Negative Equity (again!)

Here is a proposal put out by Iain Nash and Karl Deeter for people in negative equity.

My understanding is that it allows people to complete their contractual obligations to their mortgage originator, save money and restart their property decisions when things settle out for them.

The model will also work with the banks taking a hit on the mortgage principal.

What do you all think?

Head The Wall

They make some good points alright, as long as there is no disincentive for people to be going on the dole so they don't have to pay the NEL back. It could possibly encourage the Black Market more than is already happening.

And it's not a bailout which will keep most people happy. Surely the banks should have offered this initiative themselves though, it's not rocket science.

My own solution although I don't know how plausible it would be is to get the banks to temporarily renegotiate the Mortgages to a payment that the owner can currently afford. (This will involve extending the life of the mortgage temporarily). The amount of the payments can then be re evaluated every 2 years say and if the owners position changes they can up the payments they are making. Over time as the economy prospers (hopefully) and the market rises at a reasonable rate the negative equity in the house should start to balance out.

I know this won't work in all situations as it wouldn't let people move house so it would be geared for people that want to stay in their house.

We have to come up ideas as it seems the Banks are just happy to sit on their asses and collect no mortgage payments from a lot of people. Don't they see where this is going to end up

Scarab80

Another scheme by vested interests in the residential property sector to get the government to borrow to stimulate the property sector, it doesn't matter how many bells and whistles you add to a scheme it still comes down to more debt to get people buying houses. I reckon the last thing a person in negative equity wants is to add to their mountain of debt.

There are two ways to get out of negative equity,

1. A genuine increase in the demand for houses due to an increase in immigration or first time buyers fueled by real economic activity

2. Keep paying down your mortgage

Guy:Incognito

Why does anything need to be done because people are in negative equity? Being in negative equity hasnt got anythign to do with not being able to pay your mortgage.

It doesnt affect you unless your trying to sell, so just dont try sell your house.

Einhard

Stekelly wrote: »

Why does anything need to be done because people are in negative equity? Being in negative equity hasnt got anythign to do with not being able to pay your mortgage.

It doesnt affect you unless your trying to sell, so just dont try sell your house.

These are good points. The only people negative equity should affect are those who have lost their jobs or otherwise unable to meet their mortgage repayments, and are not able to recoup thr value of the initial investment should they be forced to sell. A lot of other people though, are just p*issed that the new neighbours paid half the price for the same house.

I believe the point of the model is to help those people who have to sell their house and clear their debts now because of unemployment, change of job etc.

silverharp

if commercial entities want to lend on a commercial basis to these people, good luck to them, otherwise there should not be any type of government help here. The humane solution may just be letting the people default so that they can get on with their lives and their former properties going to people who can afford them.
The housing market is still a Zombie market because prices arent being allowed to correct properly. I'd personally buy 2 or 3 investment properties in the morning if I thought there was any value there but I cant see any yet.

Head The Wall

Scarab80 wrote: »

I reckon the last thing a person in negative equity wants is to add to their mountain of debt.

There are two ways to get out of negative equity,

1. A genuine increase in the demand for houses due to an increase in immigration or first time buyers fueled by real economic activity

2. Keep paying down your mortgage

This scenario doesn't get rid of their debt, but it does let them sell the house so they are able to reduce their outgoings and move for work purposes if needs be. It looks to be a step in the right direction

ei.sdraob

Deleted User wrote: »

I believe the point of the model is to help those people who have to sell their house and clear their debts now because of unemployment, change of job etc.

I invest in horses/hedgefunds/stocks/companies,

i loose my job, investments go sour

where is my bailout?




unemployed people already get assistance

to eat, be clothed and have rent paid for

cson

Some good points made here.

If you consider your house as a stock for a second; you invested in this stock at the height of the market and now its worth a fraction of what you bought at. You can either sit it out and hope that the value recovers or else bail now and learn from the loss. The latter is not an option for a lot of people as they borrowed to fund this investment.

As has been mentioned; negative equity only really impacts upon a asset if you decide to sell it. We're a gambling nation by and large so to those who are in negative equity and looking for a bailout; you backed the wrong horse, you lost your money and the bookie ain't [and shouldn't] gonna give it back to you.

ei.sdraob

cson wrote: »

Some good points made here.

If you consider your house as a stock for a second; you invested in this stock at the height of the market and now its worth a fraction of what you bought at. You can either sit it out and hope that the value recovers or else bail now and learn from the loss. The latter is not an option for a lot of people as they borrowed to fund this investment.

As has been mentioned; negative equity only really impacts upon a asset if you decide to sell it. We're a gambling nation by and large so to those who are in negative equity and looking for a bailout; you backed the wrong horse, you lost your money and the bookie ain't [and shouldn't] gonna give it back to you.

not only that but the bookie "government" is broke

and the money has long left the country

to make matters worse you and your children are deep in debt to keep the racecourse "country" going


people really need to get it into their thick sculls that any money spend by government is money that will be taken from them (and their children) directly or/and indirectly

now that we own the banks (sigh) we inherit their problems and PAY for them

OMD

ei.sdraob wrote: »

I invest in horses/hedgefunds/stocks/companies,

i loose my job, investments go sour

where is my bailout?

Depends where your investments are. If you put your savings in an Irish bank then you got your bailout through the government guarantee. If the markets were allowed to behave normally, then the banks would have gone bust and most of your savings would have gone with them. Instead the government gave you a bailout.

Similar if you had invested in bank shares (or an investment fund that included bank shares). That money would have been lost completely rather than simply reduced. A semi bailout to investors

Taxipete29

ei.sdraob wrote: »

unemployed people already get assistance

to eat, be clothed and have rent paid for

None of which the Govt will ever get back.

Banned Account

Just a question here, why are we, as a nation, so hung up on the notion that people have some inherent right to keep their home? If you bought a luxury car at the height of things because you could afford it, you would be expected to get rid if you could no longer afford to run it. You would get no sympathy if you did not realise enough to clear the car loan.

If you bought or built a large house, and can no longer service the large mortgage, why should the situation be any different?

Not taking sides here by the way, just wondering why we feel a certain way about houses as opposed to other assets?

Spudmonkey

OMD wrote: »

Depends where your investments are. If you put your savings in an Irish bank then you got your bailout through the government guarantee. If the markets were allowed to behave normally, then the banks would have gone bust and most of your savings would have gone with them. Instead the government gave you a bailout.

Similar if you had invested in bank shares (or an investment fund that included bank shares). That money would have been lost completely rather than simply reduced. A semi bailout to investors

There is a significant difference between savings and shares. People put money in savings accounts expecting them to be secure. They are not a gamble. Bank shares are however!!

OMD

Spudmonkey wrote: »

There is a significant difference between savings and shares. People do not put money in savings accounts expecting them to fall as well as rise. They are not a gamble. Bank shares are however!!

Either way both groups got a bailout. You may think they deserve a bailout but it is still a bailout.

Inquitus

One of the issues I have with negative equity is the fact we have no mortgages over here that allow people to move negative equity from one house to the next. As that article says, we have 200k homeowners in Negative Equity, and more will be soon as the market continues its fall.

This means there are 200k homeowners currently locked out of the housing market, this further stifles demand and in turn fuels the downward spiral of houseprices.

I have friends who are in about 80k Negative Equity, but both have good jobs and would like to move house, the only way they can do so is to save the 80k as fast as possible, save a deposit on top of that then try to move to a larger house....this is despite the fact that they are clearly very well able to pay a much larger mortgage than the one they are currently paying down, even using the revised borrowing guidelines banks are now enforcing.

Jaysoose

ei.sdraob wrote: »

not only that but the bookie "government" is broke

and the money has long left the country

to make matters worse you and your children are deep in debt to keep the racecourse "country" going


people really need to get it into their thick sculls that any money spend by government is money that will be taken from them (and their children) directly or/and indirectly

now that we own the banks (sigh) we inherit their problems and PAY for them

Change the record for gods sake.

Spudmonkey

OMD wrote: »

Either way both groups got a bailout. You may think they deserve a bailout but it is still a bailout.

Under the mattress so in future eh??

average_runner

Who cares about negative equity, no one put a gun to your head to buy a house, but sorry you made a bad investment now pay for it.

Its call life

Jaysoose

average_runner wrote: »

Who cares about negative equity, no one put a gun to your head to buy a house, but sorry you made a bad investment now pay for it.

Its call life

What an insightful argument you put forward thanks for your input.

gurramok

OMD wrote: »

If you put your savings in an Irish bank then you got your bailout through the government guarantee.

I put my savings into a foreign run bank, i did not get any bailout.

Your logic is ludicrous comparing prudent people who have been prudent and those who borrowed heavily. The latter deserve no bailout.

cson

OMD wrote: »

Either way both groups got a bailout. You may think they deserve a bailout but it is still a bailout.

Those who invested in bank shares certainly didn't. A man formerly one of the richest in the country is broke because of it. Rightly so in my opinion; its gambling at the end of the day. You can dress it up all you want as investing but in the cold light it's glorified gambling, and broadly the same as the guy putting money on Aidan O'Briens in the 4.40 in York.

Jaysoose

cson wrote: »

Those who invested in bank shares certainly didn't. A man formerly one of the richest in the country is broke because of it. Rightly so in my opinion; its gambling at the end of the day. You can dress it up all you want as investing but in the cold light it's glorified gambling, and broadly the same as the guy putting money on Aidan O'Briens in the 4.40 in York.

This is so wrong, how the fck can you compare somebody making a major life decision to backing a horse?

Pathetic.

cson

Jaysoose wrote: »

This is so wrong, how the fck can you compare somebody making a major life decision to backing a horse?

Pathetic.

Investing in shares is gambling.

Same core fundamentals to it as a guy backing a horse.

Banned Account

cson wrote: »

Those who invested in bank shares certainly didn't. A man formerly one of the richest in the country is broke because of it. Rightly so in my opinion; its gambling at the end of the day. You can dress it up all you want as investing but in the cold light it's glorified gambling, and broadly the same as the guy putting money on Aidan O'Briens in the 4.40 in York.

The flaw in your argument here is that the horse does not have a legal duty to act in the best interests of its punters.

Jaysoose

cson wrote: »

Investing in shares is gambling.

Same core fundamentals to it as a guy backing a horse.

Believe what you want.

cson

Fitzcaraldo wrote: »

The flaw in your argument here is that the horse does not have a legal duty to act in the best interests of its punters.

It does to be quite honest. Rules of racing decree that you must be trying. Of course it's at the discretion of those who govern racing to decide upon that and it would appear that there are parallels between the HRI Stewards and the present government in that respect.

Edit: None of which has to do with negative equity. Bank shares were mentioned as being bailed out; I said they weren't and nor should they be as no one should be given their money back on a gamble. That idea is possibly worth a separate thread but is not the purpose of this one, thus I'll leave it at this post.

OMD

gurramok wrote: »

I put my savings into a foreign run bank, i did not get any bailout.

Your logic is ludicrous comparing prudent people who have been prudent and those who borrowed heavily. The latter deserve no bailout.

It is still a bailout. Had the market been allowed to act normally the banks would have gone bust. That is a fact. Had they gone bust those with savings would have lost their money. The government put in place a guarantee to stop people loosing their money. That is a bailout. I can't see how you can argue otherwise. You may feel it is fair to give this bailout, and I have no argument with that, but it does not change the fact that many people who have savings in Irish Banks received a bailout.

By the way you assume people who save are prudent but people who borrow are not.

Taxipete29

I dont see how this is a bailout. The people still pay back the money they owe, just to a different creditor. They have still lost money on the deal.

If people think that having 200k people locked out of the property market for the foreseeable future is good for the long term prospects of the country they are very much mistaken.

The proposal is not saying this is the main solution. Its not saying that should be the first option considered. Its about putting forth an idea that may help the housing market, may help people move home or may help people reduce their debt burden by selling their property and paying back the money they have lost over a period of time.

This is all about trying to get the economy back on track. This is not the Govt overpaying for loans( NAMA). This is not a handout with nothing in return.

This is not about helping those who wanted to own 2 and 3 houses and build a portfolio of rental properties. This is about helping people who wanted to buy a house, to live in and maybe raise a family.

Some people here just want to say I told you so over and over. Its not about whats best for the country or the economy or its people. Its about them on their moral high horse saying" but I was prudent". Well good for you. You will still be ahead of those who bought foolishly, but your preachy attitude of let them suffer is not about teaching people a lesson as much as it is about you wanting to be the billy big balls who didnt get into debt and wants to lord it over those who did.

gurramok

OMD wrote: »

It is still a bailout. Had the market been allowed to act normally the banks would have gone bust. That is a fact. Had they gone bust those with savings would have lost their money. The government put in place a guarantee to stop people loosing their money. That is a bailout. I can't see how you can argue otherwise. You may feel it is fair to give this bailout, and I have no argument with that, but it does not change the fact that many people who have savings in Irish Banks received a bailout.

By the way you assume people who save are prudent but people who borrow are not.

And whats this point of view got to do with the topic?