Is there any way to re-negotiate signed mortgage contracts?

ParkRunner

The reason I ask this is that there is a need for Ireland to become more competitive and this requires a reduction in the cost of labour. But at the same time the cost of paying off the debt of a grossly inflated asset well into the future will not be reduced (apart from variations in interest rates for those not on a fixed rate). It would make wage cuts a lot easier to impose and potentially save thousands of jobs if the cost of living could be reduced by revisitng these mortgages.

Therefore, I was wondering if the crazy 40 year, 100% mortgages and similar deals on grossly overvalued properties could be revisited? In normal circumstances contract law should apply and require performance of these contracts but given the current situation it could be worth exploring. I know some of my friends who have lost their jobs have agreed interest only payments for the next 2 years to cope with the reality of unemployment but the huge debt still remains and will have to be paid.

Any assistance through social welfare means would be very difficult given the state of the public finances, and may require tax increases making Ireland less competitive still.

P.S. I don't have a mortgage myself

johnnyskeleton

Do you mean signed contracts for sale of land where the property has dropped in value? There is scope for renegotiation, but ultimately it is a signed agreement and each case is different. A solicitor and/or a professional property negotiator might be of benefit to people in this situation.

If you mean re-negotiate mortgages from 40 years down to, say 20 or 25 years, of course there is scope to do this, but the problem is that people will then have to pay more each month and they don't have this. What we should really be looking to do is change the mentality of people buying property from the bubble "use every trick to get as much money borrowed as possible" to a more realistic what can I actually afford to repay mindset.

If you mean get banks to reduce the principle outstanding on mortgages so that people can pay them off easier, forget it.

ParkRunner

johnnyskeleton wrote: »

Do you mean signed contracts for sale of land where the property has dropped in value? There is scope for renegotiation, but ultimately it is a signed agreement and each case is different. A solicitor and/or a professional property negotiator might be of benefit to people in this situation.

If you mean re-negotiate mortgages from 40 years down to, say 20 or 25 years, of course there is scope to do this, but the problem is that people will then have to pay more each month and they don't have this. What we should really be looking to do is change the mentality of people buying property from the bubble "use every trick to get as much money borrowed as possible" to a more realistic what can I actually afford to repay mindset.

If you mean get banks to reduce the principle outstanding on mortgages so that people can pay them off easier, forget it.

Yes, contracts for sale of land where the property was grossly overvalued and has dropped in value. I totally agree about the required change in mentality and for people to have responsibility for their own actions when signing such contracts. This change in attitude seems to have kicked in with the evaporation of property sales in the recent months. But the fact is that many of those who purchased family homes during the boom times have left themselves with a phenomenal debt and the very real possibility of a cut in income. I am merely looking for ideas really on how this could be tackled without a flurry of repossessions.

johnnyskeleton

EF wrote: »

Yes, contracts for sale of land where the property was grossly overvalued and has dropped in value. I totally agree about the required change in mentality and for people to have responsibility for their own actions when signing such contracts. This change in attitude seems to have kicked in with the evaporation of property sales in the recent months. But the fact is that many of those who purchased family homes during the boom times have left themselves with a phenomenal debt and the very real possibility of a cut in income. I am merely looking for ideas really on how this could be tackled without a flurry of repossessions.

Well there is no easy answer - someone has to take the hit. The purchasor, the vendor, the developer, the bank - they all have made commitments that they now find difficult to fulfill. Some or all of them are going to have to take that hit. There is no way to renegotiate a contract for sale without the developer/vendor or the bank taking a hit on the deal, and ultimately that trickles back into the system. The way to deal with it is by an orderly deflation of assets. I don't agree that avoiding repossessions is a good idea - it would lead to people thinking that they don't have to repay their mortgage. Also, what about the people who rent. If they lose their jobs they lose where they live, so why is it not the same for people who bought property? The situation is not pleasant, but the reality is that we live in a capitalist and law abiding society, and so some people are going to get burned.

Mr. Presentable

OP, if you agreed the value of the property at time of purchase, why do you think it should be allowed a downward review? If values continued to go up, would you like a review in favour of the vendor? Didn't think so.

ParkRunner

johnnyskeleton wrote: »

Well there is no easy answer - someone has to take the hit. The purchasor, the vendor, the developer, the bank - they all have made commitments that they now find difficult to fulfill. Some or all of them are going to have to take that hit. There is no way to renegotiate a contract for sale without the developer/vendor or the bank taking a hit on the deal, and ultimately that trickles back into the system. The way to deal with it is by an orderly deflation of assets. I don't agree that avoiding repossessions is a good idea - it would lead to people thinking that they don't have to repay their mortgage. Also, what about the people who rent. If they lose their jobs they lose where they live, so why is it not the same for people who bought property? The situation is not pleasant, but the reality is that we live in a capitalist and law abiding society, and so some people are going to get burned.

Rents are falling anyway which is something positive. At least for those who lose their jobs and are renting, with any luck the pain will be short term and they would have more choices than a person locked into a crippling lifetime contract. Repossessions will have to happen I agree as distressing as it is and those whose homes are repossessed will probably have to rent in future.

I don't have the figures to hand but there must be thousands of first time buyers who are in this situation and mass repossessions would probably lead to anarchy. I just cant square the circle in relation to the economy becoming competitive while long term huge mortgages need to be paid by people from their wages.

ParkRunner

nipplenuts wrote: »

OP, if you agreed the value of the property at time of purchase, why do you think it should be allowed a downward review? If values continued to go up, would you like a review in favour of the vendor? Didn't think so.

The only reason I am making the suggestion is because the economy is in such a mess that nothing should be ruled out in an effort to help the situation. But it seems the answer will have to be either a substantial number of repossessions or government assistance to those who are struggling..unless these properties suddenly regain their false value and wages rise again, which is not going to happen.

Carawaystick

nipplenuts wrote: »

OP, if you agreed the value of the property at time of purchase, why do you think it should be allowed a downward review? If values continued to go up, would you like a review in favour of the vendor? Didn't think so.

If you sign a contract of sale and pay a 10% deposit and in the mean time the property has fallen 25%, then you've little to lose in renegotiating the price. If you walk away, you'll have lost less than completing the contract.

Victor

There are a few circumstances.

1. Deposit paid, no contract signed. Purchaser can ususally walk away (with their deposit).
2. Contract signed. There is often a clause making the contract subject to the availibility of mortgage finance. Purchaser can ususally walk away (with some expenses).
3. Contract competed - variable rate. The variable rate is probably lower at the moment than previously.
4. Contract competed - other rate. The purchaser has agreed a contract with specific terms, tying the interest rate to some external factor - either they will be benefitting from a tracker or have the security of a fixed rate.

I'm not conviced anything has to change.

johnnyskeleton

EF wrote: »

I don't have the figures to hand but there must be thousands of first time buyers who are in this situation and mass repossessions would probably lead to anarchy. I just cant square the circle in relation to the economy becoming competitive while long term huge mortgages need to be paid by people from their wages.

I'm sorry to say it, but there is no answer. We're in trouble. We have to sit tight through a few rough years, until eventually things fall back into equilibrium. If the country takes any sort of radical action it will be for short term gain but long term disaster. I feel sorry for people in this situation - many of my friends and family are in it and I have had dealings with countless other people who find themselves stuck there. The only hope that I hold out is that something is done about the mistakes made in this country, the corruption is punished and that the journey back to reality be the least painful it can be.

mikemac

Well Victor has given the examples but from reading Post 1 I'd say you're mainly asking the banks to write down the values of the property so the home owner can get a lower monthly repayment.

While it sounds reasonable you open the problems of personal responsibility. Don't pay your mortgage and you get a write down?
The tenant next door might get 10% off due to lower rent but it they fail to pay they'll be evicted.

I just can't see the fairness in it.
The Social Welfare already assist some applicants with mortgage interest so there is help if you need it. It's something anyway

You made your point very well though and seem to have it covered from most angles. I don't agree with it but interesting thread

ParkRunner

johnnyskeleton wrote: »

I'm sorry to say it, but there is no answer. We're in trouble. We have to sit tight through a few rough years, until eventually things fall back into equilibrium. If the country takes any sort of radical action it will be for short term gain but long term disaster. I feel sorry for people in this situation - many of my friends and family are in it and I have had dealings with countless other people who find themselves stuck there. The only hope that I hold out is that something is done about the mistakes made in this country, the corruption is punished and that the journey back to reality be the least painful it can be.

It seems the biggest estate agents in the country in the near future will be the State itself after BOI & AIB are nationalised!

ParkRunner

mikemac wrote: »

Well Victor has given the examples but from reading Post 1 I'd say you're mainly asking the banks to write down the values of the property so the home owner can get a lower monthly repayment.

While it sounds reasonable you open the problems of personal responsibility. Don't pay your mortgage and you get a write down?
The tenant next door might get 10% off due to lower rent but it they fail to pay they'll be evicted.

I just can't see the fairness in it.
The Social Welfare already assist some applicants with mortgage interest so there is help if you need it. It's something anyway

You made your point very well though and seem to have it covered from most angles. I don't agree with it but interesting thread

The only thing similar I can think of is something like benchmarking. We have all seen how benchmarking has operated with wages and if the value agreed at the time of purchase could be altered to reflect some kind of sane true value (e.g. today's selling prices, whatever they may be) and repayments made on this contract, it might form part of the solution. Probably a crazy idea, but the current situation is surreal.