predicted that there might be a recession in the next 20+ years? Should people have considered, if not predicted, the possibility that the property bubble might not end well and see painful drops in property value? Should people have considered that the latter might just trigger the former?

Edit: And my favourite; that in the next 20+ years inflation just might get high at some stage?

Hell yeah. What idiot makes a 20+ year investment without seriously considering such possibilities?

And no, I don't work for a bank, although I've had them as clients upon occasion.

SBWife

KELTICKNIGHTT wrote: »

Do you work for bank or something because what you say makes no sense

are you saying people who got mortgages should have predicted the recession and falls in value of there house between 50-60 % ?????

But it was logical to predict continued growth of 7% or more per annum and annual increases in value of their homes of 10% - 15%?

hmmm

clairefontaine wrote: »

While Tom Dick or Harry might resent their neighbours for getting debt relief while they are paying the full course of their debts unaided, they might feel alot worse if a flood of home repossessions available on the market pushes their home into further negative equity.

You want people who bought small houses they could afford, to pay more tax so that their neighbours get to continue living in bigger houses they can't afford?

If people don't want to pay their mortgage, and are annoyed about being in negative equity, they can go bankrupt and start over. What is not fair is for them to keep their property and have someone else (who is possibly in a smaller house, or who is renting) subsidise them.

I'm sick of this bleating about people in negative equity. The more you borrowed, and the bigger the house you bought, the more likelihood you are in negative equity. Now you're telling me that their debts are suddenly my problem and I should be paying to maintain the lifestyle they think they are entitled to?

clairefontaine

hmmm wrote: »

You want people who bought small houses they could afford, to pay more tax so that their neighbours get to continue living in bigger houses they can't afford?

If people don't want to pay their mortgage, and are annoyed about being in negative equity, they can go bankrupt and start over. What is not fair is for them to keep their property and have someone else (who is possibly in a smaller house, or who is renting) subsidise them.

That's fair enough but Ireland should make its bankruptcy laws more akin to the UK or the US.

KELTICKNIGHTT

SBWife wrote: »

But it was logical to predict continued growth of 7% or more per annum and annual increases in value of their homes of 10% - 15%?

theres no growth , won't be for long time , so this is relevant

KELTICKNIGHTT

The Corinthian wrote: »

Should people who took out 20+ year mortgages predicted that there might be a recession in the next 20+ years? Should people have considered, if not predicted, the possibility that the property bubble might not end well and see painful drops in property value? Should people have considered that the latter might just trigger the former?

Edit: And my favourite; that in the next 20+ years inflation just might get high at some stage?

Hell yeah. What idiot makes a 20+ year investment without seriously considering such possibilities?

And no, I don't work for a bank, although I've had them as clients upon occasion.

so your a broker , if so , your part of the problem

that doesn't answer the question, should people have predicted almost 50-60% loss
specially to have all happen in less than 10 yr period to have 50-60% loss, a rescission and loss of income at same time , , Does it ?
now you calling people idiot's who have negative loss in there home, loss of income , interesting
i guess your going to say they also should have guessed that the government bring out all these new taxes , property tax, water charges , septic tank charges the possibility of being force to have private pension which might be proposed to take out 15% of of there wages ?