Morgan Kelly - Pump a few billion into the middle class coffers?

thebigbiffo · 19-08-2011 11:23am #1

Surely everyone has heard by now that Morgan Kelly – that much praised economic sear – has called for mortgage forgiveness to the tune of €5-€6bn. In those heady days when I first started posting on Boards many a virtual row I had for advocating such an approach, so I understand the negatives involved.

What? Re-cap? Ok…people who have been keeping up on their mortgage repayments and weren’t stupid enough to buy a suitable house to live in with their family in 2007 will be up in arms: “why should my neighbour get money knocked off their house when I’m doing very well thank you very much and am not a financial retard like the rest of you sheep”. I understand this, really, fair enough. But it’s the selfish approach. People need to understand it’s a real and viable way to get money back into the real economy and buying the worthless crap you most probably produce in a factory in west Cork or whatever. It means more tax, vat and opportunities for entrepreneurship and therefore employment. It means the banks have less of a stranglehold on the taxpayer who has bailed them out and the unemployed are given that bit more hope.

Why should the banks take tens of billions of our money yet chase us down for the debts they, in a sense, forced us into in the first place? Are the people against this just cynical, selfish bastards? Has the general AH mood changed in the last year since I has this row? Should I as a working, middle class, income earning, taxpaying member of society get debts written off so I can buy a new flat screen TV? I’ll leave it with ya to ponder. And can I just say to all you geniuses who knew that the housing bubble was about to burst; you are legends and should be running the country. But seeing as you’re not and what’s done is done, is now not the time to try some approach to freeing up disposable income so the economy has a shot in the arm?

Freddie59 · 19-08-2011 11:32am

Personally I think it's a ludicrous solution. But it's piggy-backing onto debt forgiveness for:

Banks
Developers

Banks should have been told to eff off. There is no way the taxpayer should be footing the bill.

Developers are being let off the hook to resume their activities.

And now they want Joe/Mary taxpayer to pay people's MORTGAGES??!! FFS.

Yeah. Imagine what that 6Bn could do for education.

Nobody was stupid. They knew what they were getting into. And should foot the bill THEMSELVES.

And what about the tens of thousands of taxpayers who have actually PAID their mortgages? Are they to be discriminated against?

seamus · 19-08-2011 11:34am

thebigbiffo wrote: »

What? Re-cap? Ok…people who have been keeping up on their mortgage repayments and weren’t stupid enough to buy a suitable house to live in with their family in 2007 will be up in arms: “why should my neighbour get money knocked off their house when I’m doing very well thank you very much and am not a financial retard like the rest of you sheep”. I understand this, really, fair enough. But it’s the selfish approach.

I've not read Morgan Kelly's piece yet, so I'm assuming he's probably addressed this;

The real problem would not be so much begrudgery. Imagine I have a €300k mortgage on a €150k house, which I'm managing to pay off.
My neighbour has a €200k mortgage on the same house, but he's struggling. The bank approaches him and says, "You're struggling, so what we'll do is allow you to sell up and walk away with no debt". So the value of my house effectively collapses. The neighbour can sell up for €100k and move on, and any hope that I had of simply chipping away at the mortgae and waiting out the storm, has been lost. From my perspective, I'm now paying money on a mortgage for a house that I cannot leave for about 20 years.
So why should I bother? Why should I not stop paying?

The other argument is that you're effectively rewarding people for poor fiscal choices and punishing those who made better choices. That is, those who went for ridiculous mortgages get to walk away and start again, whereas those who have affordable mortgages are still stuck.
Rewarding the stupid choices and punishing the good is effectively what we did for the banks, just on an individual level.

cosmicfart · 19-08-2011 11:36am

The 'Banks' which we bailed out, should half the mortgages of people who bought property at a clearly inflated price. Its the banks fault for reckless lending which lead to the property bubble. I dont see why ordinary decent folk already bailing out these criminal institutions should continue to be handicapped by the very same institutions that are responsible for this whole fookin mess in the first place. write off half their debts cus ur not got it get it anyways

maudgonner · 19-08-2011 11:49am

cosmicfart wrote: »

The 'Banks' which we bailed out, should half the mortgages of people who bought property at a clearly inflated price. Its the banks fault for reckless lending which lead to the property bubble. I dont see why ordinary decent folk already bailing out these criminal institutions should continue to be handicapped by the very same institutions that are responsible for this whole fookin mess in the first place. write off half their debts cus ur not got it get it anyways

The banks are not entirely responsible for the property bubble! Every single person that bought a house at an inflated price made that decision for themselves. Nobody forced their hands. They could have rented. If they had taken an adult approach and looked at their own finances then they would have seen that the numbers only added up while times remained good, and the nature of economies is that there are good times and bad. It's not rocket science - the slump of the 80's is not so long ago that it's forgotten.

So why, for ***s sake should I, who engaged my brain for long enough to see this for myself, have to pay for the mistakes of people who were too daft/careless/lazy to do the research and now repeatedly refuse to take responsibility for their own mess? Yes, the banks are culpable for lending money too freely, but so are the people who took up the mortgage offers. Full sympathy for anyone who's caught in a debt spiral, but don't try to make me suffer with you, I've got enough worries trying to get by and pay my own rent.

tonycascarino · 19-08-2011 11:55am

cosmicfart wrote: »

The 'Banks' which we bailed out, should half the mortgages of people who bought property at a clearly inflated price

That's just rewarding someone for being an eejit. Tough luck.

Frank Black · 19-08-2011 11:55am

Well, my understanding of what he is proposing is that people who are unable to service their mortgage would be allowed sell up and walk away with 'some' of the outstanding balance being written off.
I would imagine that in such a scenario, their credit rating would be badly affected, so they wouldn't be getting away scot-free and I would imagine they would struggle to convince a lending institution to let them take out another mortgage in the short to medium term - so they'll probably be looking at renting for a considerable time. In some cases they'll be too old to ever aspire to take out another 25-30 year mortgage again.
When people hear the term ‘debt forgiveness’ it sends the wrong message and implies that ‘your neighbour’ is going to get away with recklessly borrowing while you gainfully struggle to pay your debts – I don’t think this will be the case, and the people who have sensibly borrowed and still manage to make their mortgage payments will be better off in the long term than those that don’t.

Freddie59 · 19-08-2011 11:59am

cosmicfart wrote: »

The 'Banks' which we bailed out, should half the mortgages of people who bought property at a clearly inflated price. Its the banks fault for reckless lending which lead to the property bubble. I dont see why ordinary decent folk already bailing out these criminal institutions should continue to be handicapped by the very same institutions that are responsible for this whole fookin mess in the first place. write off half their debts cus ur not got it get it anyways

Did you even READ the reply above from Seamus?

There are other 'ordinary decent folk' (myself included) who are bailing out these criminals - and paying my mortgage at the same time.

maudgonner · 19-08-2011 12:03pm

black francis wrote: »

Well, my understanding of what he is proposing is that people who are unable to service their mortgage would be allowed sell up and walk away with 'some' of the outstanding balance being written off.

That seems to be part of his proposal, but according to the article in today's Indo:
"He said that mortgages would be reduced to a level “deemed affordable” while others would be allowed to leave their properties “without being pursued for outstanding debts"."

It's the "mortgage principal reduction" part of his proposal that seems the most objectionable to me.

Sofa King Great · 19-08-2011 12:10pm

The impact of this would be to reduce the spending power of those continuing to fund their mortgages. Their payments would remain the same but the increased taxes required to plug the 5bn deficit would mean they'd have less real income.

I also strongly disagree when people go on about negative equity. People who bought houses at the peak do not have higher debt than they did back then. Whilst it is true that they can no longer sell their home at a profit their debt is no higher than it was when they signed the facility agreement.

Rabidlamb · 19-08-2011 12:14pm

Right, soon as this starts getting political momentum I'm going to stop paying my mortgage for 90 days & go interest only then for the next 6 months.

Bank comes in & writes off 25% of my mortgage
I bring the €50 notes back out from under the mattress
?????????????
Profit

maudgonner · 19-08-2011 12:20pm

I'd also love to see how they're going to get around the problem of people effectively rebuying the house they've just had mortgage forgiven on.

Say Mary had bought a house at the peak of the boom for 300k, can't make the repayments and walks away. She cannot buy back the house. But her boyfriend John promptly buys the house for 100k. Mary hands John the keys and they continue on as before, except the tax payer has just funded them to the tune of 200k. Are we legally going to be able to stop John from buying the house if they're not married? What if it's her parents that buy it back for her. Her sister? Where do we draw the line, and how do we enforce it? Surely it would be a legal nightmare?

Celly Smunt · 19-08-2011 12:22pm

€1 billion worth of vouchers for retail is far more efficient.

middle class moral maintained and boosted consumer confidence
Debts paid to banks by retail outlets and probability of more jobs created
Banks books boosted

and all of this=a return of tax and generation of money in the local economy

cosmicfart · 19-08-2011 12:22pm

Freddie59 wrote: »

Did you even READ the reply above from Seamus?

There are other 'ordinary decent folk' (myself included) who are bailing out these criminals - and paying my mortgage at the same time.

did you even read my post???

cosmicfart wrote: »

The 'Banks' which we bailed out, should half the mortgages of people who bought property at a clearly inflated price. Its the banks fault for reckless lending which lead to the property bubble. I dont see why ordinary decent folk already bailing out these criminal institutions should continue to be handicapped by the very same institutions that are responsible for this whole fookin mess in the first place. write off half their debts cus ur not got it get it anyways

in other words ALL persons who bought property at the height of the boom should have some sort of a reduction. otherwise it wont be fair and the people who still have jobs wont be able to start begrudging others who have lost theirs and now simply dont have money.

maudgonner · 19-08-2011 12:27pm

cosmicfart wrote: »

did you even read my post???

in other words ALL persons who bought property at the height of the boom should have some sort of a reduction. otherwise it wont be fair and the people who still have jobs wont be able to start begrudging others who have lost theirs and now simply dont have money.

And how exactly is that fair on the people who didn't buy and have been "throwing money down the drain" on rent? I'll be paying off your mortgage while you retain an asset. What do I get out of it?

General General · 19-08-2011 12:28pm

Liens on properties held, effectively lengthening mortgage, fine if needs must.

Leave property & get debt write off - it better be an arrangement close to going bankrupt or else it's a joke.

Economy needs a shot in the arm of people coming up with businesses focused on export markets... versus horse**** proposals.

excaliburhc · 19-08-2011 12:29pm

personally i believe this is the best option , had many a discussion at work over this and while i am against the idea of wholesale debt forgiveness , i am an advocate for reducing the mortgage to the actual value of the house and defaulting on the difference . rework the mortgage to the new price and make an arrangement with the owners that suits all - people arent homeless - banks still get money and so on.

as for the people buying houses they couldnt afford - not everyone who is now defaulting is in that boat , sure some people took the piss and got mortgages for 10 to 20 times their salary to buy second houses / flats / mansions - i have no sympathy for those .

but when we purchased our house it was a choice of dangerous neighbourhood with a known criminal element for proper money or going to the bank and trying to get a decent sized loan to purchase a house in a "safe area" , lot of people didnt have a choice about the mortgages they required - banks / government drove the house prices up - didnt do anything to deflate the market and in the end when it came to best area for the children - best schools and so on ,with the bank giving mortgages and structuring so that people could pay ,what actual choice did people have.

oh and the end of the day regardless of anything - the money is just made up - there is no gold bullion that is linked to it , it is just a piece of paper with picture on it.

cosmicfart · 19-08-2011 12:30pm

maudgonner wrote: »

The banks are not entirely responsible for the property bubble! Every single person that bought a house at an inflated price made that decision for themselves. Nobody forced their hands. They could have rented. If they had taken an adult approach and looked at their own finances then they would have seen that the numbers only added up while times remained good, and the nature of economies is that there are good times and bad. It's not rocket science - the slump of the 80's is not so long ago that it's forgotten.

So why, for ***s sake should I, who engaged my brain for long enough to see this for myself, have to pay for the mistakes of people who were too daft/careless/lazy to do the research and now repeatedly refuse to take responsibility for their own mess? Yes, the banks are culpable for lending money too freely, but so are the people who took up the mortgage offers. Full sympathy for anyone who's caught in a debt spiral, but don't try to make me suffer with you, I've got enough worries trying to get by and pay my own rent.

yes everyone has to take account for themselves and its not entirely the banks fault but ur just spouting 'im better the the rest of u nonsense' when their are FAMILIES literally gonna be broken up because of this mess, what ur solution if not to give them a helping hand? fook them???

c_man · 19-08-2011 12:31pm

If people are getting their mortgages forgiven, the very least I want is a PS3. And some games obviously.

Celly Smunt · 19-08-2011 12:32pm

excaliburhc wrote: »

personally i believe this is the best option , had many a discussion at work over this and while i am against the idea of wholesale debt forgiveness , i am an advocate for reducing the mortgage to the actual value of the house and defaulting on the difference . rework the mortgage to the new price and make an arrangement with the owners that suits all - people arent homeless - banks still get money and so on.

as for the people buying houses they couldnt afford - not everyone who is now defaulting is in that boat , sure some people took the piss and got mortgages for 10 to 20 times their salary to buy second houses / flats / mansions - i have no sympathy for those .

but when we purchased our house it was a choice of dangerous neighbourhood with a known criminal element for proper money or going to the bank and trying to get a decent sized loan to purchase a house in a "safe area" , lot of people didnt have a choice about the mortgages they required - banks / government drove the house prices up - didnt do anything to deflate the market and in the end when it came to best area for the children - best schools and so on ,with the bank giving mortgages and structuring so that people could pay ,what actual choice did people have.

oh and the end of the day regardless of anything - the money is just made up - there is no gold bullion that is linked to it , it is just a piece of paper with picture on it.

long term lease

Frank Black · 19-08-2011 12:34pm

excaliburhc wrote: »

.

but when we purchased our house it was a choice of dangerous neighbourhood with a known criminal element for proper money or going to the bank and trying to get a decent sized loan to purchase a house in a "safe area" ,

You actually had a third choice, namely not to take out a large mortgage in the first place and rent.

Richard tea · 19-08-2011 12:34pm

Absolutely, ''i am an advocate for reducing the mortgage to the actual value of the house and defaulting on the difference'' & this would free up millions to be spent in the local economy. As far as im concerned, the sh*t has not hit the fan yet. Plans should be acted on asap before there is no going back.

excaliburhc wrote: »

personally i believe this is the best option , had many a discussion at work over this and while i am against the idea of wholesale debt forgiveness , i am an advocate for reducing the mortgage to the actual value of the house and defaulting on the difference . rework the mortgage to the new price and make an arrangement with the owners that suits all - people arent homeless - banks still get money and so on.

as for the people buying houses they couldnt afford - not everyone who is now defaulting is in that boat , sure some people took the piss and got mortgages for 10 to 20 times their salary to buy second houses / flats / mansions - i have no sympathy for those .

but when we purchased our house it was a choice of dangerous neighbourhood with a known criminal element for proper money or going to the bank and trying to get a decent sized loan to purchase a house in a "safe area" , lot of people didnt have a choice about the mortgages they required - banks / government drove the house prices up - didnt do anything to deflate the market and in the end when it came to best area for the children - best schools and so on ,with the bank giving mortgages and structuring so that people could pay ,what actual choice did people have.

oh and the end of the day regardless of anything - the money is just made up - there is no gold bullion that is linked to it , it is just a piece of paper with picture on it.

Eric Cartman · 19-08-2011 12:35pm

im in no way saying forgive the principal of a mortgage, thats getting something for free, but banks that received bailout money should have to forgive all the interest going forward on all mortgages up to the point at which theyve 'forgiven' the equivalent of what they got in bailouts . It helps the people struggling to pay and it doesnt cost the tax payer anything , and for the bank - getting back the principal each month rather than f*ck all of the interest will decrease their risk and get them a higher rating. It helps people own their homes faster as no interest , so helps the people who can pay their mortgages to have more disposable income to spend and get the economy rolling again

cosmicfart · 19-08-2011 12:35pm

maudgonner wrote: »

And how exactly is that fair on the people who didn't buy and have been "throwing money down the drain" on rent? I'll be paying off your mortgage while you retain an asset. What do I get out of it?

obviously persons renting who are now struggling because they have lost their job dont also have 300K of a mortgage hanging over their head yet still have to find money for their home/rent, it is far far easier to obtain cheap rental accommodation now.

seamus · 19-08-2011 12:36pm

cosmicfart wrote: »

in other words ALL persons who bought property at the height of the boom should have some sort of a reduction. otherwise it wont be fair and the people who still have jobs wont be able to start begrudging others who have lost theirs and now simply dont have money.

Of course the question there is, where is the cut-off.

At this stage, anyone who bought a house after 2004, could possibly be in negative equity. In 2 years time, houses could be down to the levels of 2000, which means that anyone who bought since 2002 is likely in NE. How do you fairly label a mortgage-holder as being a "boom" buyer without unfairly disadvantaging his neighbour who happened to buy 2 months earlier at a slightly lower price?

In reality any debt forgiveness or mortgage reduction scheme would need to come with caveats that make it desirable for people in real difficulty but without opening loopholes for people to abuse it.

So for example, for people in negative equity who need to move (house is too small, have split up, whatever), give them the option to walk away, debt-free, but with the mortgage recorded as a default on their credit history.
This frees them from the property burden, allowing them to move and rent a more appropriate property, but prevents them from getting straight back into the property market. In fact they'll have difficulty getting any credit for five years.

For people having payment difficulties on huge mortgages, but in homes which are adequate, allow their debt to be reduced to the current market value of the property. But add in a "clawback" provision. So if they sell before the mortgage is 50% finished, the bank takes everything, i.e. they homeowner walks with nothing. If they sell before 75% is done, the bank takes half the profit, or something along similar lines.

The council operated a similar scheme during boom years to discourage people from flipping properties when they had a council mortgage.

maudgonner · 19-08-2011 12:39pm

cosmicfart wrote: »

yes everyone has to take account for themselves and its not entirely the banks fault but ur just spouting 'im better the the rest of u nonsense' when their are FAMILIES literally gonna be broken up because of this mess, what ur solution if not to give them a helping hand? fook them???

I'm absolutely not saying that I'm better than everyone else :mad:. And I have no problem with giving people a helping hand, I have genuine sympathy for anyone that's in trouble with debt.

But owning your own home is a privilege, not a right, and I don't believe this is going to prevent families being broken up. I think it's a simplistic, unfair solution that might sound popular to people that find themselves in financial difficulty, but that in reality will end up hurting more people than it helps, will be a huge slap in the face to the thousands upon thousands of households that are scrimping and saving and making huge sacrifices to service their debts, and wind up putting the economy in a worse position than it is now, at a huge cost to the taxpayer.

Celly Smunt · 19-08-2011 12:39pm

Eric Cartman wrote: »

im in no way saying forgive the principal of a mortgage, thats getting something for free, but banks that received bailout money should have to forgive all the interest going forward on all mortgages up to the point at which theyve 'forgiven' the equivalent of what they got in bailouts . It helps the people struggling to pay and it doesnt cost the tax payer anything , and for the bank - getting back the principal each month rather than f*ck all of the interest will decrease their risk and get them a higher rating

the banks at the end of the day are a business though,but an essential service,therefore they don't have to please anyone as such but keep their margins on target,they could raise it another 5 percent if they really want to

He who controls the money supply of a nation controls the nation- james a garfield

and the ECB and Germany control the money supply

Sofa King Great · 19-08-2011 12:40pm

If they were to give a write off for people who bought at the peak then they should also take the profits made by people on property during the peak.

hidinginthebush · 19-08-2011 12:43pm

c_man wrote: »

If people are getting their mortgages forgiven, the very least I want is a PS3. And some games obviously.

If I'm going to be funding the mortgages of the fools who bough shoeboxes for 350K, then I want a guarantee of a permanent job! (And a PS3, obviously

)

Celly Smunt · 19-08-2011 12:45pm

Free Hat!

General General · 19-08-2011 12:47pm

cosmicfart wrote: »

yes everyone has to take account for themselves and its not entirely the banks fault but ur just spouting 'im better the the rest of u nonsense' when their are FAMILIES literally gonna be broken up because of this mess, what ur solution if not to give them a helping hand? fook them???

Here we go... the passion!!! It'll be devastating!!!!!!!!!!!!!

Thank goodness for posts like these to bring us all to our senses.

Morgan Kelly - Pump a few billion into the middle class coffers?

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