Borrow €400k from AIB and only pay back €250k

Walker77

What is going on here.

http://www.irishtimes.com/business/personal-finance/aib-agrees-to-write-off-195-000-in-mortgage-debt-1.1730844

mrwhite2

It seems fair enough to me that debt be written off if the house is sold. The family walk away debt free but have to rent for the rest of their lives. Some people make out this is harsh. The reality is that many young families that didn't buy in the boom can't buy in the current market as no suitable properties have no choice but renting. Nobody is going to give us subsidised mortgages to get the properties we feel we deserve.

It is the system that is tuning people on each other. I know businesses that went bankrupt to the tune of millions at stat of recession and were repossessed only for a family member to buy them back at hugely reduced prices. This is were taxpayers anger should go!

jay0109

jay0109 wrote: »

AIB agrees over 100 deals for mortgage write-offs
http://www.rte.ie/news/business/2014/0319/603254-aib-mortgage-write-offs/

478k would have gotten you some size house in Cork, even during the boom.

So say a family buy a mega gaff in a very upmarket part of town that is now totally unaffordable. They bought something way above what their family and friends ever would consider, or perhaps way above what their own wages could realistically handle.
They now get to stay on in that house but at a mortgage that they can afford in today's terms.

Thats a lotto win right there folks. And a kick in the teeth to those of us who bought nothing or bought small starter properties in less salubrious parts of towns v's where we grew up or where we'd realistically like to end up

OldNotWIse

I think I saw an AIB advertisement on TV last night saying something about mortgages and how they are "still lending". Thought I was hearing things. Will this be more free money? Better get down there and ask for a 400k loan quick! Sure in a few years I will just tell them I only want to pay back 250k. The taxpayer will foot the bill for the difference anyway.

Nino Brown

Complaining on boards isn't going to do anything. Neither is emailing politicians, or picketing the Dail. People should start taking their money out of AIB, and putting it into Bank of Ireland, who aren't as quick to give away our money to deadbeats. Money talks, bullsh!t walks.

RedPandaDan

jay0109 wrote: »

478k would have gotten you some size house in Cork, even during the boom.

So say a family buy a mega gaff in a very upmarket part of town that is now totally unaffordable. They bought something way above what their family and friends ever would consider, or perhaps way above what their own wages could realistically handle.
They now get to stay on in that house but at a mortgage that they can afford in today's terms.

Thats a lotto win right there folks. And a kick in the teeth to those of us who bought nothing or bought small starter properties in less salubrious parts of towns v's where we grew up or where we'd realistically like to end up

Thats the thing, I'm only going off the back of an envelope but the difference between paying a 200k mortgage and paying interest only on a 400k mortgage is about 200 euro a month.

I can't see how they can make capital + interest payments now if they couldn't afford interest only before. Interest rates would have to go up by like half a percent for them to be back at an unaffordable payment level.

mrwhite2

My point is that nobody begrudges a family that are struggling debt relief. The fact that seems to annoy people is that some get debt relief and are able to live in the same house. This definitely promotes moral hazard as why wouldn't people try to get some off there mortgage written off if they can. It's easy to get cash work and not declare it. If you were asked to move out of your home in exchange for debt relief people wouldn't do it on a whim.
It would be hard on people if they had to move out but they would have no debts and plenty of us with jobs are forced to rent as the property market in some areas is still artificially. If they can afford a restructured mortgage they can afford rent.

cookie1977

mrwhite2 wrote: »

My point is that nobody begrudges a family that are struggling debt relief. The fact that seems to annoy people is that some get debt relief and are able to live in the same house. This definitely promotes moral hazard as why wouldn't people try to get some off there mortgage written off if they can. It's easy to get cash work and not declare it. If you were asked to move out of your home in exchange for debt relief people wouldn't do it on a whim.
It would be hard on people if they had to move out but they would have no debts and plenty of us with jobs are forced to rent as the property market in some areas is still artificially. If they can afford a restructured mortgage they can afford rent.

I think though the bank is looking to get as much cash back as is possible. The banks clearly see that repossessing these properties is costly and yields not nearly as much as doing a debt reduction deal that keeps the family there and long term gives the bank more cash (turning a non performing asset into a performing one). There is a risk of moral hazard but we'll have to see if that actually transpires. I personally dont believe it will.

Some of the people complaining here were concerned in other threads primarily about the tax payer. If the bank is getting a better return (for the tax payer), then repossession and sale, then surely these people should be happy but it seems they want their cake and to eat it in that they want those people to suffer more then what they feel they are. Who's not to say they are not suffering substantially under these agreements? Yes they're not being kicked out of their house so that is a huge plus for them but which is it? Are we for ensuring the banks get the best return on the tax payers investment or are we for ensuring that we punish people? Is it sour grapes?

Shiraz 4.99

fliball123 wrote: »

Well think of it like this..at the moment me and my wife work..we could both just stop working, collect the scratch..stop paying our bills and live comfy for about a year before the banks come knocking...Let them come we say we aint working go through the process..get the debt writedown and then go back working...we get a nice 3/5 year holdiay paid for by the tax payer..we get a nice writedown on our house when we go back to work we are in a much better position...and the sucker the tax payer not only pays for some of my house but gave a few years of sitting on my hole not working...I tell you if these mortage writedowns start becoming the norm instead of the exception I will be doing that...I am sick and tired of bailing everyone else out..time for me to get my own one

Good thinking, also remember to convert any savings you have to cash beforehand & hide it down your jocks, you won't get 200k off your mortgage if they know about your secret stash.
Good luck comrade.

Deise Vu

cookie1977 wrote: »

I think though the bank is looking to get as much cash back as is possible. The banks clearly see that repossessing these properties is costly and yields not nearly as much as doing a debt reduction deal that keeps the family there and long term gives the bank more cash (turning a non performing asset into a performing one). There is a risk of moral hazard but we'll have to see if that actually transpires. I personally dont believe it will.

Some of the people complaining here were concerned in other threads primarily about the tax payer. If the bank is getting a better return (for the tax payer), then repossession and sale, then surely these people should be happy but it seems they want their cake and to eat it in that they want those people to suffer more then what they feel they are. Who's not to say they are not suffering substantially under these agreements? Yes they're not being kicked out of their house so that is a huge plus for them but which is it? Are we for ensuring the banks get the best return on the tax payers investment or are we for ensuring that we punish people? Is it sour grapes?

I think you'll find those are crocodile tears.

The absolute pre-requesites for any debt relief deal is that the bank (taxpayer) will get a better return than from an immediate sale and that the mortgagee is left with only minimal 'appropriate' living expenses after the revised mortgage. These deals are only done where the mortgagee has shown willingness to co-operate, after humiliating trawls by strangers though all their income and expenditure and then only after review by a credit committee at Head Office (emphatically not the local bank manager who hasn't the authority to buy tippex these days let alone make large write-offs).

This has been explained countless of times on this and other threads but you are wasting your time trying to explain this to the mob. They want people punished and, as far as I can see, total and utter carnage in the market with repossessions right left and centre so they can pick up a house on the ultra cheap and the taxpayer can kiss their royal asses.

Nino Brown

Deise Vu wrote: »

This has been explained countless of times on this and other threads but you are wasting your time trying to explain this to the mob. They want people punished and, as far as I can see, total and utter carnage in the market with repossessions right left and centre so they can pick up a house on the ultra cheap and the taxpayer can kiss their royal asses.

What total and utter carnage?, the US banks repossessed almost immediately and their housing market is in better shape than ours now. Repossessions help the market find it's level, it's all over the place at the moment because it's artificially propped up in so many ways.

fliball123

Deise Vu wrote: »

I think you'll find those are crocodile tears.

The absolute pre-requesites for any debt relief deal is that the bank (taxpayer) will get a better return than from an immediate sale and that the mortgagee is left with only minimal 'appropriate' living expenses after the revised mortgage. These deals are only done where the mortgagee has shown willingness to co-operate, after humiliating trawls by strangers though all their income and expenditure and then only after review by a credit committee at Head Office (emphatically not the local bank manager who hasn't the authority to buy tippex these days let alone make large write-offs).

This has been explained countless of times on this and other threads but you are wasting your time trying to explain this to the mob. They want people punished and, as far as I can see, total and utter carnage in the market with repossessions right left and centre so they can pick up a house on the ultra cheap and the taxpayer can kiss their royal asses.

No they dont want to be continually overburdened by having their take home pay taxed further to cover this..Why cant you and your cohort of deal wanters see this..Its morally wrong to take the debt of one section of society and transfer it to another...Yet that is what these deals are doing.

As for the humiliating trawls through their income and expenditure ..excuse me if there is an investigation into someone reneging on their commitment ..maybe we should just take everyone's word for it..The country has become a phucking host for parasites....Looking for their deal ..its a joke

cookie1977

Nino Brown wrote: »

What total and utter carnage?, the US banks repossessed almost immediately and their housing market is in better shape than ours now. Repossessions help the market find it's level, it's all over the place at the moment because it's artificially propped up in so many ways.

The US banks have non recourse mortgages.

cookie1977

fliball123 wrote: »

No they dont want to be continually overburdened by having their take home pay taxed further to cover this..Why cant you and your cohort of deal wanters see this..Its morally wrong to take the debt of one section of society and transfer it to another...Yet that is what these deals are doing.

As for the humiliating trawls through their income and expenditure ..excuse me if there is an investigation into someone reneging on their commitment ..maybe we should just take everyone's word for it..The country has become a phucking host for parasites....Looking for their deal ..its a joke

This doesn't make sense. Listen if the bank is getting more cash on a part debt forgiveness then if they repossess and sell the property, then there is less requirement for more cash from the tax payer.

Nino Brown

cookie1977 wrote: »

The US banks have non recourse mortgages.

I know, so doesn't that put our banks in a better position?

cookie1977

Nino Brown wrote: »

I know, so doesn't that put our banks in a better position?

No, if you repossess and sell a property that yields less cash for the bank then partial debt forgiveness and a sustainable performing mortgage then I dont believe it does.

Daith

cookie1977 wrote: »

This doesn't make sense. Listen if the bank is getting more cash on a part debt forgiveness then if they repossess and sell the property, then there is less requirement for more cash from the tax payer.

Wait haven't the banks already got the money from the tax payer? Hasn't the tax payer bailed them out?

When does the money go back to the tax payer in either scenario?

cookie1977

Daith wrote: »

Wait haven't the banks already got the money from the tax payer? Hasn't the tax payer bailed them out?

When does the money go back to the tax payer in either scenario?

And if we start mass repossessions we might need to pump in more. The banks need to start standing for themselves and not continuing to rely on the tax payer. Eventually, long term we might get at least some of the money back from them.

Nino Brown

cookie1977 wrote: »

No, if you repossess and sell a property that yields less cash for the bank then partial debt forgiveness and a sustainable performing mortgage then I dont believe it does.

In the US, the banks repo'd the houses, sold them at market value, and ate the loss.
In Ireland the banks can repo the houses, sell them at market value and they still have recourse on the outstanding debt. I would call that a better position.

US banks, repo'd the houses, took the losses, the market found its level and the market recovered. (Helped along by helicopter Ben, but still recovered). We're plodding along here in limbo, people with money don't want to buy houses, and people with houses don't want to pay for them.

Nino Brown

cookie1977 wrote: »

And if we start mass repossessions we might need to pump in more. The banks need to start standing for themselves and not continuing to rely on the tax payer. Eventually, long term we might get at least some of the money back from them.

Yes but banks can only lend if people want to borrow. People can't/won't buy houses here because they're too expensive still, or they're waiting to see if prices drop due to repossessions. If the banks repo houses, the buyer will most likely be taking out a mortgage, which is where banks make their money.

cookie1977

Nino Brown wrote: »

In the US, the banks repo'd the houses, sold them at market value, and ate the loss.
In Ireland the banks can repo the houses, sell them at market value and they still have recourse on the outstanding debt. I would call that a better position.

US banks, repo'd the houses, took the losses, the market found its level and the market recovered. (Helped along by helicopter Ben, but still recovered). We're plodding along here in limbo, people with money don't want to buy houses, and people with houses don't want to pay for them.

They might have recourse on the debt but what's the chances of extracting that from the presumably/possibly bankrupt person? Does that person/family if they cannot afford to rent then become a burden on the tax payer through the need for social supports?

What I will say is that if the banks hadn't stuck their fingers in their ears and shut their eyes for the past 6 years and rather done proper reorganising of mortgages before they fell into arrears then maybe we wouldn't now be seeing the debt forgiveness that's going on but as long as it sorts out the banks so they dont come back looking for more cash then I dont have a massive problem with it.

Daith

cookie1977 wrote: »

And if we start mass repossessions we might need to pump in more. The banks need to start standing for themselves and not continuing to rely on the tax payer. Eventually, long term we might get at least some of the money back from them.

Ok but it's still the banks doing what's the best for the banks not the tax payer. It is possible that even with a debt write off, the families can't pay or some other situation changes and the bank is looking for more funding also from the tax payer.

cookie1977

Daith wrote: »

Ok but it's still the banks doing what's the best for the banks not the tax payer. It is possible that even with a debt write off, the families can't pay or some other situation changes and the bank is looking for more funding also from the tax payer.

Agreed and yes what you say is quite possible. There's as much risk in doing nothing as in doing something.

MouseTail

Daith wrote: »

Ok but it's still the banks doing what's the best for the banks not the tax payer. It is possible that even with a debt write off, the families can't pay or some other situation changes and the bank is looking for more funding also from the tax payer.

Of course the banks do what is best for the banks (and their shareholders). Now who are the shareholders of AIB?

Nino Brown

MouseTail wrote: »

Of course the banks do what is best for the banks (and their shareholders). Now who are the shareholders of AIB?

The problem is banks are short sighted. They do what's good for them short term. That's what got us into this mess in the first place. If they ECB says they have to sort out a certain percentage of bad debt by the end of the year, that will be their priority.

The_Conductor

Daith wrote: »

Wait haven't the banks already got the money from the tax payer? Hasn't the tax payer bailed them out?

When does the money go back to the tax payer in either scenario?

The banks received bailouts sufficient to repair their capital ratios (without writing down the values of their mortgage loan books). If you want to write down those values- the Irish banking sector needs another 40-45 billion.......

When does the money go back to the tax payer? Seeing as AIB still haven't paid off their bailout from the 80's, I think you can kiss that one goodbye.

riclad

THE problem here is houses were overvalued,
banks were doing reckless landing,
now houses in some area,s are worth 40-50 per cent of the loan amount.
And peoples incomes have dropped, taxes have increased.
IF banks go for 1000 s of repossessions ,it may push house prices down further.
People can say give me a write down ,
or i,ll go bankrupt,
all you,ll get is a house thats worth x amount, plus bank has to pay legal fees,
pay estate agents etc
IF i go bankrupt i,ll owe you nothing.
The banks may not have the staff to deal with 1000,s of repossessions,
I presume they look at this person earns 30k ,
how much can they realistically pay per month , on a mortgage.
MAYBE they are doing things slowly,
in some areas, eg dublin prices rises might reduce negative equity problem.

THE difference in the usa ,is people could just give the keys back if the value
of the house fell ,into negative equity.

MAYBE they have targets, sort out x amount of loans per month,
where the client is not paying the full mortgage.

cookie1977

The_Conductor wrote: »

The banks received bailouts sufficient to repair their capital ratios (without writing down the values of their mortgage loan books). If you want to write down those values- the Irish banking sector needs another 40-45 billion.......

When does the money go back to the tax payer? Seeing as AIB still haven't paid off their bailout from the 80's, I think you can kiss that one goodbye.

The ICI/AIB calamity was different though. I dont believe the government back then took any thing from AIB as collateral. The bailed out ICI which in turn saved AIB. No? But yes I take your point as far as seeing the cash back but the fact that BOI has started paying back some has to be something positive, no? The pay back being double from the tax payer in the form of the ever lasting insurance levy which could grow (again) if the talk of supporting flood affected properties is pushed through.

The_Conductor

cookie1977 wrote: »

The ICI/AIB calamity was different though. I dont believe the government back then took any thing from AIB as collateral. The bailed out ICI which in turn saved AIB. No? But yes I take your point as far as seeing the cash back but the fact that BOI has started paying back some has to be something positive, no? The pay back being double from the tax payer in the form of the ever lasting insurance levy which could grow (again) if the talk of supporting flood affected properties is pushed through.

Bank of Ireland were in a mad rush to repay preference shares- that had a 10% coupon associated with them. They borrowed money on the market @ 3% to repay these preference shares- it was a bit of a no-brainer. Don't know when we'll see more back from them- NAMA is repaying money to the banks now- redeeming bonds they paid for the loans they took on board- so if anything- there is new public money flowing into them. The banks are arguing they need the NAMA funds in cash, to reduce their exposure to ECB loans- which probably is true- but it really is a case that they're still robbing Peter to pay Paul.

riclad

BANKS would probably get less money,if they take back a house, sell it
than giving say 30 per cent writeoff ,
eg the case where loan is 400k,
house is worth 170k now,
Client is now on reduced income ,struggling to pay the full mortgage.
as long as client pays the new mortgage every month.
Most irish banks are owned by the government ,
its the government who pays rent allowance for people who lose their homes.