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SVR, negative equity solution.

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  • 21-04-2015 2:03pm
    #1
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭


    This post has been deleted.


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    #2
    tinkerbell
    Registered Users Posts: 6,423 ✭✭✭tinkerbell


    There are lots of people in negative equity, it's not just those on an SVR.


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    #3
    NewDirection
    Registered Users Posts: 223 ✭✭NewDirection


    What happens if the borrower defaults? Does NAMA have a claim on a percontage of the house, or does the bank still keep 100%?


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    #4
    NIMAN
    Registered Users Posts: 32,991 ✭✭✭✭NIMAN


    Surely NE is irelevant unless you are trying to sell your house?


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    #5
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭draiochtanois


    This post has been deleted.


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    #6
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭draiochtanois


    This post has been deleted.


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    #7
    [Deleted User]
    Posts: 5,121 ✭✭✭ [Deleted User]


    draiochtanois wrote: »
    A potential solution to the SVR negative equity problem would be as follows:
    What exactly is the problem you are trying to address?

    Negative equity can be addressed by paying down the loan or increasing the value of the house. It isn't really a problem as long as people pay their mortgage.
    draiochtanois wrote: »
    Part B is taken over by NAMA at a discount.
    NAMA securitises and funds these loans at the best rate possible and passes the savings on to the borrower.
    Who pays for the discount - from what you have outlined it seems like the answer would be anyone but the mortgage holder.


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    #8
    NewDirection
    Registered Users Posts: 223 ✭✭NewDirection


    draiochtanois wrote: »
    This post has been deleted.
    I can't see how this would work. You've gotten a loan and used your house as a security on the loan, I'm not sure you can double up that security with another lender (NAMA).
    The bank has a contract with you, you can't just force them to change it.

    If NAMA (or anyone) was to give you an unsecured loan, you could use it to pay off some mortgage alright, but why would NAMA (or anyone) give you an unsecured loan if you have shown a history of not being able to afford it currently?


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    #9
    NIMAN
    Registered Users Posts: 32,991 ✭✭✭✭NIMAN


    This is just a taxpayer writedown of mortgages by another name.


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    #10
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭draiochtanois


    This post has been deleted.


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    #11
    NIMAN
    Registered Users Posts: 32,991 ✭✭✭✭NIMAN


    Who is paying for the NAMA discount?
    Who funds NAMA?


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    #12
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,278 Mod ✭✭✭✭The_Conductor


    NAMA is being wound down.
    They were never interested in managing individual properties- the loans put into NAMA had a face value of 1.2million or more (in the second and subsequent tranches- originally they had to be over 5 million)- nothing lower than this qualified. NAMA, should be completely gone by 2018.


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    #13
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭draiochtanois


    This post has been deleted.


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    #14
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,278 Mod ✭✭✭✭The_Conductor


    NIMAN wrote: »
    Who is paying for the NAMA discount?
    Who funds NAMA?

    The banks of course! (Haha!)
    Aka- loans were bought off the banks @ 60c in the dollar.
    The bank crystalised the 40c in the dollar loss (which is why we had to recapitalise the bloody things).

    I.e. yet again- the tax payer would be asked to pay.


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    #15
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭draiochtanois


    This post has been deleted.


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    #16
    alias no.9
    Registered Users Posts: 6,264 ✭✭✭alias no.9


    We had paper millionaires during the bubble and paper paupers now. The value of a house doesn't matter a damn unless you're buying or selling. Being in negative equity does not affect your ability to make your mortgage payments, just like being in positive equity doesn't stop you getting into arrears if you can't afford the payments.


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    #17
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭draiochtanois


    This post has been deleted.


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    #18
    NIMAN
    Registered Users Posts: 32,991 ✭✭✭✭NIMAN


    But that's the T&C you signed up to. These are legally binding contracts that you put your signature to.

    I am not trying to be smart as someone sitting on a tracker. I have a SVR myself and am paying 4.04% iirc. I would love this to be 3% or 3.5%, but I signed up to the contract and the bank will be able to point to where I did. No arguments.

    Its a Variable mortgage after all. It varies.


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    #19
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭draiochtanois


    This post has been deleted.


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    #20
    NIMAN
    Registered Users Posts: 32,991 ✭✭✭✭NIMAN


    Trackers are not loss-making anymore.

    I know in the past variables moved with funding costs, but if you read the small print you will see that it justifies the banks charging anything they want to.


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    #21
    alias no.9
    Registered Users Posts: 6,264 ✭✭✭alias no.9


    draiochtanois wrote: »
    This post has been deleted.

    Bunkum. Variable rates are high because there's no competition. There's no competition because we have ridiculous rates of arrears and enforcement of the security on the loans is nigh on impossible. The only thing that would change if every tracker converted to SVR tomorrow is that even more people would squeezed by the lack of competition.

    Trackers are a relic of a time when there was competition, if there'd been prudent LTV and Income Multiples at the time, we'd still have them.

    The banks are happy to vilify the trackers because it distracts from the real issue, lack of competition. Remember new entrants to the mortgage market won't have any losses from non performing loans to cover so they can cherrypick the best customers, undercutting the incumbents but still creaming off profit. No new entrants will come into the market until there's an effective way of dealing with defaulters.


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    #22
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,278 Mod ✭✭✭✭The_Conductor


    NIMAN wrote: »
    Trackers are not loss-making anymore.

    I know in the past variables moved with funding costs, but if you read the small print you will see that it justifies the banks charging anything they want to.

    I'm not sure if you work in one of the smaller lenders. Trackers are loss making in BOI, AIB, PTSB and Ulster Bank. Perhaps somewhere else they are profitable- but not in any of the larger lending institutions.


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    #23
    evolving_doors
    Closed Accounts Posts: 11,812 ✭✭✭✭evolving_doors


    draiochtanois wrote: »
    I would say NAMA has first cut, the whole aim of this would be to force financial institutions to deal with the issue.

    maybe its in their interests not to deal with the issue...


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    #24
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,278 Mod ✭✭✭✭The_Conductor


    Gebgbegb wrote: »
    maybe its in their interests not to deal with the issue...

    By not dealing with it- they have artificially inflated asset prices on their balance sheets- and their capital ratios are better than they would otherwise be. After the latest rule changes- were they to crystalise the losses- most of them would be looking at yet another recapitalisation. They could probably manage it privately- but it would have a massive dilutory effect on current shareholders- their holdings would be massively written down (as happened particularly in BOI).

    Not writing down the debts, is in their shareholders best interests.


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    #25
    johnp001
    Registered Users Posts: 658 ✭✭✭johnp001


    alias no.9 wrote: »
    Bunkum. Variable rates are high because there's no competition. There's no competition because we have ridiculous rates of arrears and enforcement of the security on the loans is nigh on impossible. The only thing that would change if every tracker converted to SVR tomorrow is that even more people would squeezed by the lack of competition.

    Trackers are a relic of a time when there was competition, if there'd been prudent LTV and Income Multiples at the time, we'd still have them.

    The banks are happy to vilify the trackers because it distracts from the real issue, lack of competition. Remember new entrants to the mortgage market won't have any losses from non performing loans to cover so they can cherrypick the best customers, undercutting the incumbents but still creaming off profit. No new entrants will come into the market until there's an effective way of dealing with defaulters.

    Giving out a mortgage post 2009 Conveyancing Act ("no repo act") and the dunne judgement in a state where repossession is effectively impossible and where an unprecedented proportion of loans continue in long term default is different than before these conditions existed.
    Banks have to hold to contractual obligations like tracker rates, where they are not contractually bound to lower rates (as with SVR) they will not lower rates as they need to maximise profit (within their contractual obligations) due to the extreme pressures from government on them not to act to recoup losses from those who are not fulfilling their contractual obligations towards the banks.
    Bank losses = taxpayer losses so any argument that "banks should take the hit" is just shorthand for "taxpayer should fund another bailout"


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    #26
    NIMAN
    Registered Users Posts: 32,991 ✭✭✭✭NIMAN


    AIB CEO to make a statement today apparently on this whole SVR issue.

    From reading of it, the high rate SVRs are paying for all those who aren't paying, rather than trackers.


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    #27
    draiochtanois
    Registered Users Posts: 2,655 ✭✭✭draiochtanois


    This post has been deleted.


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    #28
    NIMAN
    Registered Users Posts: 32,991 ✭✭✭✭NIMAN


    But I am sure the banks logic is that if they lower the SVR then they will not get any of those in arrears to start paying again, well not in numbers that would offset the money they would lose from the majority on SVRs who are paying regularly.

    Remember the vast majority of mortgage holders are paying their mortgages, so giving them money off will only cost the banks.


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    #29
    alias no.9
    Registered Users Posts: 6,264 ✭✭✭alias no.9


    draiochtanois wrote: »
    This post has been deleted.

    SVR's are high because they can be, there's no competition, no consequence. It's easier for the banks to try and squeeze a little bit more from those who are paying than try and follow up with those who aren't.

    It will take a new entrant into the market to rectify this. New entrants won't come anywhere near the market until there is a proper structure through which properties can be be repossessed within a year (or less) of the mortgage going into default.


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