Why don't the banks foreclose on more houses?

whiteonion

According to what I read there are over 44 000 mortgages that are in 90 days arrears or more.
http://www.westmeathindependent.ie/news/comment/articles/2011/04/15/4004318-country-must-find-a-way-to-relieve-mortgage-pressure/

Why don't the banks just foreclose on them and sell them to the highest bidder? The banks in this country are bleeding and in desperate need for cash. Upping the rate of foreclosure would bring in some cash to the banks.

Please spare me from the bleeding heart crap that you can't kick families out on the streets. If they fail to pay their mortgage they should not get to keep their house. I have no sympathy whatsoever for people who over-borrowed and overspent.

Delancey

several reasons -

1) Banks are pretty hated right now , kicking families out on the streets ( which is how it will be portrayed ) will just get them even worse PR.

2) Selling off at low prices these properties ' crystallises ' the banks losses.

3) Following on from number 2 - sales of these assets at low prices may force the banks to revalue their mortgage stock and thus create another hole in their balance sheets.

These are the 3 ones that spring to mind , doubtless thare are more.

whiteonion

Selling off at realistic prices you mean?
Is there any chance that the prices will appreciate within the next 10 years given the state of the economy?

beeftotheheels

whiteonion wrote: »

Why don't the banks just foreclose on them and sell them to the highest bidder? The banks in this country are bleeding and in desperate need for cash. Upping the rate of foreclosure would bring in some cash to the banks.

Well, first off I promise to avoid all bleeding heart ****.

Say Mr X has a mortgage of €300k on a house in Primrose Lawns which he bought in 2005. We guess that that house is now worth €170k but we're not sure because not many houses are selling at the moment. Mr X is behind on his mortgage.

If the bank has a mortgage asset of €300k on its balance sheet, and it forecloses and sells the house for €160k, it makes an immediate loss of €140k.

But, I hear you cry, if the loan is really only worth €160k then shouldn't the bank be carrying it at €160k in its books? Yes and no, it is quite possible that many mortgages up and down the country, to homeowners in negative equity, will be repaid in full. So to start crystallising losses now could require the banks to raise more capital (from us).

Is that all? Afraid not. You have savings of €150k because you have been good and prudent. You want to buy a home. But you reckon that if the banks are foreclosing and selling then the price of homes will drop further so you decide not to buy yet. So the next time that the bank forecloses on a house in Primrose Lawns, it cannot get the €160k it got on Mr Xs house, because purchasers are waiting for the prices to fall further, it manages to get €150k so realizes a loss of €150k. The cycle continues...

House prices keep falling, banks write off more and more of their loan books, the capital hole in the banks increases and we have to cough up more cash...

If the bank does not foreclose it is possible Mr X will get a better job/ Mrs X who is at home minding the kids will go back to work etc etc and the Xs might become one of those families who pay off their entire €300k loan over the next 30 odd years which is a better result for the banks.

So even without mention the bleeding heart issues there are reasons why the banks are not doing this.

MagicSean

Who'd buy them? The people who were foreclosed on would likely never get a mortgage again and everyone else is struggling to pay theirs.

Marsden

whiteonion wrote: »

According to what I read there are over 44 000 mortgages that are in 90 days arrears or more.
http://www.westmeathindependent.ie/news/comment/articles/2011/04/15/4004318-country-must-find-a-way-to-relieve-mortgage-pressure/

Why don't the banks just foreclose on them and sell them to the highest bidder? The banks in this country are bleeding and in desperate need for cash. Upping the rate of foreclosure would bring in some cash to the banks.

Please spare me from the bleeding heart crap that you can't kick families out on the streets. If they fail to pay their mortgage they should not get to keep their house. I have no sympathy whatsoever for people who over-borrowed and overspent.

Banks have messed up more than any person who took on a hefty mortgage to buy a house. They've been repeatedly bailed out at the expense of the taxpayer.

Same tax payers who will be evicted.

drkpower

beeftotheheels wrote: »

Well, first off I promise to avoid all bleeding heart ****.

Say Mr X has a mortgage of €300k on a house in Primrose Lawns which he bought in 2005. We guess that that house is now worth €170k but we're not sure because not many houses are selling at the moment. Mr X is behind on his mortgage.

If the bank has a mortgage asset of €300k on its balance sheet, and it forecloses and sells the house for €160k, it makes an immediate loss of €140k.

But, I hear you cry, if the loan is really only worth €160k then shouldn't the bank be carrying it at €160k in its books? Yes and no, it is quite possible that many mortgages up and down the country, to homeowners in negative equity, will be repaid in full. So to start crystallising losses now could require the banks to raise more capital (from us).

Is that all? Afraid not. You have savings of €150k because you have been good and prudent. You want to buy a home. But you reckon that if the banks are foreclosing and selling then the price of homes will drop further so you decide not to buy yet. So the next time that the bank forecloses on a house in Primrose Lawns, it cannot get the €160k it got on Mr Xs house, because purchasers are waiting for the prices to fall further, it manages to get €150k so realizes a loss of €150k. The cycle continues...

House prices keep falling, banks write off more and more of their loan books, the capital hole in the banks increases and we have to cough up more cash...

If the bank does not foreclose it is possible Mr X will get a better job/ Mrs X who is at home minding the kids will go back to work etc etc and the Xs might become one of those families who pay off their entire €300k loan over the next 30 odd years which is a better result for the banks.

So even without mention the bleeding heart issues there are reasons why the banks are not doing this.

What an awful answer....

Dont you know that the OP is looking for simplistic knee-jerk answers, not well thought out rational ones?

whiteonion

House prices will fall even further, so if the banks don't foreclose now they will lose even more money down the lined. The mortgages I was talking about have been in arrears for over 90 days, it's obvious that they will not get the money back from these people. Makes more sense to foreclose.

Prakari

whiteonion wrote: »

According to what I read there are over 44 000 mortgages that are in 90 days arrears or more.
http://www.westmeathindependent.ie/news/comment/articles/2011/04/15/4004318-country-must-find-a-way-to-relieve-mortgage-pressure/

Why don't the banks just foreclose on them and sell them to the highest bidder? The banks in this country are bleeding and in desperate need for cash. Upping the rate of foreclosure would bring in some cash to the banks.

Please spare me from the bleeding heart crap that you can't kick families out on the streets. If they fail to pay their mortgage they should not get to keep their house. I have no sympathy whatsoever for people who over-borrowed and overspent.

If a bank forecloses on a house and sells it, the money this generates gets destroyed once it goes into the bank (assuming the sale did not cover the principle). It essentially just cancels out numbers on the bank’s book and can never be used by the bank for any other activity like lending.

Foreclosure becomes a particularly moral issue once you realise that the monetary system is set up in a way that guarantees that a significant proportion of the population will default (whatever that loan may be). To put it simply, there is simply not enough money in the system to pay off the debt in the system. The only way that people can pay back their debts in full is through increased money creation by the banks. People who cannot pay off their mortgages now were not reckless, they simply took out loans prior to the slowdown of money production by the banks.

ilovesleep

k_mac wrote: »

Who'd buy them? The people who were foreclosed on would likely never get a mortgage again and everyone else is struggling to pay theirs.

And anyone young and free are tring to get the hell out of ireland

beeftotheheels

whiteonion wrote: »

House prices will fall even further, so if the banks don't foreclose now they will lose even more money down the lined. The mortgages I was talking about have been in arrears for over 90 days, it's obvious that they will not get the money back from these people. Makes more sense to foreclose.

There is a school of thought that foreclosing will cause a race to the bottom, and once the market is aware that mass foreclosures are being instituted, people will stop buying and house prices will keep falling and we will have more Irish property mass hysteria only this time depressing prices rather than inflating them.

I noted from one of your previous threads that you are a prudent person without debt, which makes the situation of those who borrowed to spend wildly difficult to comprehend/ sympathize with, especially that now you're expected to pay for some of their excesses.

However, often times in business prudence doesn't work the same way that it works for individuals (believe me, it is difficult to type this given the extreme situation we find ourselves in where prudence had a nuclear bomb dropped on her before being buried under 2m tonnes of concrete).

90 days is not that long in terms of a mortgage. If we assume that the mortgage is 30 years then 90 days is less than 1%. The fact that you pay your debts as they fall due makes you think a 90 day debtor is unable to pay, but that may not be the case.

Say Mrs X in my above example had just had a baby when they fell into arrears. For the first 90 days, maybe longer, she's not at work and none of us would suggest that she should be. But if her parents live near by and can help with child care then she may be able to go back to work when the child is a couple of months old. The Xs may be able to clear their arrears and pay off their mortgage.

So, leaving aside the fact that it is politically unpalatable for the banks to foreclose (I didn't promise not to raise bleeding heart issues in this reply), 90 days is not a long time for the banks to sit on the problem to see if it improves. Foreclosing now, which you view as the prudent approach, will realize huge losses now which the banks then stand no chance of recovering.

I guess to your mind they are gambling a bit, that things can get better, rather than taking the pain now. But taking the pain now creates a self fulfilling prophesy and creates yet more pain. So, I'm personally okay with them taking that gamble, at least for the time being ONCE THEY ARE INVESTIGATING ALL CASES AND TRYING TO ENSURE THAT INDIVIDUAL MORTGAGEES HAVE A PLAN TO GET BACK ON TRACK WITH THEIR MORTGAGES.

The banks need to be a lot more prudent than they were, and they need to return to having actual customer relationships where someone in the bank really understands whether Mr & Mrs X are likely to be able to repay their loan.

One of the problems with the previous system where the banks looked at general numbers, instead of people, was that they ended up lending daft amounts of money to people who would struggle to repay it.

So on the same basis I am going to suggest that we don't look at general numbers like 44k in arrears, we start thinking about them being 44k households with their own reasons for being in arrears, their own circumstances, some may be unable to pay ever, some may be suffering from a temporary glitch and may be able to get back on track.

whiteonion

What you are advocating is a game of extend and pretend. There is no chance in hell that property prices will increase in the next couple of years.

Fact: Interest rates will rise.
Fact: Taxes will be higher and benefits will be cut.
Fact: Unemployment will remain high for a long time.
Fact: We can expect food and utilities to go up based on the fact of rapidly rising commodity prices.

If the banks don't take the losses now, they will lose even more in the future. What makes you think there is a chance in hell that property prices would increase?

beeftotheheels

drkpower wrote: »

What an awful answer....

Dont you know that the OP is looking for simplistic knee-jerk answers, not well thought out rational ones?

Doh! My bad

P. Breathnach

whiteonion wrote: »

What you are advocating is a game of extend and pretend. There is no chance in hell that property prices will increase in the next couple of years.

Fact: Interest rates will rise.
Fact: Taxes will be higher and benefits will be cut.
Fact: Unemployment will remain high for a long time.
Fact: We can expect food and utilities to go up based on the fact of rapidly rising commodity prices.

If the banks don't take the losses now, they will lose even more in the future. What makes you think there is a chance in hell that property prices would increase?

A good proportion of those in negative equity are able to service those loans fully; another proportion can meet some reasonable part of their obligation; yet others may be able to do something about their indebtedness in the medium term.

If the banks became more aggressive about foreclosing, they would lose many of those in the second and third categories that I have listed. Further, while the banks might incur losses on foreclosure, the people on whom they foreclose would be utterly destroyed financially, something which most of us would consider to be a bad thing.

You should also bear in mind that Irish mortgage lending is with recourse, so foreclosure does not finish the business. The banks could continue to pursue the debtors for years. It's probably better strategy for the bank to hang in there with people who are experiencing difficulties, and work with them on how they address their liabilities. Better for the bank; better for the borrower.

whiteonion

P. Breathnach wrote: »

A good proportion of those in negative equity are able to service those loans fully; another proportion can meet some reasonable part of their obligation; yet others may be able to do something about their indebtedness in the medium term.

If the banks became more aggressive about foreclosing, they would lose many of those in the second and third categories that I have listed. Further, while the banks might incur losses on foreclosure, the people on whom they foreclose would be utterly destroyed financially, something which most of us would consider to be a bad thing.

You should also bear in mind that Irish mortgage lending is with recourse, so foreclosure does not finish the business. The banks could continue to pursue the debtors for years. It's probably better strategy for the bank to hang in there with people who are experiencing difficulties, and work with them on how they address their liabilities. Better for the bank; better for the borrower.

If the borrower is in arrears for 90-120 days or more they should be foreclosed upon. That's the way they do it where I'm from and yes they also pursue people for the money that they still owe plus interest.

People who borrowed to much need to be mad an example of and perhaps it would be good if they were utterly destroyed financially. That would scare people from making the same mistakes.

hatrickpatrick

whiteonion wrote: »

Please spare me from the bleeding heart crap that you can't kick families out on the streets. If they fail to pay their mortgage they should not get to keep their house. I have no sympathy whatsoever for people who over-borrowed and overspent.

1: The government of the day was constantly telling people that the good times would keep rolling and that there was no reason to worry. If someone unexpectedly loses their job and was a perfectly paid-up customer before then, it is not a case of "over borrowing".

2: The banks themselves also lied to people about how easy things would be. Unless someone has a good understanding of economics and how money circulation works, you cannot possibly expect them to understand the underlying situation. they rely on banks for financial advice, and the banks lied through their teeth every single step of the way.

3: Every single taxpayer in this country has paid, and will continue to pay for the next several years, a gigantic amount of money to keep these banks afloat, pay off their precious bondholders who can't accept that when you gamble and lose, YOU pay for your f*ck ups, and to keep the managers with their 4k / year salaries.

We owe NOTHING to the banks. They should be crawling all over us licking our boots and thanking us for not letting them fail as they should have. Any other section of the economy which f*cks up pays for its mistakes. When banks f*ck up, WE pay for their mistakes. It works both ways.

If banks want to play hardball now that's perfectly fine. but they can do it without €100bn of taxpayer's money. How's that for "over spending"?

People like you really make me sick. How you can possibly side with corrupt and dishonest millionaires instead of naive and ruined taxpayers is utterly beyond me.

I'll remember your stance on all this the next time you are mislead by a liar who you thought you could trust, and end up in financial hell because of it.

token101

whiteonion wrote: »

If the borrower is in arrears for 90-120 days or more they should be foreclosed upon. That's the way they do it where I'm from and yes they also pursue people for the money that they still owe plus interest.

People who borrowed to much need to be mad an example of and perhaps it would be good if they were utterly destroyed financially. That would scare people from making the same mistakes.

Well thank God we don't live where you come from. Bit bloody rich the banks making an example of people who made bad decisions, don't you think? Particularly when the banks played an active role in encouraging those decisions. If people make an effort in harsh times and can't do anymore then what's the alternative? Start putting people in the streets and have a social crisis on top of our existing financial crisis? Have some cop on and realise it's not viable for the banks to repossess the 40000 households that are in arrears, it's probably not even viable to repossess a quarter of that.

Debt forgiveness has to start at the top and that has to start with the ECB. Pure and simple. And it'll come to that eventually when countries start defaulting on these unbearable bailouts. Greece are getting close and we will eventually when we miss our next target. It's a Europe wide problem, Irish banks can't do f all at this stage.

whiteonion

The Irish banks should have been allowed to collapse. Bailing them out was stupid, I said so from the beginning. Look where bailing out the banks led Ireland to.

Am I the only person here who is capable of rational thought? :mad:

Anyone

Just to put it into context....90 days is 3 missed payments. 3 missed payments over what could realistically be a 25 year loan. Don't you think that a blanket repossession and sale of a house due to what could be 3 missed payments over a long number of years to be excessive?

Deal with on a case by case situation. Don't get me wrong, some should be foreclosed. Most though shouldn't.

whiteonion

If I miss three repayments on my rent in my home country I will be kicked out and after that my credit score will be so bad that I will not be able to rent another apartment, I will not even be able to get a broadband subscription or a phone subscription.

In my home country there is no lenience towards those who don't pay what they owe and that's why there are no problems like there are in Ireland.

ScouseMouse

"In your home country?"

But you are not in your home country. So what does that have to do with anything? This is a different country, or even a multiple country issue, so stop will you!

stephentbb2000

Whiteonion i just laugh when i read your comments, how about lets call it 3 strikes and your out or like the Washington 3 strike law. As 90 days is roughly 3 payments.

First of all i would like to point out that not everyone in arrears borrowed excessively or splashed out on mansions.

Secondly, what would you propose to do with all these evicted families as by all accounts there is thousands of families in arrears. Maybe send them all to some island of the West coast to fight it out.

Now with all these houses back under the banks control back on an already packed market. Maybe auction them for half their value to foreigners who will stay there once a year offering nothing to the economy.

Why not offer some constructive well taught out options like mortgage payments that bridge generations or a scheme where the government buy a stake in the property and the families in turn stay there to pay rent.

But i forgot, no sad stories.

swampgas

whiteonion wrote: »

Am I the only person here who is capable of rational thought? :mad:

Maybe - just maybe - if you seem to have drawn different conclusions to everyone else, it is you who are having problems with rational thought?

Or is it that you expect everyone else to be just as callous to their fellow countrymen as you seem to be?

whiteonion

The people who can't afford their mortgages will have their house repossessed and sold in some sort of executive auction. Afterwards they can start renting a place they can afford.

Owning a house is not a right.

I myself come from a family who made handsome profits from buying houses that had been sold on executive auctions, seeing the faces of these people and their crying children made me decide from a young age that I would not buy stuff I couldn't afford.

Delancey

whiteonion wrote: »

People who borrowed to much need to be mad an example of and perhaps it would be good if they were utterly destroyed financially. That would scare people from making the same mistakes.

You seem to forget that many families paid exorbitant amounts for houses because they were the prices the market demanded at the time. We are not talking about greedy amateur property gurus who tried to make a fast buck - rather ordinary families who desperate to get a foot on the housing ladder found themselves forced to take out huge loans on properties now worth significantly less than they paid for them.

whiteonion

Delancey wrote: »

You seem to forget that many families paid exorbitant amounts for houses because the were the prices the market demanded at the time. We are not talking about greedy amateur property gurus who tried to make a fast buck - rather ordinary families who desperate to get a foot on the housing ladder found themselves forced to take out huge loans on properties now worth significantly less than they paid for them.

Who put a gun to their heads and "forced" them to buy a house? Renting is an option you know. In normal countries renting is the norm.

Tayla

whiteonion wrote: »

The Irish banks should have been allowed to collapse. Bailing them out was stupid, I said so from the beginning. Look where bailing out the banks led Ireland to.

Am I the only person here who is capable of rational thought? :mad:

Plenty agree that bailing them out was stupid, you're not the only one who thinks that.

However claiming houses should be foreclosed after 90 days is RIDICULOUS, it's not rational thought.

stephentbb2000

I think whiteonion is taking the piss and is trying to stir it up. Take a hike.

whackball

No offence Whiteonion, but maybe you should go back to your country where these rules and regulations are what you want. You seem quite axious to have them imposed here. Would that be so YOU could benefit from buying a cheaper house at auction.

Just curious....

superscouse wrote: »

"In your home country?"

But you are not in your home country. So what does that have to do with anything? This is a different country, or even a multiple country issue, so stop will you!

whiteonion

whackball wrote: »

No offence Whiteonion, but maybe you should go back to your country where these rules and regulations are what you want. You seem quite axious to have them imposed here. Would that be so YOU could benefit from buying a cheaper house at auction.

Just curious....

I won't deny that I myself would stand to profit handsomely from the regulations that I propose.

mr.mickels

beeftotheheels wrote: »

the capital hole in the banks increases and we have to cough up more cash....

We, as in the taxpayer, shouldn't have to, we are forced to by our corrupt government

Tayla

Whiteonion, why don't you let us all know which perfect country it is you come from so we can nitpick about what it does and doesn't do right.

We don't foreclose here after 90 days, it's ridiculous that someone would want that to happen, we haven't exactly got bustling house sales going at the moment and yet you still think it is a wonderful idea............the mind boggles

whiteonion

Tayla wrote: »

Whiteonion, why don't you let us all know which perfect country it is you come from so we can nitpick about what it does and doesn't do right.

We don't foreclose here after 90 days, it's ridiculous that someone would want that to happen, we haven't exactly got bustling house sales going at the moment and yet you still think it is a wonderful idea............the mind boggles

I never claimed my country is perfect, for example we have an insane immigration policy allowing to many refugees from Somalia and Afghanistan into the country with disastrous results for the local communities that they move into.

Tayla

whiteonion wrote: »

I never claimed my country is perfect, for example we have an insane immigration policy allowing to many refugees from Somalia and Afghanistan into the country with disastrous results for the local communities that they move into.

whiteonion wrote: »

In my home country there is no lenience towards those who don't pay what they owe and that's why there are no problems like there are in Ireland.

You said that you don't have problems like there are in Ireland, the banks here would be fine if mortgage arrears were their biggest problem.

You want to evict 45000 families, what kind of problems do you think that will cause

brianthelion

So I take it that you have been a good boy and you have a good job and you managed to save some money and you are now in a position to buy a house.But you are not happy just to buy a house,you want to pay as little as possible for this house just because some poor ****er lost his job.SHAME ON YOU

whiteonion

brianthelion wrote: »

So I take it that you have been a good boy and you have a good job and you managed to save some money and you are now in a position to buy a house.But you are not happy just to buy a house,you want to pay as little as possible for this house just because some poor ****er lost his job.SHAME ON YOU

I have no shame.

Black Swan

whiteonion wrote: »

I have no shame.

Please be advised that such comments (and there have been many whiteonion) were a bit inflammatory, more appropriate for AH, and lacking serious content and meaningful discussion of Irish Economy. Locked.