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Government to pay mortgage arrears *Mod Note in Opening Post*
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How about if a family A bought house with a mortage of 250k with a monthly repayments of €1200, house is now worth 150k and the mortage repayment would be €720 for a new family. Family A can afford to pay €720 euro a month so why not allow the negative equity to be spilt and the amount to paid back over 30 year at a zero interest rate as this was already bailed out by the government and would also be a lean on the home.
I see an easier way to deal with this.
CGT of 100% on any house subject to restructuring involving the taxpayer covering losses or partial debt write off.
Here's the point: negative issue is not generally the problem for a lot of people. Inability to pay is. They are two different things and I'm not doing sympathy for people who are in negative equity, can afford to pay and do not have to move. Since we're talking about keeping people in the houses they cannot afford, I'm assuming we're not talking about people who actually want to move.
If people are going to moan about negative equity and look for coverage on their associated poor me feelings, they must give up any subsequent gains.0 -
My car has halved in value since I bought it. Should somebody who bought a similar model for the current value pay more in order that my repayments on the loan are the same as theirs?
They are going to pay back the full loan. If it gets repo'd they can go bankrupt and the 100k get absorbed by the banks/government. Then the goverment can pay for their new home rent.
Do government have social cars like they do houses. Point is removing the family will cost more to tax payers then working with them so they can stay.0 -
Do government have social cars like they do houses.
It's called public transport. It's of varying quality across the countryPoint is removing the family will cost more to tax payers then working with them so they can stay.
Point is teaching a country that they can get away with not paying their debts will lead to seriously expensive problems in the long term.
Do you seriously want to turn the country into a total basket case?0 -
It's called public transport. It's of varying quality across the country
Point is teaching a country that they can get away with not paying their debts will lead to seriously expensive problems in the long term.
Do you seriously want to turn the country into a total basket case?
No, actually I am very right wing and would be happy to cancel all social programmes, but if the goverment are going to have them so they might as well help mortage people in trouble as well as non mortgage people.
Seriously mortage to rent is the best option for the left wing goverment, goverment get the asset and people get their free council house.0 -
They are? They already have bad credit ratings. Their ability to pay back the loan in full is questionable.They are going to pay back the full loan.
You're forgetting an important point here. After bankruptcy is over, they are free to move on. Why would you lock them into a single house for life? What if they need to move for work? Why would you make them pay "market rates" for the house and then give them a massive bill just as they come into retirement.If it gets repo'd they can go bankrupt and the 100k get absorbed by the banks/government. Then the goverment can pay for their new home rent.Do government have social cars like they do houses. Point is removing the family will cost more to tax payers then working with them so they can stay.
What if they don't pay the warehoused portion of the loan? They could claim that they weren't able to save a cent in that time and that they are skint after paying the "market value" for years. The state has already expended resources to keep them in that house and now the state has to expend further resources in dealing with the now defaulted upon split mortgage.0 -
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They are? They already have bad credit ratings. Their ability to pay back the loan in full is questionable.
You're forgetting an important point here. After bankruptcy is over, they are free to move on. Why would you lock them into a single house for life? What if they need to move for work? Why would you make them pay "market rates" for the house and then give them a massive bill just as they come into retirement.
What if they don't pay the warehoused portion of the loan? They could claim that they weren't able to save a cent in that time and that they are skint after paying the "market value" for years. The state has already expended resources to keep them in that house and now the state has to expend further resources in dealing with the now defaulted upon split mortgage.
It will be assessed as like a new mortgage if they can't meet the requirements then it needs to be repo'd. The choice to restructure the mortgage is their they can give back the house if they choose.
The split would be done as new mortgage over 35-40 years basically till they hit 68 €620 + €150 payments a month they need to be able to be assessed to pay the back. There is no massive bill at retirement and the split is linked to the house.
If they stop paying again repo'd as it's unsustainable0 -
It will be assessed as like a new mortgage if they can't meet the requirements then it needs to be repo'd. The choice to restructure the mortgage is their they can give back the house if they choose.
The split would be done as new mortgage over 35-40 years basically till they hit 68 €620 + €150 payments a month they need to be able to be assessed to pay the back. There is no massive bill at retirement and the split is linked to the house.
If they stop paying again repo'd as it's unsustainable
Perfectly good idea as is the mortgage to rent with the state getting to build back up its housing stock.0 -
You're assuming they are young. The majority of people going to MABS are over 45.It will be assessed as like a new mortgage if they can't meet the requirements then it needs to be repo'd. The choice to restructure the mortgage is their they can give back the house if they choose.
The split would be done as new mortgage over 35-40 years basically till they hit 68 €620 + €150 payments a month they need to be able to be assessed to pay the back. There is no massive bill at retirement and the split is linked to the house.
If they stop paying again repo'd as it's unsustainable
What if they are 60? What's the split mortgage term there?
Isn't it a lot crueler to let somebody live in a house for years and then repo just as they hit retirement? Wouldn't it be better for them to get the pain out of the way early while they still have a chance to rebuild?0 -
You're assuming they are young. The majority of people going to MABS are over 45.
What if they are 60? What's the split mortgage term there?
Isn't it a lot crueler to let somebody live in a house for years and then repo just as they hit retirement? Wouldn't it be better for them to get the pain out of the way early while they still have a chance to rebuild?
If they are 60 with huge negative equity so can't downsize something has gone wrong as they should be very near end of term and should give back the keys go bankrupt, they wouldn't qualify for the new mortgage anyway, for the split you have to qualify as like a new mortgage and show it's feasible and sustainable.
The split would be for people that would be able to get the mortgage at today's house value, so instead of leaving the bank losing the 100k while they go bankrupt then in a few years the people getting the a new mortgage. By doing this the bank lose interest on the 100k but would still at least get paid it and the mortgage might take a few more years to reach end of term0 -
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They may have worked for Dell before they went to Warsaw!!
You took an extreme view. Not everyone in trouble went from a monthly take home of 5k to 500e. There is a hugh percentage where the house hold income halved. Most people buying in the 2000 to 2008 period did so on a dual income house hold and unfortunately one person may have lost their job, in this scenario if the people downsize in a different area they can hopefully manage without support.
I dont know what the answer is where both people lost their jobs. These people do need help but I would be totally against them keeping the house, yes they need social welfare and housing for a period while they get back on their feet, but no way should they build an asset in the process0 -
You took an extreme view. Not everyone in trouble went from a monthly take home of 5k to 500e. There is a hugh percentage where the house hold income halved. Most people buying in the 2000 to 2008 period did so on a dual income house hold and unfortunately one person may have lost their job, in this scenario if the people downsize in a different area they can hopefully manage without support.
I dont know what the answer is where both people lost their jobs. These people do need help but I would be totally against them keeping the house, yes they need social welfare and housing for a period while they get back on their feet, but no way should they build an asset in the process
No I agree however my extreme view was in response to a generalised 75% are employed and in arrears. Without the breakdown my extreme view could in fact be the norm!!0 -
I see some of my original post is being quoted here again so I would like to make a few further comments/clarifications on it
Firstly, I am the furthest thing from a socialist you can get. I lived outside of Ireland during most of the Celtic Tiger and only returned in late 2006 and saw the madness around me. I ended up buying my house in 2011, but of course am on an SVR rate. However, I do understand that there is an elephant in the room which has been kicked down the road for a few years and it is time that it is addressed for once and for all.
To me there are three types of people in arrears
1. People who purchased properties as investments, or ended up with investments as a result of marriage etc
2. People who have fallen on tougher times but expect to pull through them. Public Sector with 15% pension levy or families with young children paying high childcare costs.
3. People who have fallen on tougher times but realistically will not pull out of them. So people who were used a boom time overinflated salary/wage to get the mortgage that is unlikely to be achievable again etc
The first group should have their investments repossessed and sold. The banks should facilitate a scenario where the person agrees to pay a realistic amount (based on their financial position) for say 5 years and the rest written off. However as part of this, they should be blocked from getting an investment loan for another say 15 years. They made a bad decision, they lost and they have been given an out, but the out comes at a cost.
The third group is a difficult one. Realistically repossession is the only real option as the mortgage is completely unsustainable long term. Whether the person should be permitted to remain in the house (under bank or local authority ownership) should depend on a number of factors including size, value, rental potential etc. Ultimately this group cannot believe they are entitled to retain ownership of the property. However I also believe that they should have the debts written off, and let them walk away debt free. I do not believe mortgage supplement will assist this group due to the unsustainable nature of the mortgage. However, I do also believe they should be blocked from getting a mortgage again for at least 5 years.
The middle group is the ones who I believe should be entitled to the mortgage supplement for a defined period of time, with the charge on the property as a means of attempting to restrict its abuse. Other restrictions would also need to be put in place regarding size of property and value of property, as well as LTV and LTI ratios etc. It should be used as a means of supporting citizens for a defined window until they can come back on their feet again, but there has to be a means of showing the person has the ability to get back on their feet.
Yes, as a taxpayer who pays 4.35% on my mortgage it does frustrate me that others would be bailed out for making poor financial decisions. I made a clear financial decision in 2006-2008 that I was not purchasing a property even though I had mortgage approval if I wanted to do so. But that said, it has been 7 plus years since the tiger roared, and the general citizens have endured enough stress in relation to this. We cannot our people continue to suffer for a single mistake they made.
A person found guilty of manslaughter pays their debt to society after ~6 years according to the courts. Surely its time to say people have paid their debt for a bad financial decision after ~7 years ? I know its a strange comparison, but there are people living in mental prisons over the arrears issue and its time to let them free ! All that can be done is ensuring that the situation is not abused.
To avoid abuse going forward on this, the cleanest proposal would be that all house purchasers would need to have 20% deposit for a PPR and 50% deposit for investment property. The mortgages are then deemed to be non-resource, so the owner has the ability to walk way in the event of a default situation. The owner loses their deposit and the monies paid to the bank to date and the bank loses in the event the property is in negative equity.
However, for this to happen Irish people need to realise that a property only gets 'home' status once it is paid for, and repossessions will become more common place. However, given our experience of the current crisis, which would option would people have opted for ??0 -
No I agree however my extreme view was in response to a generalised 75% are employed and in arrears. Without the breakdown my extreme view could in fact be the norm!!
Sorry, I misunderstood your point.
I would like to see some legislation rushed through (not botched through!) where people can walk away. Hand back the keys and the property is then owned by the bank. Any business carries a risk, if property only has a positive equity then banks in loans for mortgage is a risk free business. The only risk is if the property goes into negative equity , this should be the banks risk. If this was the case the whole housing bubble wouldn't have happened in the first place as banks would have insisted that borrowers met strict income thresholds.
Banks concerned can't complain as they have been bailed out, I think its time these banks took the pain from the homeowners.
It still leaves a family out on the street, but they would be debt free and not bankrupt.0 -
Gnf
There is almost certainly a cohort of folks who feel they shouldn't have to pay because they are in negative equity. We know this from previous crashes in other countries.0 -
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gaius_c
There is a massive difference between being in negative equity and being in a mortgage that is in trouble. Very few people buy at the bottom of the market. I bought in March 2011, and I probably did not buy at the bottom. I doubt many people would entertain me asking for relief on my mortgage...
Overall I do believe there is a level of personal responsibility lacking here. The issue as I see it is people tend to view house ownership as a right or entitlement, and something that is taken for granted. House ownership comes with responsibilities.
So yes, changes need to be made to renting to make it more secure as an option long term.0 -
gnf_ireland wrote: »To me there are three types of people in arrears
1. People who purchased properties as investments, or ended up with investments as a result of marriage etc
2. People who have fallen on tougher times but expect to pull through them. Public Sector with 15% pension levy or families with young children paying high childcare costs.
3. People who have fallen on tougher times but realistically will not pull out of them. So people who were used a boom time overinflated salary/wage to get the mortgage that is unlikely to be achievable again etc
The first group should have their investments repossessed and sold. The banks should facilitate a scenario where the person agrees to pay a realistic amount (based on their financial position) for say 5 years and the rest written off. However as part of this, they should be blocked from getting an investment loan for another say 15 years. They made a bad decision, they lost and they have been given an out, but the out comes at a cost.
The third group is a difficult one. Realistically repossession is the only real option as the mortgage is completely unsustainable long term. Whether the person should be permitted to remain in the house (under bank or local authority ownership) should depend on a number of factors including size, value, rental potential etc. Ultimately this group cannot believe they are entitled to retain ownership of the property. However I also believe that they should have the debts written off, and let them walk away debt free. I do not believe mortgage supplement will assist this group due to the unsustainable nature of the mortgage. However, I do also believe they should be blocked from getting a mortgage again for at least 5 years.
The middle group is the ones who I believe should be entitled to the mortgage supplement for a defined period of time, with the charge on the property as a means of attempting to restrict its abuse. Other restrictions would also need to be put in place regarding size of property and value of property, as well as LTV and LTI ratios etc. It should be used as a means of supporting citizens for a defined window until they can come back on their feet again, but there has to be a means of showing the person has the ability to get back on their feet.
Group 1: Minimum 12,000, up to 20,000 repossessions
Group 3: are probably minimum 50% of the 2 years + in arrears so another 20k repossessions
Group 2: Are probably the people scrapping by and just managing to meet there day to day living expenses. They will be the people asked to pay for all this.
On a side note in relation to Group 2, It would seem unusual for the state to be helping out people who over-extended themselves buying a house and are now in trouble for a foreseeable event as having a child or a pay cut. These things should be factored into every mortgage by the bank and the applicant.
Sorry if that sounds crude, but it is common sense0 -
Villa05
The Group 2's that I am describing are not scrapping by though. These are the ones who are in trouble and need a level of support. However the support should be deemed to be short term and therefore makes sense to provide support than repossess.
And yes, it does sound like common sense. But sadly there was a severe lack of that during the celtic tiger years among a reasonable element of the population. I clearly remember conversations I had from Oct 2006 (when I returned to Ireland) until July 2007 in particular and I genuinely thought the country had lost the run of itself.
And don't get me wrong, the cost of this should be borne by both the tax payer (no different to rent supplement) and the banks (as no debt is risk free!)
The question is - how long should people be forced to suffer for a bad judgement?0 -
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gnf_ireland wrote: »gaius_c
There is a massive difference between being in negative equity and being in a mortgage that is in trouble. Very few people buy at the bottom of the market. I bought in March 2011, and I probably did not buy at the bottom. I doubt many people would entertain me asking for relief on my mortgage...
Overall I do believe there is a level of personal responsibility lacking here. The issue as I see it is people tend to view house ownership as a right or entitlement, and something that is taken for granted. House ownership comes with responsibilities.
So yes, changes need to be made to renting to make it more secure as an option long term.
My point is that every bust has seen a large portion of strategic defaulters and your "3 group" scenario is overly simplistic. Brendan burgess has an article suggesting that there are massive levels of strategic default.
Pop over to politics.ie and you'll see people laying out their strategies for dumping their debts on the taxpayer.0 -
ITS not fair to blame everything on the client,
the banks made mistakes, gave out crazy loans,
eg 250k for an ordinary 3bed house in cavan.
THE Banks caused this crisis by bad lending,
the old rule ,5 times salary is the max mortgage was dropped.
The rule you need 15-20 per cent of loan saved up was forgotten.
if 1000,s of familys are evicted ,it may push rents up for everyone.
And the government will have to pay more in the form of rent allowance payments.
I understand some people with no kids will be angry ,
they are just about paying their bills and their mortgage,
and getting no help from anyone.
i presume the majority of people in difficulty now ,
are people who bought in the boom ,
from 2000-2007,
when prices were at their highest.
So they would be in the 20-35 age range ,mostly .
eg in the boom almost anyone working on an average age could get a mortgage.0 -
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My point is that every bust has seen a large portion of strategic defaulters and your "3 group" scenario is overly simplistic. Brendan burgess has an article suggesting that there are massive levels of strategic default.
Pop over to politics.ie and you'll see people laying out their strategies for dumping their debts on the taxpayer.
You lay a lot of credit in Brendan Burgess and his analysis. The central bank figures however suggest otherwise. Am I correct in stating that Brendan Burgess portrays strategic defaulters as those who don't engage with the banks? People who are under pressure and bury the envelopes.0 -
gaius_c
I have no doubt that there are people out there who would love to engage in a strategic default, and are actively planning to do so. The question goes down to "ok, we will allow you to default on your debt - but it comes at a cost" scenario. Should people be able to walk free and into the bank a year later and get a new mortgage - absolutely not !
Fundamentally I believe that there should be a 20% deposit on all PPR house purchases and absolute LTI ratios limits. The house value should take the LPT valuation into consideration and Income should be tax return averages for the last 3 years. Income should not be allowed to be 'fudged'. If you are not declaring it, it does not exist as income. But with this comes the whole concept of non-recourse loans and the ability for the mortgage holder to walk away. This is the only way I can see the banks taking responsibility for their lending practices - where they are the ones who suffer if it goes bad
The question is how to tidy up the mess that is gone before, especially over the celtic tiger years. This thread in particular is about the concept of a mortgage supplement where the tax payer pays funds to support a mortgage payer in trouble, and where they KEEP ownership of their property.
Defaulters by their nature SHOULD NOT keep ownership of their property.
I have no issues with defaulters walking away from the debt, and the property and being able to start again (albeit with some restrictions on their abilities to take out mortgages for a number of years). What I do have a fundamental issue with is a defaulter walking away from their debt and being allowed to stay in their property (or worse again retaining ownership of their property).
What I am talking about in this thread is the ones who need a helping hand (beyond the point of coping) but it is a short term measure. In by view these are the only people who should be given assistance with their mortgages and remain owners of the property. The key is short term support0 -
Tell that to the wide boys on p.ie who think that mortgage payments are optional if the LTV goes over 100%.
and this is where personal responsibility comes into play
If they had paid a 20% deposit on the property, and knew by walking away they would lose this and also have to hand back the keys, they may not be so keen to strategically default. Add a restriction on obtaining another mortgage for 5 years (and having to save another 20% deposit), it definitely makes a difference
The issue with some boom time mortgages is they were 100%, and therefore the holder has no skin in the game so to speak !0 -
the old rule ,5 times salary is the max mortgage was dropped.
The rule you need 15-20 per cent of loan saved up was forgotten.
if 1000,s of familys are evicted ,it may push rents up for everyone.
Firstly the 'old rule' was 2.5 times the primary salary and once the second salary. I am wondering how many people would qualify for their current mortgage under those conditions now. The central bank proposals of 3.5 times came under enough pressure as being too restrictive
20% deposit proposal from the central bank was resisted by so many. I happen to agree with it personally but there are lots of people who don't. For me 20% deposit should come with non-resource loans, so the bank understand the are taking elements of the risk also.
Finally, if 1000's of families get evicted what do you think happen to these properties ? Are they demolished or are they sold/rented out to other people. The stock of housing is not going to diminish here, it will just be different people occupying it.0 -
You lay a lot of credit in Brendan Burgess and his analysis. The central bank figures however suggest otherwise. Am I correct in stating that Brendan Burgess portrays strategic defaulters as those who don't engage with the banks? People who are under pressure and bury the envelopes.
What central bank figures?0 -
What central bank figures?
Exactly. There are no extremely high figures for strategic defaulters. Does Brendan consider them as those that don't engage, those that won't fill out MARP and SFA forms. Far too easy to state that 75% of mortgage arrears are by employed people. Far too easy to state that there are extremely high numbers of strategic defaulters, far tto easy to quote Politics.ie as your references.0 -
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Has David Hall taken over this form?0
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