Mortgage debt plan 'will save economy'

Blazer

Are these guys for real?
They want to artificially create a property boom in order to save us?
And let's throw out debt forgiveness as well...sure it will only cost us €6billion.
I'm beginning to think economist is just another word for chancer.
I can see some of the points he raises but the two below just blow me away.
The second one is basically abdicating fiscal responsibility to someone else and to hell with the consequences...
Now all of this sounds somewhat vaguely familiar

• Against the backdrop of a summer of political inertia, putting a stop to the collapse in house prices is seen as the only way to avoid a second worldwide recession by ensuring the return of consumer confidence, increasing spending and creating jobs,

Asked for his response to the argument that debt forgiveness would give rise to moral hazard, Dr Gurdgiev said anyone who thought this needed "to have their head examined".

[*]"The biggest moral hazard by far magnified by hundreds of times is not the moral hazard of forgiving household debt, it is the moral hazard of the entire nation's resources being thrown at insolvent banks," he said.

[*]Dr Gurdgiev said that moral hazard was "not a problem of something being done today" to address the crisis, but could only arise in the future if financial regulators failed to introduce reforms in the banking sector.

[*]"If our regulators are so concerned about moral hazard, have the regulations going forward.


http://www.independent.ie/national-news/mortgage-debt-plan-will-save-economy-2853846.html

Kidchameleon

I have no problem with my tax money being used to help people from loosing their home. Id rather that than helping ar**hole bankers keeping their bonuses.

omahaid

If mortgage debt forgiveness becomes a reality what's to stop me from quitting my job, going on the dole, spending all my savings on holidays and claiming I can't pay my mortgage and hope that it will be written off? What's the deterrent?

Wibbs

Sc@recrow wrote: »

• "The biggest moral hazard by far magnified by hundreds of times is not the moral hazard of forgiving household debt, it is the moral hazard of the entire nation's resources being thrown at insolvent banks," he said.

Whatever about debt forgiveness, the part in bold I agree with.

longshanks

omahaid wrote: »

If mortgage debt forgiveness becomes a reality what's to stop me from quitting my job, going on the dole, spending all my savings on holidays and claiming I can't pay my mortgage and hope that it will be written off? What's the deterrent?

Common sense?

Inverse to the power of one!

Kidchameleon wrote: »

I have no problem with my tax money being used to help people from loosing their home. Id rather that than helping ar**hole bankers keeping their bonuses.

[FACEPALM.JPG]

No, the govt shouldn't bail out either individual or banker! FFS, why do we as a country look to do everything up to and including wiping our arses for us......haven't they done enough damage? Haven't you learned that our politicians are incompetents of the highest order and that anything they touch turns to sh!t?

NO, NO, NO and NO!

Grow up Ireland, stand on your own two feet, otherwise you'll only get more of the same!

omahaid

longshanks wrote: »

Common sense?

This is Ireland, any scheme like this will be abused, so I don't see how common sense will prevent this. Anyway, common sense if far from common.

The goal of debt forgiveness is laudable but if it ever comes to fruition it will be like every other scheme the Irish government comes up with, i.e. ill thought out.

slavetothegrind

i've seen enough homes gifted to people by the state pre-boom in the social welfare housing schemes only for the "owners" to sell them on during the boom profit massively and subsequently buy a house debt free!

If you forgive the debt on my neighbours 400k detached house and i have to struggle on paying for my substantially smaller holding working and paying tax where is the morality in that?

i'm not saying put them on the street but they cannot gain eqity in the house for free.

drunkmonkey

Kidchameleon wrote: »

I have no problem with my tax money being used to help people from loosing their home. Id rather that than helping ar**hole bankers keeping their bonuses.

As someone who didn't buy into the property against everyones good advice i've a big problem with the debt forgiveness bull****, these people made stupid investments they could not afford, repossess the houses, have a fire sale, let the market hit it's real bottom and allow people like me to own a home at a reasonable affordable price.
If I went out and bought a new ferrari and couldn't afford the repayments the car would be repossessed, that's the way loans work. We can't start changing the game because of peoples stupid mistakes and before anyone says well it wasn't their fault it was the banks, nobody put a gun to anybody's head, if you bought a 3 bed semi for 500k or an apartment for 400k your a feckin idiot and deserve to learn a lesson and not at my expense.

Amhran Nua

Sc@recrow wrote: »

Dr Gurdgiev

Okay stop the show right here.

Gurdgiev, a vocal libertarian by the way, is constantly whining on his blog about how he can't pay his mortgage, he's taken on too big a mortgage, he's in trouble with his mortgage despite him being a brilliant economist, etc.

This is the second time himself and his fellow travellers have suggested that the taxpayer foot the bill for his stupidity, the last time was the economic good news story.

He's proven himself conclusively to be an opportunistic jezebel who'll bend over for anyone as long as it makes his own personal position a bit better.

I mean this "putting a stop to the collapse in house prices is seen as the only way to avoid a second worldwide recession" this is completely flat out insane. You'd have to be a complete idiot to really believe that. It's wrong on so many levels you could find a picture of it beside "wrong" in the dictionary. I have no idea how that man looks himself in the mirror every day. Anyway I wouldn't worry about him, he's nobody really.

Worry instead about where NAMA's clammy hands are creeping under the covers.

sollar

The rules for this need to be very seriously applied if its to happen.

You go to jail for a year if your caught defrauding this system.
There should be no Audi's or fancy cars sitting out in the driveway.
Sell any other valuable asset you have.

Sofa King Great

If they are going to essentially write off the losses made by people who purchased during the boom years then they should also go after anyone who made a financial gain. If we are going to go back in time and make out that these transactions never occurred it should be equitable on both sides. Now obviously this will never happen but it should allow people to realise how ridiculous a suggestion it is

CiaranC

Presume the 300k empty properties will be handed out for free to those of us who didnt buy into the bubble?

sollar

This plan is not going to help the thousands of people like me who are paying a mortgage but are still struggling overall. I'm going to have no extra money to spend in the economy. I made a prudent decision not to over mortgage myself.

The people who will gain and be able to go out spending money in the economy are the fools who bought houses they should never have bought at vastly inflated prices.

Sofa King Great

sollar wrote: »

This plan is not going to help the thousands of people like me who are paying a mortgage but are still struggling overall. I'm going to have no extra money to spend in the economy. I made a prudent decision not to over mortgage myself.

The people who will gain and be able to go out spending money in the economy are the fools who bought houses they should never have bought at vastly inflated prices.

Exactly!

Take two neighbours, both on 60k per year. Both bought houses for 700k with mortgages of 650k.

The houses are now worth 300k against a mortgage of 600k.

Family A are excellent at money management, realise that sacrifices need to be made and are continuing to pay their mortgage. This has impacted on their lives and they have very little discretionary expenditure.

Family B are poor at money management and continue to live beyond their means which has resulted in them defaulting on their mortgage.

The scheme as I understand it would reward family B leaving family A as it always was.

Family B receive debt forgiveness and the house is sold. The release of these houses on the market increases supply and the bank only gets 280k.

The result, family A continue to fund mortgage under severe financial constraints, their home further depreciates in value. Family B now rent a home across the road which was sold by the equally financially inept family C. The house is the same but family B have much more disposable income. Family C subsequently rent the home once occupied by family B.

The loser: Family A

drunkmonkey

That's the problem Solar, your paying your loan right now if you default you might get some forgiveness in the future, if you keep paying your going to feel like a right muppet when the neighbor gets his house for free.
It's a stupid idea thought up by the same stupid people who overstretched themselves in the thought they were buying into an ever increasing asset now the penny has dropped and they can't or won't pay because it's not their fault.

If this happens, I'm withdrawing all my money from the bank, putting it in a foreign account and defaulting on my personal loans and the bank can go fcuk themselves. You either have to pay back loans or you don't, it shouldn't make a fiddlers what the loan is on, them's the rules of taking out a loan.

Irish Slaves for Europe

sollar wrote: »

You go to jail for a year if your caught defrauding this system.
There should be no Audi's or fancy cars sitting out in the driveway.
Sell any other valuable asset you have.

There would be no way to prevent fraud. People could simply begin taking more cash out of their account each month, and claim they are spending it on higher living costs and so can no longer afford to pay their mortgage. So even though these people could easily afford the repayments on their mortgage, it would look like they can't and they would get a large amount of their mortgage written off.

Then you need to consider the fact that the extra taxes for such a scheme would push many more people over the edge, so more people would have mortgages written off, hence more taxes again are needed, it would be a never ending cycle.

Plus the fact that many people, like myself, would simply stop paying rent if such a scheme was ever introduced. There would be no way someone like myself who lives prudently and within my means is going to fund the lavish lifestyle of idiots.

As a result, there would be complete anarchy.

aligator_am

I'm in the same boat as some here, my wages aren't great since pay cuts and whatnot but the most important things that need to be paid each month are mortgage and bills, whatever's left is my own.

It seems quite unfair for some people to be able to basically walk away from a bad investment and leave the rest of the country to pickup the tab (same way the bankers did).

If this scheme is introduced then there should be some really serious conditions that go with accepting the government's offer:

Home owner(s) who avail of the scheme will have worst possible personal credit rating applied to them for either 25 years or remainder of mortgage term, whichever is greater.

Although one potential downside to this is I'm not sure if bad credit ratings follow you overseas?

galwayrush

So, peoplewho bought in the height of the boom were stupid to pay those high prices that the market dictated at the time, and those who were old enough to buy their houses years earlier were sensible by virtue of the fact they were born earlier and the market price happened to be lower.

CiaranC

drunkmonkey wrote: »

If this happens, I'm withdrawing all my money from the bank, putting it in a foreign account

You should have done this months ago. Everyone else has.

Sofa King Great

galwayrush wrote: »

So, peoplewho bought in the height of the boom were stupid to pay those high prices that the market dictated at the time, and those who were old enough to buy their houses years earlier were sensible by virtue of the fact they were born earlier and the market price happened to be lower.

There are plenty of people continuing to pay mortgages on houses bought at the peak.

galwayrush

Sofa King Great wrote: »

There are plenty of people continuing to pay mortgages on houses bought at the peak.

Of course there is, as there are plenty of people who can't because they no longer have jobs.
The only workable solution long term is to create employment and generate money so people can pay their way.

drunkmonkey

There's no way to give forgiveness fairly so it should not even be tried, there is no way anyone getting a get of a jail card should be allowed to even keep 1% of equity in the property.

What might work is the bank take ownership of the property until the negative equity is balanced and then the people are allowed walk away from the property. The signal has to be sent out that nobody is getting something for nothing and if you have to stay living in the house well then you'll be renting it from the bank until the negative equity is cleared, then you have the option to keep paying and eventually own the home or walk away. Either way the debt has to be cleared and it can not have a negative impact on anyone involved like neighbour A above.

Sofa King Great

drunkmonkey wrote: »

There's no way to give forgiveness fairly so it should not even be tried, there is no way anyone getting a get of a jail card should be allowed to even keep 1% of equity in the property.

What might work is the bank take ownership of the property until the negative equity is balanced and then the people are allowed walk away from the property. The signal has to be sent out that nobody is getting something for nothing and if you have to stay living in the house well then you'll be renting it from the bank until the negative equity is cleared, then you have the option to keep paying and eventually own the home or walk away. Either way the debt has to be cleared and it can not have a negative impact on anyone involved like neighbour A above.

That is basically the terms of a mortgage as it is

Richard tea

Oh dear lord. Regardless if people like or agree with it or not, there is going to be some sort of mortgage debt forgivness. I dont know how or who will get it but sticking our heads in the sand wont solve anything.

Richard tea

drunkmonkey wrote: »

There's no way to give forgiveness fairly so it should not even be tried, there is no way anyone getting a get of a jail card should be allowed to even keep 1% of equity in the property.

What might work is the bank take ownership of the property until the negative equity is balanced and then the people are allowed walk away from the property. The signal has to be sent out that nobody is getting something for nothing and if you have to stay living in the house well then you'll be renting it from the bank until the negative equity is cleared, then you have the option to keep paying and eventually own the home or walk away. Either way the debt has to be cleared and it can not have a negative impact on anyone involved like neighbour A above.

Who told you life was Fair

iPlop

So it's the People who did buy Vs The people who couldn't /didn't thread again.


Listen the fundamentals are all wrong in the economy, one of the big issues with the banks lending which hasn't seen the light of day is lending to people with permenent jobs.


MOST jobs out there are contract, ALL my friends and family have had their T's & C's changed by their employer (with a payoff), everyone I know is on rolling contract these days, it's good for the employer and they can avoid future redundancy payments.


This is one of the problems with the housing market, you NEED a permenent job to get a mortgage or a loan, one of my friends is on 50k and can't get a mortgage because his job is not permenent, but his employer said he could be there for 15 years, this is part of the problem.

They can throw all the debt forgiveness at it all they like, but if people are not in permenent jobs there will be no lending by any bank to anyone, until that changes we're just going to go round in circles.

aligator_am

Richard tea wrote: »

Oh dear lord. Regardless if people like or agree with it or not, there is going to be some sort of mortgage debt forgivness. I dont know how or who will get it but sticking our heads in the sand wont solve anything.

And if there is some form of debt forgiveness, who foots the bill?

If the amount required is €6bn, where does that cash come from, the IMF?

Wonder how much the interest will accrue to on that.

drunkmonkey

Sofa King Great wrote: »

That is basically the terms of a mortgage as it is

Yes but let those unable to pay just pay the negative equity not the capital, let the bank own the capital. So lets say on a 300k place, 100k would be negative, let them pay repayments on 100k rather than the 300k. The bank basically freeze the capital and can repossess if loans on the 100k are defaulted on. This would require some fancy algorithms but it's not unworkable.
Still what ever plan you come up with it's only helping to bail out silly investors and keep property prices artificially high.
The only way I can see is repossession and fire sale. That's the only fair way on everyone, will hurt some but it won't kill them.

Predalien

People seem to be focused on the "why should my neighbour get something free?" argument, the bigger picture is a rescue of the domestic Irish economy, debt forgiveness is one of the necessary measures to provide some stimulus, it will be open to abuse but with proper structure and planning that can be minimised.

10000maniacs

sollar wrote: »

The rules for this need to be very seriously applied if its to happen.

You go to jail for a year if your caught defrauding this system.
There should be no Audi's or fancy cars sitting out in the driveway.
Sell any other valuable asset you have.

It shouldn't be put in place at all.
If there has to be debt forgiveness, it should be a percentage (maybe 30% of the remaining loan) down the line for EVERYBODY who took out a mortgage on a home in the last 10 years. That will stop the moral hazard argument. This way it will stop the "can't pay won't pay" scenario. If they are still in trouble after getting the 30% bailout, then let the banks repossess the house. Set up a trailer park in Longford or somewhere like they do in the US.

Richard tea

They are discussing this issue on newstalk. Paul sommerville, constantin Gurdgive and others. Download the podcast if you miss it. Well worth listening to.

Predalien

aligator_am wrote: »

And if there is some form of debt forgiveness, who foots the bill?

If the amount required is €6bn, where does that cash come from, the IMF?

Wonder how much the interest will accrue to on that.

How about we default on €6bn of bank bonds we're paying back that we don't have to?

Richard tea

aligator_am wrote: »

And if there is some form of debt forgiveness, who foots the bill?

If the amount required is €6bn, where does that cash come from, the IMF?

Wonder how much the interest will accrue to on that.

I foot the bill. You foot the bill. We all foot the bill.
Havent a breeze where the cash comes from.
But doing nothing will only make it worse.

aligator_am

Predalien wrote: »

How about we default on €6bn of bank bonds we're paying back that we don't have to?

Isn't that something similar to what Iceland did? they seem to be getting back on their feet from what I've heard.

aligator_am

Richard tea wrote: »

I foot the bill. You foot the bill. We all foot the bill.
Havent a breeze where the cash comes from.
But doing nothing will only make it worse.

I know what you're saying, but I think what may happen is that those who have their mortgage debt forgiven could up sticks and emigrate thus leaving the bill with the rest of us.

I know I'm being cynical but I think it's a fair point.

10000maniacs

Predalien wrote: »

People seem to be focused on the "why should my neighbour get something free?" argument, the bigger picture is a rescue of the domestic Irish economy, debt forgiveness is one of the necessary measures to provide some stimulus, it will be open to abuse but with proper structure and planning that can be minimised.

WHY BLEEDING NOT.:mad:
I could have got a decent sized house if I got out a 110% mortgage in 2005.
Instead I opted for a modest sized house and a 65% mortgage. Why should I be the one paying to allow the fecker who took out the 110% mortgage to stay in his massive house. :mad::mad:

Predalien

aligator_am wrote: »

Isn't that something similar to what Iceland did? they seem to be getting back on their feet from what I've heard.

Yeah they didn't pay back the unsecured bonds, there were haircuts for the rest. They weren't weighed down by the euro though, or the ridiculous proposition that the "markets" won't like us if we default on bank debt and that we'll never be able to borrow again if we do. The sooner we default on the bank debt the sooner we can borrow normally imo.

MysticalRain

This is of course the same Dr Gurdgiev who happens to be in negative equity with his own home. Funny how libertarians like Dr Gurdgiev can call for state intervention when it suits their own personal needs.

I think a better idea than debt forgiveness would be debt restructuring. Where a 30 year mortgage is turned into a 40 or 60 year mortgage to make it more manageable. That would make things easier for the homeowner or property investor, but would prevent them from abdicating their responsibility to pay back the money they owe.

CiaranC

10000maniacs wrote: »

It shouldn't be put in place at all.
If there has to be debt forgiveness, it should be a percentage (maybe 30% of the remaining loan) down the line for EVERYBODY who took out a mortgage on a home in the last 10 years. That will stop the moral hazard argument.

lol, what about the people who didnt take out a mortgage? What do they get?

Richard tea

aligator_am wrote: »

I know what you're saying, but I think what may happen is that those who have their mortgage debt forgiven could up sticks and emigrate thus leaving the bill with the rest of us.

I know I'm being cynical but I think it's a fair point.

Tis a fair point indeed. As mentioned by others. Any forgiveness/restructuring of mortgage should come hand in hand with strict rules with harsh penalties for people trying to scam the system.

Have a quick read through this page. Its a start I would say.
http://www.davidmcwilliams.ie/2011/05/16/mortgage-crisis-my-mad-solution

Predalien

10000maniacs wrote: »

WHY BLEEDING NOT.:mad:
I could have got a decent sized house if I got out a 110% mortgage in 2005.
Instead I opted for a modest sized house and a 65% mortgage. Why should I be the one paying to allow the fecker who took out the 110% mortgage to stay in his massive house. :mad::mad:

Your anger is fair but we need some domestic stimulus, this will give more money to a chunk of middle class folk and boost all areas, everyone will benefit from it in the long run. The only other option is to leave the eurozone and maybe the EU and balance our budget over about two years. Either that or we keep going the way we are and slowly sink further with no hope of economic recovery.

Biffo The Bare

Predalien wrote: »

Your anger is fair but we need some domestic stimulus, this will give more money to a chunk of middle class folk and boost all areas, everyone will benefit from it in the long run. The only other option is to leave the eurozone and maybe the EU and balance our budget over about two years. Either that or we keep going the way we are and slowly sink further with no hope of economic recovery.

I will tell you if this deal comes in there will be civil unrest.

Predalien

MysticalRain wrote: »

This is of course the same Dr Gurdgiev who happens to be in negative equity with his own home. Funny how libertarians like Dr Gurdgiev can call for state intervention when it suits their own personal needs.

I think a better idea than debt forgiveness would be debt restructuring. Where a 30 year mortgage is turned into a 40 or 60 year mortgage to make it more manageable. That would make things easier for the homeowner or property investor, but would prevent them from abdicating their responsibility to pay back the money they owe.

It's forgiveness for those who can't make the full repayments, individuals financial situations will have to be taken into account.

They'd have to stay working til their mid 80's or 90's.

Flex

Predalien wrote: »

Your anger is fair but we need some domestic stimulus, this will give more money to a chunk of middle class folk and boost all areas, everyone will benefit from it in the long run. The only other option is to leave the eurozone and maybe the EU and balance our budget over about two years. Either that or we keep going the way we are and slowly sink further with no hope of economic recovery.

How will it provide a stimulus? Youll depress demand in the economy even more as the government implements levys or initiates further tax increases to come up with the money to pay peoples mortgage for them. "Debt Forgiveness" is a (deliberately) misleading name for this, the debt isnt being wrote off and forgotten about, the beneficiaries of this scheme will simply be forcing their neighbours to pay their mortgage for them (reducing their neighbours disposable income and damaging consumer confidence throughout the whole economy in the process).

Richard tea

Biffo The Bare wrote: »

I will tell you if this deal comes in there will be civil unrest.

Not likely Biffo. Unless by civil unrest you mean a 2 hour march in the city centre. A few people getting bashed over the head by the garda and then everyone goes home and watches the X factor

Predalien

Biffo The Bare wrote: »

I will tell you if this deal comes in there will be civil unrest.

There should be civil unrest at the continuation of the policy of paying back bonds we have no obligation to. Oh and Ireland doesn't do civil unrest sadly.

MysticalRain

Predalien wrote: »

They'd have to stay working til their mid 80's or 90's.

I am beginning to think I will end up working until my 80's and 90's myself if I am expected to pay off other peoples mortgages for them.

aligator_am

Richard tea wrote: »

Tis a fair point indeed. As mentioned by others. Any forgiveness/restructuring of mortgage should come hand in hand with strict rules with harsh penalties for people trying to scam the system.

Have a quick read through this page. Its a start I would say.
http://www.davidmcwilliams.ie/2011/05/16/mortgage-crisis-my-mad-solution

Interesting article there, thanks for the link

galwayrush

We'll all be working into our 80's as will our kids and grandkids to pay the poor :rolleyes:gambling bondholders who gambled and lost but thanks to our bailout deal, but still win.

Amhran Nua

The only debt forgiveness that is possible is if upstream lenders do the forgiving, that's the ECB and bond holders and so on. If they decide to cut off a lump of what the banks owe, and the banks in turn decide to reduce outstanding mortgages a bit, then fair enough.

Making the taxpayer hand over money for someone's bad investment is never going to work. Nobody else is going to pay your mortgage for you, full stop.

Of course its ironic that Fianna Fail did exactly that for the banks with their disastrous guarantee, and followed it up with NAMA which is still using taxpayer money to try and keep property prices high (and failing).