Home foreclosure in the cards for Ireland?

TomF

Call me a doom-sayer, but this article on the situation in America almost has to be describing what will be happening soon in Ireland: "NEW YORK (Reuters) - U.S. mortgages in foreclosure climbed to a record high in the first three months of 2003 as job losses and personal bankruptcies forced more people out of their homes, a mortgage industry group said on Friday. ... The housing market has been a pillar of strength for the sluggish U.S. economy. Ultra-low interest rates have fueled record home sales... ."

http://www.washingtonpost.com/wp-dyn/articles/A16479-2003Jun20.html

dahamsta

I look forward to picking one up.

adam

uzami

Nahh....will never happen.

Irish Nationwide started foreclosing on peoples homes sometime back (8/10 years?) and there was uproar...all the biddies on Marian Finucane talking about the evil bank taking away the family home etc.etc.etc.

Nationwide lost a load of business.

All the Irish banks are reluctant to foreclose on family homes for exactly this reason (call it the Finucane Factor). Investment homes are, of course, a different matter.

I think there are figures (some mortgage cartel of the leading lenders) where they only foreclosed on something like 20 houses last year!!

Hyzepher

Unfortunately this is already happening. Irish banks last year forclosed on a number of family homes and the figures have been rising over the last 3-4 years.

The levels are not up to the numbers of 10 years ago but they are getting larger. What makes things worse is that the banks aren't reducing their lending criteria - they know that house prices are still rising enough that if someone can't pay the mortgage that they will be clear when they sell the house - this is no compensation to the house owner who finds their house sold from under them.

Hyzepher

spongebob

i agree with uzami

the only lender that did so was Nationwide . Finucane runs that lot like a mafia gang.....they would not tell their borrowers what interest rate they were on for their mortgage for example. I think that may have changed but only last year. That is unacceptable behaviour.

They sometimes forced people into foreclosure by applying massive penalty rates on any missed payment and then selling through 'selected' estate agents as market rates, thereby recouping 'their' money including the penalties.

Nationwide is uniquely scummy in the mortgage market in Ireland. Avoid it like the plague as a borrower, no matter how stuck you are.

The rest oif the lenders, including all the big ones, are most reluctant to foreclose and will give you a chance to sell the thing and cover your debt to them before you get into real ****.

M

M

uzami

However, according to banks, the numbers of cases do not reflect the number of repossessions. Neither Bank of Ireland nor AIB repossessed any houses last year, according to spokespeople. EBS repossessed only one house. Other financial institutions contacted did not respond to questions.

http://archives.tcm.ie/businesspost/2002/08/11/story325805.asp


3 of the top lenders and only one house reposessed in 12 months.....its the Finucane Factor I tell ya!!!

uzami

Marian Finucane = Radio Personality

Michael Fingelton = Mafia Don, Cappo di Cappo of Irish Nationwide


I agree with Muck!!!

spongebob

/me is well corrected by uzami

thats who I meant

no disssing of Marion intended.

The US has thousands of lenders as well because there are vast numbers of local banks, unlike Ireland. Some are great and some are bottom feeders.

uzami

knew I had them somewhere:


TOTAL REPOSSESSIONS
Properties taken into Possession
.....................................1995 1996 1997 1998 1999 2000 2001
Possession orders Executed 85 102 84 52 30 20 17
Properties Surrendered ......73 59 46 27 11 11 6
Properties Abandoned........35 17 13 7 9 2 2
Totals..............................193 178 143 86 50 33 25


taken from IMSA Annual Report 2001

The Irish Mortgage & Savings Association (IMSA) is a representative organisation for mortgage lenders in Ireland.

Our man in Havana

What is the max penalty interest that can be applied to late payments? Is there an industry standard?


What would be the min amount owed before they would repossses?

uzami

What is the max penalty interest that can be applied to late payments? Is there an industry standard?

Each lender varies on penalties, if there is a max that can be applied I suspect it would be covered in the Consumer Credit Act, or you could try phoning ODCA, or IFSRA.

What would be the min amount owed before they would repossses?

All the banks will do everything in their power not reposess.

They only repo in very extreme circumstances, eg someone is actively destroying the asset whilst not paying the mortgage.

Our man in Havana

I heard that some charge 1% per day. I think this is excessive as things would very quickly spiral out of control.

Victor

Unlikely, but a growing possibility. Mortgages are on a completely different basis in the USA to Ireland. In the USA the mortgage is limited to the property, in Ireland they can go after your car / boat / business / second property. this means that in any given downturn, an American bank is more likely to foreclose.

News today that the Central Bank is concerned with the growth in personal lending, up 26% in the last year. If they instruct the banks to implement tighter rules, you can expect a very sudden and real drop in the value of mortgages - and prices.

http://home.eircom.net/content/irelandcom/breaking/921820?view=Eircomnet

Irish Life predicts healthy lending levels
From:ireland.com
Tuesday, 24th June, 2003

Irish Life & Permanent has predicted the strength of the Irish property market should ensure its lending business will continue to perform well this year but said sales of its life assurance would fall.

In a trading statement, the company said its life business would be off around 40 per cent on the same period last year, largely due to the impact of SSIA sales last year.

Another cause of the fall-off in life assurance polices, the company said, was the consumer caution brought about due to the continuing slump in global equity markets.

However, a stronger banking performance should offset lower earnings from life assurance, the statement predicted.

Irish Life & Permanent said new lending in Ireland and Britain was expected to be around €2.6 billion, with new residential mortgage lending in Ireland up by more than 30 per cent.

Mortgage lending business in Britain is expected to grow by 50 per cent.

Irish Life & Permanent also said its short-term investment fluctuations were no positive, despite a significant negative outcome last year.

sceptre

Originally posted by uzami
All the banks will do everything in their power not reposess.

They only repo in very extreme circumstances, eg someone is actively destroying the asset whilst not paying the mortgage.

Indeed. What they've apparently been doing in the past few years in a number of cases is taking possession of the house deeds (not just holding them, taking possession of the property) and leaving the family there, paying rent pretty much at the same rate as the mortgage but obviously without the property ever being transferred to the occupiers.

Helps keep a few extra houses off the market too.

Victor

Actually, this is potentially the problem area, where people have a second property and find the rent doesn't cover the mortgage anymore and have to pay for it from their own pocket.

http://home.eircom.net/content/unison/national/930302?view=Eircomnet

House prices to drop as investors hit
From:The Irish Independent
Thursday, 26th June, 2003
Brendan Keenan Group Business Editor

HOUSE prices will probably fall over the next few years, but a general collapse looks unlikely, a new report on the property market said yesterday.

But there could be a major shock for thousands of "off-the-plans" buyers who have agreed to purchase houses and flats which are not yet built.

The property may be worth less than they have paid by the time it is ready, according to the conclusions in the report.

Worst-hit of all may be "buy-to-let" investors who have poured into the market in the last two years.

With rents falling, and little sign that the price boom will continue, they are unlikely to make much profit on their investments, NCB Stockbrokers said in the report.

House prices have risen by 15pc a year for the past six years, with the exception of 2001, when tax increases cooled the market.

The report said the main reason was that builders could not keep up with soaring demand from a growing population and workforce.

"Now, however, supply would appear to have finally caught up, with more than 50,000 houses built in each of the past two years," NCB said.

This will take the pressure off prices, while banks and building societies may tighten up on mortgage lending - which would also curb prices.

"There are some risks of a setback to house prices, although probably not a collapse.

"This is not a replica of the UK experience of the late 1980s, when policy changes largely accounted for the house price boom, and their reversal largely accounted for the bust," the report said.

NCB are more worried about the buy-to-let market. Increasingly, ordinary people are taking out mortgages based on the value of their home and buying flats and houses to rent out, in the hope of enjoying future 15pc per annum price gains.

But the report thinks they are likely to be disappointed.

"Rents are already 3pc lower than a year ago. Moreover, there is a potentially large overhang of supply which has been sold to investors, but not yet built.

"This means a large number of properties are likely to come onto an already soft rental market, depressing rents further over the next year or two.

"New investors are likely to shy away from the market as a result.

"Thus, prices for new houses and apartments may well decline in this period," the report warned.

Rents have gone up by 60pc since 1994, but prices have risen even faster.

As a result, a new buyer would need a rent of €2,250 a month to give the same return as €800 a month did in 1994.

With the actual average rent just €1,280 a month, buyers will need a further sharp rise in prices to justify the purchase, but the brokers think this is unlikely to happen.

Dublin prices should be less vulnerable to any setback because of the growing population in the capital, which is expected to increase by almost 100,000 over the current decade.

Thereafter, the rest of the country will catch up, with an increase of almost 200,000 from 2011-26, compared with 70,000 growth in Dublin.

The long-run trend for house prices depends on whether builders can meet this demand.

NCB believe more than 50,000 dwellings a year will have to be built from now until 2011.

Immigration at current levels would increase this to 60,000 a year.

Price rises could resume if the planning and construction sectors are not able to provide these numbers.

Experts last night said that the report raises an important point about the future.

They said it could lead to the conclusion that prices may stabilise in the medium term - and then rise significantly again quite soon.

They drew this conclusion from the report's claim that builders can easily shut off the supply of houses and therefore not create an oversupply which would spark a crash.

"Rents have gone up by 60pc since 1994, but prices have risen even faster. As a result, a new buyer would need a rent of €2,250 a month to give the same return as €800 a month did in 1994. With the actual average rent just €1,280 a month, buyers will need a further sharp rise in prices to justify the purchase, but the brokers think this is unlikely to happen. " - this sounds like fuzzy accounting, not taking into account the amount that interest rates have fallen.

antoinolachtnai

Yup. The real problem will happen if we see a lot of lay-offs in the middle-management layer of multinationals. The people in this layer are likely to have used their high incomes to purchase a second property.

If they are made redundant, however, they may find it difficult to find a new job, and at the same time may not be able to get appropriate tenants at a rate that would cover the mortgage.

Obviously paying the mortgage on the dwelling house will be the priority, so they may have to sell the second property. That could result in a loosening-up of the starter-home market.

Personally, I don't think we'll see any big drop in the value of property overall. I think the city centres will be pretty solid. Low-quality properties in the outer suburbs might have a rough ride, however. (Just my view.)

In general the banks will avoid foreclosing, if only to avoid causing a price-crash.

Victor

Originally posted by antoinolachtnai
Obviously paying the mortgage on the dwelling house will be the priority, so they may have to sell the second property. That could result in a loosening-up of the starter-home market.

And this, selling into a falling market, is the risk. Remember the way the say only use money you can afford to loose to invest in the stcok market, well these house might have only 0-25% equity behind them (stamp duty will have eaten up most of the deposit).