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Alternative Financing for the Property Market?

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24

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    #32
    Wanderer78
    Registered Users Posts: 29,387 ✭✭✭✭Wanderer78


    The Belly wrote: »
    Yes well ECB is there for the long-term finance but the less we have to borrow the better. There is plenty of money here tied up in nothing deposits when it could be put to better use.

    true, but its important to remember, deposits are never loaned out, there just held as reserves, but we could put them to use via the creation of our own public banking systems, but theres no will for their creation


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    #33
    The Belly
    Registered Users Posts: 572 ✭✭✭The Belly


    Pensions are a classic example. Why don't they allow a person to buy their own home non investment and claim pension tax relief on it?

    Not endowment rubbish that went on way back.

    At the end of the day, its the biggest asset anyone will ever own and it's a home. Rules apply of course. But instead its equity funds and the stock market fund charges and the like.


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    #34
    Wanderer78
    Registered Users Posts: 29,387 ✭✭✭✭Wanderer78


    The Belly wrote: »
    Pensions are a classic example. Why don't they allow a person to buy their own home non investment and claim pension tax relief on it?

    Not endowment rubbish that went on way back.

    At the end of the day, its the biggest asset anyone will ever own and it's a home. Rules apply of course. But instead its equity funds and the stock market fund charges and the like.

    interesting idea, but shur housing is a complete mess, and looks unresolvable at the moment. other eu financial institutions, such as the eib, could easily be used to create eu wide infrastructure projects, but theres also little or no will there either


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    #35
    The Belly
    Registered Users Posts: 572 ✭✭✭The Belly


    Wanderer78 wrote: »
    interesting idea, but shur housing is a complete mess, and looks unresolvable at the moment. other eu financial institutions, such as the eib, could easily be used to create eu wide infrastructure projects, but theres also little or no will there either

    If there was any joined-up thinking your home would form part of your pension. Buy it with a state-backed loan and tax relief at source like any pension and available to all.

    Cant sell until paid off and retired and if it's worth more then the pension threshold you pay some tax.

    Instead money flows into the 1000 different pension funds managed for-profit and most not here.


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    #36
    Wanderer78
    Registered Users Posts: 29,387 ✭✭✭✭Wanderer78


    The Belly wrote: »
    If there was any joined-up thinking your home would form part of your pension. Buy it with a state-backed loan and tax relief at source like any pension and available to all.

    Cant sell until paid off and retired and if it's worth more then the pension threshold you pay some tax.

    Instead money flows into the 1000 different pension funds managed for-profit and most not here.

    definitely for state backed loans for home building, this is why i advocate for public banking systems, these could be used for such things


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    #37
    The Belly
    Registered Users Posts: 572 ✭✭✭The Belly


    Wanderer78 wrote: »
    definitely for state backed loans for home building, this is why i advocate for public banking systems, these could be used for such things

    Remove PS pensions all of them and last count there are 4-5 types. One universal pension for all relative to your income the more you earn the bigger it is. No special deals for anyone just straight and fair. You see less messers enter politics if it was done.


    Self-funded and can be used for housing. Take the private sector out of it. If someone wants more then use the private sector.


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    #38
    Wanderer78
    Registered Users Posts: 29,387 ✭✭✭✭Wanderer78


    The Belly wrote: »
    Remove PS pensions all of them and last count there are 4-5 types. One universal pension for all relative to your income the more you earn the bigger it is. No special deals for anyone just straight and fair. You see less messers enter politics if it was done.


    Self-funded and can be used for housing. Take the private sector out of it. If someone wants more then use the private sector.

    im not sure id completely take the private sector out of it, but offer the public option along side of it, its seems to work in other countries reasonably well, including some european countries


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    #39
    The Belly
    Registered Users Posts: 572 ✭✭✭The Belly


    Wanderer78 wrote: »
    im not sure id completely take the private sector out of it, but offer the public option along side of it, its seems to work in other countries reasonably well, including some european countries

    Always need enterprise my point is there should be a set basic standard for all.

    Certain functions as I have said before should not left to the open market. Key functions from housing to health to retirement should not be left to the open market completely.

    If you take housing. You have a job you apply for your loan it may be a state built house or private and up to a limit, you make your payments and receive tax relief for it as it forms your pension. What good is a 25-year-old paying into a pension when are renting.


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    #40
    Wanderer78
    Registered Users Posts: 29,387 ✭✭✭✭Wanderer78


    The Belly wrote:
    Certain functions as I have said before should not left to the open market. Key functions from housing to health to retirement should not be left to the open market completely.


    Completely agree with this, the market is not absolute, it has inefficiencies, in which we do not truly understand, the relationship between the state and the market is a symbiotic one, they need each other in order to survive, leaving such critical needs entirely to the market has caused mayhem, and the markets have no clear solutions to these problems


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    #41
    The Belly
    Registered Users Posts: 572 ✭✭✭The Belly


    Wanderer78 wrote: »
    Completely agree with this, the market is not absolute, it has inefficiencies, in which we do not truly understand, the relationship between the state and the market is a symbiotic one, they need each other in order to survive, leaving such critical needs entirely to the market has caused mayhem, and the markets have no clear solutions to these problems

    In the bigger scheme of things, it actually does the private sector more harm than good the way it is. Before this covid the big concern was MNC's could not find housing for employees. This should not be the case. It stifles growth and makes Ireland uncompetitive.


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    #42
    mcsean2163
    Registered Users Posts: 1,839 ✭✭✭mcsean2163


    schmittel wrote: »
    There is a huge range of measures which would make up quite a long post but in a nutshell it would involve 180 degree turn in change of focus and strategy to reallocate housing budgets and resources.

    The short version:

    Scrap all Help to Buy/Shared Equity etc etc measures designed to make housing more affordable to private buyers. Reallocate these funds to HAP/Social Housing budgets. Set a more modest limit on HAP rates than current market rates.

    Scrap all rent controls. Let private landlords charge what they think the market will bear. Scrap all long term leases for social housing with landlords, offer them tax incentives to offer longer leases in private rental market. Generally improve tax risk/reward for landlords.

    Although no rent controls keep designated RPZs as a marker of where problems are greatest.

    Hammer any Airbnbs hard in current RPZs to get them either on market for sale or market for rent. Enforce it properly in the future.

    Introduce vacant property register in RPZs. (Give the job to the CSO, not Fingal CC!)

    Reduce CGT on sale of long term vacant property if sold within next 6 months.

    Introduce some sort of planning permission type system for vacant property in RPZs - i.e no tax if you wish to keep a property vacant but you need to have a good reason. Enforce it properly. Monitor it. If a property is listed as a rental, check it regularly.

    Increase CAT allowances within a near term timescale specifically for pensioners downsizing properties in RPZs.

    Introduced government backed bridging loans for downsizers.

    Do a deal with banks/vulture funds whereby the government pledges a change in policy and to promote change in public opinion on arrears - i.e if you are not paying your mortgage we will repossess you.

    In exchange banks/vulture funds hand over the loan books of those who are genuinely the poorest in need of most help, and every property that is suitable for social housing.

    So basically if Vultures Inc have an unemployed family of four living in a modest house, or modest buy to let, it becomes the governments problem.

    And if they have a celebrity chef and model living in a 1m house in Clontarf they have the green light to fast track the repo and get it on the market.

    Clear all this overhang and then scrap CB lending limits. Allow banks to lend as much as they wish based on their risk analysis of individual borrower BUT with non recourse loans and fast tracked repos after 6 months.

    I could go on and on and on but you get the idea, basically the opposite of everything we are doing now!

    And this government have the perfect excuse with which to protect themselves from some of the negative fall out from the above - they can blame covid impact on the economy.


    non recourse loans

    That would change a pot! In itself!


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    #43
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    mcsean2163 wrote: »
    non recourse loans

    That would change a pot! In itself!

    Banks would police themselves in lending limits. Would be no need for CB limits.


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    #44
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    Timing belt wrote: »
    I don't agree with this as this is the only thing that is preventing the housing market from generating another bubble and if this was lifted banks would go on a credit binge especially at the moment when they have so much cash sitting on there balance sheet attracting negative interest. It would be a feeding frenzy!!!

    If banks want to take the risk let them at it - with the warning that there will be no bail out next time.

    They are not going to lend 100% at 500k to some no hoper who clearly cannot afford it, if he can throw back the keys at them say "meh, that didn't work out, your problem now".

    They will lend 80/90% to solvent sensible buyers, who are not going to suddenly stop paying the mortgage if they know they can be hauled out in 6 months.

    It will also introduce competition and interest rate cuts.


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    #45
    Timing belt
    Registered Users Posts: 3,511 ✭✭✭Timing belt


    schmittel wrote: »
    If banks want to take the risk let them at it - with the warning that there will be no bail out next time.

    They are not going to lend 100% at 500k to some no hoper who clearly cannot afford it, if he can throw back the keys at them say "meh, that didn't work out, your problem now".

    They will lend 80/90% to solvent sensible buyers, who are not going to suddenly stop paying the mortgage if they know they can be hauled out in 6 months.

    It will also introduce competition and interest rate cuts.

    Banks will lend to anyone that they can and will lend 120% mortgages if they were legally allowed to do so.

    Banks have to be bailed out or at least the systemically important banks not bailing them out is not an option you may as well turn the lights out on the country.


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    #46
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    Timing belt wrote: »
    Banks will lend to anyone that they can and will lend 120% mortgages if they were legally allowed to do so.

    Banks have to be bailed out or at least the systemically important banks not bailing them out is not an option you may as well turn the lights out on the country.

    With all the money the government will save on HAP payments they can stockpile generators. Letting a bank or two or their creditors go bust seems perfectly fine to me.


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    #47
    Timing belt
    Registered Users Posts: 3,511 ✭✭✭Timing belt


    schmittel wrote: »
    With all the money the government will save on HAP payments they can stockpile generators. Letting a bank or two or their creditors go bust seems perfectly fine to me.

    The thing is that if a bank goes bust so to does the economy. Think about if tomorrow you could not use an ATM or pay for purchase with card or have nowhere to lodge cash/cheques or make payments. They are systemically important for a reason because the economy can not function without them and the banks know this so will lend whatever they can if they were allowed.

    It's like saying the country can function without electricity!!!!!


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    #48
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    Timing belt wrote: »
    The thing is that if a bank goes bust so to does the economy. Think about if tomorrow you could not use an ATM or pay for purchase with card or have nowhere to lodge cash/cheques or make payments. They are systemically important for a reason because the economy can not function without them and the banks know this so will lend whatever they can if they were allowed.

    They will still have to maintain their capital ratios. Introduce rules to ring fence them, and the deposit guarantee scheme.

    If they want to go on a lending spree they will have to raise funds from elsewhere - bond market for example. Put this lending into non systemic business. Let them go wallop if they cock it up.

    The empty ATM scenario should not be an insurmountable problem.


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    #49
    Timing belt
    Registered Users Posts: 3,511 ✭✭✭Timing belt


    schmittel wrote: »
    They will still have to maintain their capital ratios. Introduce rules to ring fence them, and the deposit guarantee scheme.

    If they want to go on a lending spree they will have to raise funds from elsewhere - bond market for example. Put this lending into non systemic business. Let them go wallop if they cock it up.

    The empty ATM scenario should not be an insurmountable problem.

    Yes I agree that you should ring fence the banks like they do in the UK and prevent them from lending to Financial institutions where most of there risk sits these days.

    Yes regulation exists so they need to maintain capital ratios but that is meaningless if they know they will be bailed out. Look at how long Irish banks failed the ECB stress tests and a situation like covid can come along and deplete the capital reserves very quickly and then no-one will invest in the bank or buy its debt and the bank goes bust and with it the economy because it can not function.

    Even if all the Irish banks have fully implemented the bank bail in regulation (MREL). Whereby if a bank fails all the holders of the MREL Debt gets converted to equity and it recapitalise the bank it would not work as the bank would not be functioning for a period of time and the economy would ground to a halt. As I said before they are systemically important for a reason.

    The last bit thing to throw in is in regards to the CBI rules of income x lending limit. This is already in the pipeline to be delivered to all banks worldwide as part of the banking regulations.


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    #50
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    Timing belt wrote: »
    Yes I agree that you should ring fence the banks like they do in the UK and prevent them from lending to Financial institutions where most of there risk sits these days.

    Yes regulation exists so they need to maintain capital ratios but that is meaningless if they know they will be bailed out. Look at how long Irish banks failed the ECB stress tests and a situation like covid can come along and deplete the capital reserves very quickly and then no-one will invest in the bank or buy its debt and the bank goes bust and with it the economy because it can not function.

    Even if all the Irish banks have fully implemented the bank bail in regulation (MREL). Whereby if a bank fails all the holders of the MREL Debt gets converted to equity and it recapitalise the bank it would not work as the bank would not be functioning for a period of time and the economy would ground to a halt. As I said before they are systemically important for a reason.

    The last bit thing to throw in is in regards to the CBI rules of income x lending limit. This is already in the pipeline to be delivered to all banks worldwide as part of the banking regulations.

    Ok fine - scrap lending limits for non pillar banks. Allow building societies to form, I.e financial services companies solely in the business of mortgages, the likes of which already exist. you can go and get your non recourse mortgage from pepper money.

    The point is not to be giving pillar banks enough rope to hang themselves and the economy but to allow greater access to finance for buyers, and greater access to security for lenders.


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    #51
    Timing belt
    Registered Users Posts: 3,511 ✭✭✭Timing belt


    schmittel wrote: »
    Ok fine - scrap lending limits for non pillar banks. Allow building societies to form, I.e financial services companies solely in the business of mortgages, the likes of which already exist. you can go and get your non recourse mortgage from pepper money.

    The point is not to be giving pillar banks enough rope to hang themselves and the economy but to allow greater access to finance for buyers, and greater access to security for lenders.

    I get where you are going on this and understand what you are saying but the cost of getting a banking licence and the fact that any new entry would need to be a agency bank of one of the main settlement banks means that they will always be more expensive to run. Just look at the credit unions and the trouble they have at the moment. Its a non-starter.


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    #52
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    Timing belt wrote: »
    I get where you are going on this and understand what you are saying but the cost of getting a banking licence and the fact that any new entry would need to be a agency bank of one of the main settlement banks means that they will always be more expensive to run. Just look at the credit unions and the trouble they have at the moment. Its a non-starter.

    ICS Mortgages for example? Non systemic I presume. Why would it be a non starter for them?


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    #53
    Timing belt
    Registered Users Posts: 3,511 ✭✭✭Timing belt


    schmittel wrote: »
    ICS Mortgages for example? Non systemic I presume. Why would it be a non starter for them?

    it has a retail credit licence and not a banking licence.

    Its funding model is to package up the mortgages and in a RMBS and sell to investors.

    The central bank would not allow a institution like this to have a significant share of the mortgage market and with good reason. Think of the funding model that Northern Rock bank in the UK used before it was the first UK bank to go bust in 2008 that is the model that is being deployed here.

    This is no different to a vulture fund buying a mortgage book it just takes the middle man out of the equation. I bet that a fund owns this business


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    #54
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    Timing belt wrote: »
    it has a retail credit licence and not a banking licence.

    Its funding model is to package up the mortgages and in a RMBS and sell to investors.

    The central bank would not allow a institution like this to have a significant share of the mortgage market and with good reason. Think of the funding model that Northern Rock bank in the UK used before it was the first UK bank to go bust in 2008 that is the model that is being deployed here.

    Northern Rock had current accounts and atms. ICS does not, that’s kind of the point. I don’t really understand why the central bank would allow them to have a share of the mortgage market but not a significant share. Surely they’re either fit to sell mortgages or they’re not.


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    #55
    Timing belt
    Registered Users Posts: 3,511 ✭✭✭Timing belt


    schmittel wrote: »
    Northern Rock had current accounts and atms. ICS does not, that’s kind of the point. I don’t really understand why the central bank would allow them to have a share of the mortgage market but not a significant share. Surely they’re either fit to sell mortgages or they’re not.

    It is the same as a vulture fund it just cuts out the middle man (the bank). It is no different to a money lender that knocks on your door


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    #56
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    Timing belt wrote: »
    It is the same as a vulture fund it just cuts out the middle man (the bank). It is no different to a money lender that knocks on your door

    They must have knocked on a lot of doors to get 30% market share in BTLs!


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    #57
    Timing belt
    Registered Users Posts: 3,511 ✭✭✭Timing belt


    schmittel wrote: »
    They must have knocked on a lot of doors to get 30% market share in BTLs!

    No banks want BTL mortgages because of the capital cost


    UPDATE:
    I had a look at one of the RMBS that this company have "DILOSK RMBS NO.3 DAC"

    If you go to page 31 of there prospectus you will see who they can lend to which is quite restricted

    https://centralbank.ie/docs/default-source/regulation/prospectus-regulation/2019/prospectusdoc-2019-04/job20003311-prospectus.pdf?sfvrsn=2

    Its also worth looking at what they are paying for funding for the mortgages which can be found on page 3. This is what it costs them so add a profit margin and a credit margin on top and you will get the customer rate. (It's not cheap)

    This is a boutique market that specialises in providing credit to customers that would not get credit from a bank.

    They may sell normal mortgages to retail customers but the only reason they are doing this is to fill the 'A' Tranche of the RMBS to get a credit rating while the fill the lower tranches with risky mortgages and charge an arm and a leg for doing so.


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    #58
    Wanderer78
    Registered Users Posts: 29,387 ✭✭✭✭Wanderer78


    It's disturbing to see some still don't realise the dangers of unregulated markets, particularly in the financial sector, incredibly disturbing, 08 mustn't have been a big enough wake up call for you folks!


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    #59
    Wanderer78
    Registered Users Posts: 29,387 ✭✭✭✭Wanderer78


    schmittel wrote:
    The point is not to be giving pillar banks enough rope to hang themselves and the economy but to allow greater access to finance for buyers, and greater access to security for lenders.

    This is why I advocate for public banking systems, they might just be a little more secure than your average bank.


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    #60
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Mod Note

    some posts moved from the property market 2020 thread.


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    #61
    hometruths
    Registered Users, Subscribers Posts: 5,981 ✭✭✭hometruths


    Wanderer78 wrote: »
    It's disturbing to see some still don't realise the dangers of unregulated markets, particularly in the financial sector, incredibly disturbing, 08 mustn't have been a big enough wake up call for you folks!

    I'm not talking about the wild west. There would still be regulation in terms of capital reserves and rules about stress testing etc.

    The pushback on this seems to be that lenders will revert to type and engage in widespread reckless lending, but what I am suggesting is trying to create a system that encourages prudent lending, and if not, it is private capital that takes the hit rather than the taxpayer.

    This should not be impossible to achieve.

    You think the current system is better?

    Economy in lockdown, fears of a significant recession, almost half the labor force on some sort of government financial support - prompting AIB to take stock::
    In a statement, AIB said it believe it's "prudent" to review its mortgage lending policies amid the current economic instablity.

    The bank said: "It is imperative that the mistakes of the past are not repeated, that customers are not exposed to unnecessary risk and that their loans are sustainable."

    Great, seems sensible.

    Cue public outcry. Having berated the banks for years for reckless lending, everyone gets on their high horse about prudent lending. Predictably enough politicians step up to the plate, incuding Michael McGrath, Minister for Public Expenditure:
    He explained: "When they went about draw-down, the brakes were pressed by the institution on the mere fact that the people were part of the wage subsidy scheme, even though their income was completely unaffected.

    "The banks would argue they have to reassess the capacity of the borrower to repay... but for me the key issue is that if the affordability of the mortgage is unaffected, then those mortgages should be honoured."

    He said the new Government will now discuss the issue with the banks and the Central Bank.

    So the banks refused loans for the mere fact that borrowers were on a temporary from of social welfare.

    Shortly after the Government discussed the issue AIB said they would reopen applications to those on the wage subsidy scheme.

    This is banking by public opinion, and if it goes tits up, the taxpayers are on the hook again.

    Nobody can blame the banks this time, they can say "We told you it was madness, but the government said keep lending!"


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