Government to pay mortgage arrears *Mod Note in Opening Post*

Uncle Ben

Uncle Ben wrote: »

Just read the initial link again. Interesting that FF are against it. Makes it appear more likely that the Government would introduce it.

Apart from the rights and wrongs of the issue, politically it would take centre ground taxpaying votes back from FG.
Let the Sinners and Labour fight for the mortgage payout (and no water rates) vote.

JJJJNR

I think a write down of the interest accrued on arrears would be better then a full write off, makes more sense, that way it could only effect the banks themselves. Possibly no going to keep everyone happy though.

hopgog

_Kaiser_ wrote: »

As I said above, no-one NEEDS to own a house and there ARE viable alternatives such as renting.. maybe not ideal, maybe a hassle, but nothing that private tenants don't deal with every day.

What happens when the renters hit OAP, at the moment most of our OAP own property, our rental system is not able to haddle a huge amount of low income renters.

on_my_oe

hopgog wrote: »

What happens when the renters hit OAP, at the moment most of our OAP own property, our rental system is not able to haddle a huge amount of low income renters.

Option a) inter generational housing - families living together, which provides supports for all levels of the family

Option b) multi occupational housing, where groups of older people live together, again providing collective support

Option c) immigrate to cheaper locations where their retirement funds go further

Option d) use pension funds to service rent

Option e) use pension funds to purchase long term lease on home

Option f) join retirement home / village

hopgog

on_my_oe wrote: »

Option a) inter generational housing - families living together, which provides supports for all levels of the family

Option b) multi occupational housing, where groups of older people live together, again providing collective support

Option c) immigrate to cheaper locations where their retirement funds go further

Option d) use pension funds to service rent

Option e) use pension funds to purchase long term lease on home

Option f) join retirement home / village

That's a very bleak future, most pension funds won't be able to service rent. This is why paying a mortage to have a home when you retire is so important.

johnp001

hopgog wrote: »

What happens when the renters hit OAP, at the moment most of our OAP own property, our rental system is not able to haddle a huge amount of low income renters.

This is an argument against restructuring and for repossession.
Some forms of restructuring extend loan terms or warehouse a portion of the debt for the future so if the current non-paying occupant is kept in the house they are less likely to own it outright when they retire.
If the house in default was repossessed and sold to someone who pays the mortgage in the agreed term then the house would be owned outright before the owner reaches retirement age.

Cushie Butterfield

hopgog wrote: »

That's a very bleak future, most pension funds won't be able to service rent. This is why paying a mortage to have a home when you retire is so important.

Exactly, & with people living to a ripe old age compared to the past their home can be used as a security against their nursing home care should they eventually require it as happens now through the Fair Deal Scheme. Planning for the future instead of taking the easy option of renting all their lives without a care in the world & expecting to be looked after when the time comes.

on_my_oe

hopgog wrote: »

That's a very bleak future, most pension funds won't be able to service rent. This is why paying a mortage to have a home when you retire is so important.

Then the person needs to
1) save adequately that their pension fund meets requirements
2) choose a property with a mortgage level they can comfortably afford

If they cannot meet either of those options, then they also need to look at retraining or switching careers so they earn a sufficient income to achieve those goals.

And before anyone says "Its too hard", its not - I work full time (45hrs a week) and am studying part time for a 4 year degree. We chose a home and a lifestyle we could comfortably afford on one salary 'just in case', and the second salary goes into shares, pensions, and savings. We are not on high incomes (average wage), but we are careful. The fact remains, if you can't afford your mortgage, you can't afford to own your own home. We rented for years while saving for our deposit, and we survived. I'm sure those who have their homes repossessed will manage too.

hopgog

johnp001 wrote: »

This is an argument against restructuring and for repossession.
Some forms of restructuring extend loan terms or warehouse a portion of the debt for the future so if the current non-paying occupant is kept in the house they are less likely to own it outright when they retire.
If the house in default was repossessed and sold to someone who pays the mortgage in the agreed term then the house would be owned outright before the owner reaches retirement age.

Restructuring it at least allows the person to catch up, wages increase and so might house prices, sure if they are still in a hole at oap they will need to downsize but at least the kids will have moved on/finished school and the house won't be in neg equity. It still a better option then kick them out now so they have to rent and be stuck with the neg equity debt or the government paying the mortgage.

Restructuring a mortgage to 40 years give the family an amount they can pay now, gives say 35 year old 30 years to catch up sure they might only be able to pay €1000 now but in 15 years they might be able to pay €2000 and can overpay so the mortgage is clear at the time they hit OAP.

If they can't and have to sell at OAP the house will be well out of neg equity and sould have enough to buy a smaller property , bank won't lose any money either

on_my_oe

hopgog wrote: »

Restructuring it at least allows the person to catch up, wages increase and so might house prices, sure if they are still in a hole at oap they will need to downsize but at least the kids will have moved on/finished school and the house won't be in neg equity. It still a better option then kick them out now so they have to rent and be stuck with the neg equity debt or the government paying the mortgage.

Restructuring a mortgage to 40 years give the family an amount they can pay now, gives say 35 year old 30 years to catch up sure they might only be able to pay €1000 now but in 15 years they might be able to pay €2000 and can overpay so the mortgage is clear at the time they hit OAP.

If they can't and have to sell at OAP the house will be well out of neg equity and sould have enough to buy a smaller property , bank won't lose any money either

I have no issue with a mortgage holder restructuring with their bank to make their repayments affordable for their current circumstances.

I do not in any way agree to the government using taxpayers money to service an individual mortgage holder's debt, thereby providing a benefit to the mortgage holder.

If they cannot afford their repayments and their bank does not believe that a viable restructure is possible, welcome to the world of renting.

_Kaiser_

Cushie Butterfield wrote: »

Planning for the future instead of taking the easy option of renting all their lives without a care in the world & expecting to be looked after when the time comes.

You clearly haven't rented in this country for a while.

Private renting is far from an "easy option". Aside from the ridiculous rents (in Dublin particularly), the cowboy/amateur/accidental Landlords who haven't a clue as to their responsibilities or just don't care (combined with a sizeable number of tenants with a similar viewpoint), the hassle people have getting deposits back in a timely manner and in full, where (increasingly) you can be turfed out because your Landlord hasn't been making the repayments but has been pocketing your rent, and other such hassles it's far from living "without a care in the world"

But for many it's all that's available to them - partly because of this notion that we should protect mortgage holders at all costs.

It's really pretty simple.. It's a financial contract to purchase a dwelling that you are free to enter into..or not! If you can make the repayments then all good, if not you should be forced to go look/live elsewhere - even rent (god forbid!) if necessary so that someone else who can live up to their commitments/responsibilities can take it on.

And regardless of whether you rent or own, of course you should make provision for your retirement... but don't forget that even with ownership you'll still have to worry about property tax, utility bills, repairs and maintenance, appliance failures/replacements etc too!

foggy_lad

Is this not just deflection?

The story linked to in the OP does not contain any comment from any government minister or any other fine gael or labour minister or councillor.

Nowhere does any Fine Gael or Labour member say this will happen or that this proposal is actually on the table, I suspect the story has been manufactured to deflect from something else as happens so often in politics.

Basically it looks like a fabricated story made real by hysteria and adding comment from the opposition.

http://www.independent.ie/irish-news/politics/taxpayers-to-bail-out-those-in-mortgage-arrears-plan-31135507.html

The controversial idea is being considered as part of a series of measures in a package the Government is finalising to deal with the mortgage-arrears crisis.

There are dozens if not hundreds of ideas being "considered" to deal with the crisis and most like this one will be gently "considered" to the office waste bin

hopgog

on_my_oe wrote: »

I have no issue with a mortgage holder restructuring with their bank to make their repayments affordable for their current circumstances.

I do not in any way agree to the government using taxpayers money to service an individual mortgage holder's debt, thereby providing a benefit to the mortgage holder.

If they cannot afford their repayments and their bank does not believe that a viable restructure is possible, welcome to the world of renting.

I am also not happy about the government paying the mortgage, but banks won't allow people to restructure loan to long term. Banks think restructuring to 70 or 75 is not viable but really it is as it allows the person to pay what they can now and gives them 30 years to catch up, at 68 if they havn't then downsizing and the money they paid to the mortage won't be wasted on rent.

All restructuring must be paying capital and interest and must be the family home not investment property.

johnp001

hopgog wrote: »

Restructuring it at least allows the person to catch up, wages increase and so might house prices, sure if they are still in a hole at oap they will need to downsize but at least the kids will have moved on/finished school and the house won't be in neg equity. It still a better option then kick them out now so they have to rent and be stuck with the neg equity debt or the government paying the mortgage.

Restructuring a mortgage to 40 years give the family an amount they can pay now, gives say 35 year old 30 years to catch up sure they might only be able to pay €1000 now but in 15 years they might be able to pay €2000 and can overpay so the mortgage is clear at the time they hit OAP.

If they can't and have to sell at OAP the house will be well out of neg equity and sould have enough to buy a smaller property , bank won't lose any money either

There's a lot of variables in that scenario that would need to come to pass to cause a situation where a term extension is not a worse outcome according to your OAP renting criteria.

I think the easiest way to decide if it would be a good idea would be to compare the delinquency rates of total new loans to the delinquency rates of restructured loans. If the restructured borrower is more likely to keep to the loan terms then there could be an argument to restructure as opposed to repossess.

I don't have the figures to hand but I think I read that a very high proportion of restructured loans were falling back into arrears in a short period of time. Which would suggest that the banks are already allowing restructuring in any case when it has a chance of succeeding (and also evidently in some cases where it doesn't)

galljga1

foggy_lad wrote: »

Is this not just deflection?

The story linked to in the OP does not contain any comment from any government minister or any other fine gael or labour minister or councillor.

Nowhere does any Fine Gael or Labour member say this will happen or that this proposal is actually on the table, I suspect the story has been manufactured to deflect from something else as happens so often in politics.

Basically it looks like a fabricated story made real by hysteria and adding comment from the opposition.

http://www.independent.ie/irish-news/politics/taxpayers-to-bail-out-those-in-mortgage-arrears-plan-31135507.html
There are dozens if not hundreds of ideas being "considered" to deal with the crisis and most like this one will be gently "considered" to the office waste bin

Kite flying, common practice, hardly likely to happen. How would such a scheme be governed?

on_my_oe

hopgog wrote: »

I am also not happy about the government paying the mortgage, but banks won't allow people to restructure loan to long term. Banks think restructuring to 70 or 75 is not viable but really it is as it allows the person to pay what they can now and gives them 30 years to catch up, at 68 if they havn't then downsizing and the money they paid to the mortage won't be wasted on rent.

All restructuring must be paying capital and interest and must be the family home not investment property.

People applying for mortgages must prove they can afford to make the payments. We jumped through hoops and one bank turned us down for being too disciplined with our savings.
If the bank won't allow the mortgage to be restructured, then generally there is a reason for it. Perhaps a decent independent appeals structure can be set up, but it boils down to this - if a mortgage isn't being paid the occupier doesnt have the right to retain use of the property.
Why should an occupant who can't afford repayments take precedence over another family who is currently renting but could afford the mortgage repayments? You talk about 'wasted rent', but what about the rent payments of the would-be purchasers stuck in rentals because of delinquent borrowers?

hopgog

johnp001 wrote: »

There's a lot of variables in that scenario that would need to come to pass to cause a situation where a term extension is not a worse outcome according to your OAP renting criteria.

I think the easiest way to decide if it would be a good idea would be to compare the delinquency rates of total new loans to the delinquency rates of restructured loans. If the restructured borrower is more likely to keep to the loan terms then there could be an argument to restructure as opposed to repossess.

I don't have the figures to hand but I think I read that a very high proportion of restructured loans were falling back into arrears in a short period of time. Which would suggest that the banks are already allowing restructuring in any case when it has a chance of succeeding (and also evidently in some cases where it doesn't)

Yeah there is a chance they might not of fully caught up by oap, but if a 300k house with 50k neg equity now, getting repossessed and getting lumped with 50k debt and having to rent at 35 no chance to get back on the ladder or restructuring and say having to sell in 30 years when your mortage has 80k left and the house is worth 400k so you sell and have 320k to buy a smaller place with no mortgage.

The bank gets it money they don't lose anything, the kids get to stay in the local schools and you have 30 years of pay increases to catch up on your mortgage before you hit OAP.

hopgog

on_my_oe wrote: »

People applying for mortgages must prove they can afford to make the payments. We jumped through hoops and one bank turned us down for being too disciplined with our savings.
If the bank won't allow the mortgage to be restructured, then generally there is a reason for it. Perhaps a decent independent appeals structure can be set up, but it boils down to this - if a mortgage isn't being paid the occupier doesnt have the right to retain use of the property.
Why should an occupant who can't afford repayments take precedence over another family who is currently renting but could afford the mortgage repayments? You talk about 'wasted rent', but what about the rent payments of the would-be purchasers stuck in rentals because of delinquent borrowers?

What about if the family that are on a €1600 mortgage but can pay €1000, the new family buying will end up with a mortage of €1000 cause the current value of the house is lower, should the original family not be allowed to restructure the mortage to the €1000 amount.

Calina

Cushie Butterfield wrote: »

Planning for the future instead of taking the easy option of renting all their lives without a care in the world & expecting to be looked after when the time comes.

As opposed to expecting to be looked after now, after you've bankrupted yourself on property you can't afford?

Most people do a certain amount of planning for the future. But renting, especially in this country, is not actually the easy option. For some people, it's the sole option. For other options, it is financially prudent.

The kiteflying for a scheme like keeping people in houses they can't afford shows that really, people will spin anything in their own interests. Their children's interests would be better served by a semi-rational housing market both on rental and purchase.

This means crashing the property market and regulating it such that bidding it out of reason is mitigated against. My guess is a major crash followed by a 15% property tax would help there. It'll never happen though because people like feeling rich and a house worth 500,000 matches their self esteem better than a house worth 150,000 even when it's the same house.

on_my_oe

hopgog wrote: »

What about if the family that are on a €1600 mortgage but can pay €1000, the new family buying will end up with a mortage of €1000 cause the current value of the house is lower, should the original family not be allowed to restructure the mortage to the €1000 amount.

My gut instinct is no.

Family number 1 brought at that price, if the property had gone up in value, they wouldn't have knocked on anyone's door and said "Hey, the property went up 50%, here's a portion for you". Therefore if the property went down by 50%, they can't expect a refund/discount either.

Also family #1 got their bite of the cherry, let family #2 have a go and see if they can be more sensible.

hopgog

on_my_oe wrote: »

My gut instinct is no.

Family number 1 brought at that price, if the property had gone up in value, they wouldn't have knocked on anyone's door and said "Hey, the property went up 50%, here's a portion for you". Therefore if the property went down by 50%, they can't expect a refund/discount either.

Also family #1 got their bite of the cherry, let family #2 have a go and see if they can be more sensible.

Family 1 are not taking goverment tax money on the restructure, they are just getting time to make it right, they are not getting a discount either there is no write off if the loan was 300k it still is they just have 10 to 15 years more to pay it back.

Greyian

hopgog wrote: »

What about if the family that are on a €1600 mortgage but can pay €1000, the new family buying will end up with a mortage of €1000 cause the current value of the house is lower, should the original family not be allowed to restructure the mortage to the €1000 amount.

If they were paying 4% interest, and their mortgage payments were €1600, with 20 years left on the mortgage, to get the repayment down to €1000 would mean lengthening the term to about 53 years.

Do we really want to see 50+ year mortgages?

Bob24

on_my_oe wrote: »

My gut instinct is no.

Family number 1 brought at that price, if the property had gone up in value, they wouldn't have knocked on anyone's door and said "Hey, the property went up 50%, here's a portion for you". Therefore if the property went down by 50%, they can't expect a refund/discount either.

Also family #1 got their bite of the cherry, let family #2 have a go and see if they can be more sensible.

Not to mention that family 1 is not unlikely to have a much lower interest rate (tracker) and still benefit from mortgage interest tax relief fro a bit - whereas family 2 will be paying almost 3% more interest rate and won't be entitled for tax relief (these 2 things can account for 10s if not 100s of thousand of euros over the whole duration of the mortgage).

NewDirection

Greyian wrote: »

If they were paying 4% interest, and their mortgage payments were €1600, with 20 years left on the mortgage, to get the repayment down to €1000 would mean lengthening the term to about 53 years.

Do we really want to see 50+ year mortgages?

They could move to interest only for the short term, and their repayments would be down to €880.

hopgog

NewDirection wrote: »

They could move to interest only for the short term, and their repayments would be down to €880.

Interest only is not viable, it has to be capital and interest, the loan has to go down so at oap there is no neg equity so the bank is not left with a shortfall.

Cushie Butterfield

Calina wrote: »

As opposed to expecting to be looked after now, after you've bankrupted yourself on property you can't afford?

That isn't what I said. The bit of my post that you snipped out was part of a larger one that was in agreement with another poster, whose post highlighted the importance of paying a mortgage to have a home when you retire. (Note I said paying a mortgage & not having it paid by someone else!)

hopgog

hopgog wrote: »

That's a very bleak future, most pension funds won't be able to service rent. This is why paying a mortage to have a home when you retire is so important.

What is important is that people approaching retirement have built up a nest egg sufficient to live on. Paying off a mortgage for their entire working lives is an extremely inefficient way of saving, yet the sytem in Ireland has severely taxed all other methods of saving and investing apart from this (don't start me on rip-off funds).

johnp001

johnp001 wrote:

I don't have the figures to hand but I think I read that a very high proportion of restructured loans were falling back into arrears in a short period of time. Which would suggest that the banks are already allowing restructuring in any case when it has a chance of succeeding (and also evidently in some cases where it doesn't)

The proportion of restructured loans in arrears is higher than for overall loans
https://www.centralbank.ie/polstats/stats/mortgagearrears/Pages/releases.aspx
This suggests the banks are restructuring where it is realistic and erring on the side of giving the borrower the benefit of the doubt.

hopgog

Deleted User wrote: »

What is important is that people approaching retirement have built up a nest egg sufficient to live on. Paying off a mortgage for their entire working lives is an extremely inefficient way of saving, yet the sytem in Ireland has severely taxed all other methods of saving and investing apart from this (don't start me on rip-off funds).

My mortage is lower then market rent bought in 2003, if I was renting I would have less to save for a pension and the rent money would be thrown away. If I was renting my future would be way worse off. Market rents seem to be jumpin crazily but my mortage will stay similar enough. But I made sure when I bought my mortage was €150 below what I was paying in rent.

Without rent control I cannot see a good future for OAP that are renting.

NewDirection

hopgog wrote: »

Interest only is not viable, it has to be capital and interest, the loan has to go down so at oap there is no neg equity so the bank is not left with a shortfall.

Why is it not viable? Do peoples positions not change?
If there is restructuring there has to be the hope that your position changes in the future to go back to capital+interest payments.

I don't think anyone here expects the government to chip in with paying off the capital of anyone's mortgage.