Writing off mortgage debt

golfwallah

According to Matthew Elderfield, Deputy Governor of the Central Bank, there is no magic bullet or easy solution. It’s still very much a case by case approach and we’ll have to live with the problem of negative equity for years to come.

Banks are still trying to get an overall picture of the precise nature of the problem and the various segments within it.

For details of recent speech “Mortgage arrears resolution – where next?”, see: http://www.bis.org/review/r120306d.pdf

Maybe we should hold off investing in bank shares for now?

jmayo

hmmm wrote: »

And so far it's working. The world has managed to avoid a depression, and in Ireland's case we've been given time to work out the imbalances in our economy over time without a catastrophic collapse of our economy.

But isn't it a bit like putting a sticking plaster on a gaping wound, taking a couple of apsirins and hoping for the best.
Eventually by the time proper action is taken the wound has turned gangrenous.

With regards to the way the EU has handled things it is likely there is no way that the previous solutions and existing policies will ever see all the PIIGS avoiding default.

golfwallah wrote: »

...
Attached article on “burden sharing” by Stephen Donnelly, Independent TD for Wicklow in Sunday Independent, 4th September 2011, makes sense to me: http://www.independent.ie/opinion/analysis/were-morally-obliged-to-share-burden-2866127.html.
...

Ah yes I have noticed this guy banging this drum a lot.
I wonder when he bought his house in Greystones and how many of his peers
are hoping for some of this bailout.

Interesting that RTE had a nurse on this morning braying about how she got 150k knocked off her mortgage by BOI.
Perhaps all BOI mortgage holders, including those who are paying their way, should match down to their local branches and demand the same ?

It is getting very evident how the bailout for the little guy/gal is being pushed by the media.

Tigerandahalf wrote: »

I think what we are seeing is that the banks' books are being totally cleaned up so that they can make a fresh start. I wouldn't be surprised to see some entrants investing heavily in AIB and BoI. This will wipe out any ownership that the gov has. The banks will then have the finance to lend properly.

Yeah I can see a rush of outside altruistic investors giving loads of money to some zombie banks to lend even further into zombie over indebted state. :rolleyes:

Patser

We're talking about this over on Octane.ie but figure it could be as suitable here.

http://www.broadsheet.ie/2012/04/27/mortgage-forgiveness-nurses-advice-pray/#comment-165209

Long story short - Nurse borrowed €245,000 in 2005 for a house in Coolock, decided she couldn't afford it any more, so sold up but still owed €170,000. Has struck a deal with the bank to have all but €18,000 written off and that €18,000 to be paid back over 6 years. Helps that she got some Pro Bono legal aid but she's crediting her prayers to God.

So a write off of €152,000 for some-one that just walked away from the house, while still employed in the job she originally got the mortgage from.

Edit: Just noticed this is what JMayo refers to in his last paragraph directly above.

jmayo

She claims she can only afford to reay €250 a month for the next 6 years and she is supposedly on 40 to 50 k ???

Interesting how this story is given blanket coverage by the media a week after the last poster case for the "bailout for the littleguy" fell flat on it's face after it was revealed that the poor pensioners being evicted from their home were infact investors with thirty odd properties. :rolleyes:

This story will give some hope to the "bailout for the little guy" brigade, but the sting in the tail for a lot of them is that she had to surrender her home.

I would say watch now for the ambulance chaser legal eagles start to advertise that they will get people out of their debts.

There is a cost to debt writedown and for every one that gets to walk away like this, the rest of us have to pony up even more.

And as a Bank Of Ireland customer I know I will end up paying in some fashion for this.

Tigerandahalf

But is she bankrupt now or what? Can she go back out and buy another house?

Monty Burnz

Tigerandahalf wrote: »

But is she bankrupt now or what? Can she go back out and buy another house?

No, she's not. Yes, she can if she has the money.

Farmer Pudsey

Tigerandahalf wrote: »

But is she bankrupt now or what? Can she go back out and buy another house?

No she is not bankrupt but her credit rating will be badly impaired she will find it impossible to get another mortgage,change or geta credit card or even a personel loan.

golfwallah

Farmer Pudsey wrote: »

No she is not bankrupt but her credit rating will be badly impaired she will find it impossible to get another mortgage,change or geta credit card or even a personel loan.

It seems she handed the house back to the bank in 2009 and there were delays in selling it.

She's prohibited from borrowing for 6 years and faces a judgement of €120,000 of she fails to repay the reduced amount.

See http://www.irishtimes.com/newspaper/breaking/2012/0427/breaking16.html

golfwallah

Publication of new personal insolvency legislation has now been postponed until June (i.e. before the Summer recess).

I guess this means publication of the bill to be put before the Dail and further delays before it is passed into law.

See http://www.irishtimes.com/newspaper/finance/2012/0427/1224315233337.html

Monty Burnz

golfwallah wrote: »

Publication of new personal insolvency legislation has now been postponed until June (i.e. before the Summer recess).

I guess this means publication of the bill to be put before the Dail and further delays before it is passed into law.

See http://www.irishtimes.com/newspaper/finance/2012/0427/1224315233337.html

No rush guys, everything is fine...:rolleyes:

Mr.Micro

Farmer Pudsey wrote: »

No she is not bankrupt but her credit rating will be badly impaired she will find it impossible to get another mortgage,change or geta credit card or even a personel loan.

That is reality for most of us, would she expect anything less? She is not capable of handling another loan or mortgage as she would probably bail again.

golfwallah

Monty Burnz wrote: »

No rush guys, everything is fine...:rolleyes:

I know the feeling ..... we're all getting a bit fed up waiting for a solution.

But, I guess it’s better to get the new legislation as near to right for the Irish situation as is possible, rather than rush something in just to meet a deadline. So, in fairness, let’s cut Minister Shatter a bit of slack and see what he comes up with.

On 19 April 2012, FLAC held a conference on Legislating for personal insolvency in Ireland: International developments and domestic issues.

Among the presenters was Egil Rokhaug, Lawyer, Norwegian Minister of Children, Equality and Social Inclusion, who gave a presentation on Norway’s solution to the problem.

Lots of interesting material from this conference on the FLAC site: http://www.flac.ie/getinvolved/campaigns/current/21st-century-law-needed-for-21st-century-overindebtedness/

population

golfwallah wrote: »

It seems she handed the house back to the bank in 2009 and there were delays in selling it.

She's prohibited from borrowing for 6 years and faces a judgement of €120,000 of she fails to repay the reduced amount.

See http://www.irishtimes.com/newspaper/breaking/2012/0427/breaking16.html

What is the point of that 120k threat? She will just say 'I do not have it' again and its back to square one!

golden lane

when are people ever goingb to realise.....you live beyond your means.....the result is disasterous........

that also applies to a country...look at the mess for paying everybody too much....they spend it..and want more..

Sleepy

I can't believe that the nurse in question had her debts written off. Reading the thread in Accommodation and Property she chose to move from her Dublin job which paid 70k a year (which would have made the mortgage a rather sensible 3.5 times gross earnings) to one in Galway paying 50k a year because she fancied the move.

There must be something missing from the reporting on this, a serious ****-up by the bank in relation to their procedures for dealing with idiots who think jingle mail exists in this country or something? I honestly can't see how, based on the facts presented, they'd allow her to set such a precedent for their other customers. Surely it's something to do with the debate on the date at which the house was sold?

Morrisseeee

golden lane wrote: »

when are people ever goingb to realise.....you live beyond your means.....the result is disasterous........

that also applies to a country...look at the mess for paying everybody too much....they spend it..and want more..

But surely she wasn't living beyond her means, she was single & on a very good wage ??!!
It's bizare that she can walk away so easily from her responsibilities.
I also think 6 years is not enough, ie. she shouldn't be allowed anywhere near a mortgage/big-loan for the next 20 years.

Icing on the cake would be that she becomes an unmaried mother & claims all her benefits !

golden lane

Morrisseeee wrote: »

But surely she wasn't living beyond her means, she was single & on a very good wage ??!!
It's bizare that she can walk away so easily from her responsibilities.
I also think 6 years is not enough, ie. she shouldn't be allowed anywhere near a mortgage/big-loan for the next 20 years.

Icing on the cake would be that she becomes an unmaried mother & claims all her benefits !

whatever......money changes people beyond all recognised logic.....

the country of ireland plc..............is a bankrupt of ideas as it is economically....

the fllod came.......every claimed the their share of the water......now they should have their share of the damage it caused......

BrianD3

Not only do I disagree with this person having had her mortgage written down by 152k I'm also wondering about this New Beginnings group. Lawyers and barristers offering their services for free to debt laden homeowners dealing with the big bad banks? A cynical person might suggest that there could be an agenda here.

Going back to the nurse, so she's still working as a nurse yet can only afford to pay 250 euro a month for 6 years towards the 170k she owes. Bullcrap in my view. I'd love to see what she spends her money on. I'd say she buys all manner of crap.

How can those of us who will never be "forgiven" for any financial or investment decision they'll make show our disapproval here. If as a protest all savers were to take their money out of BOI/ICS they'll end up getting hit anyway through higher taxes.

Unrealistic

Monty Burnz wrote: »

The problem with this - as mentioned repeatedly in the last several pages - is that property owners usually have no equity to give to the banks as they are in negative equity. These sort of deals seem to assume that we will be seeing a return to bubble prices at some stage.

As has also already been explained that isn't necessarily and impediment. And it doesn't require that prices return to bubble levels, just that they are at or above the strike price at the end of the day.

Unrealistic wrote: »

That isn't a necessarily a barrier. If you have a €300k mortgage on a €200k home you are in negative equity. But if you can still fund a €200k mortgage you could give half of the equity in the house to the bank for a €100k writedown and then continue to pay down a €200k mortgage although you'll only own half a house at the end.

Monty Burnz

Unrealistic wrote: »

That isn't a necessarily a barrier. If you have a €300k mortgage on a €200k home you are in negative equity. But if you can still fund a €200k mortgage you could give half of the equity in the house to the bank for a €100k writedown and then continue to pay down a €200k mortgage although you'll only own half a house at the end.

This isn't strictly speaking a debt for equity swap though. It's changing a 300k mortgage into a 200k mortgage for half the amount of property. Net debt remains the same.

It's certainly not the worst potential solution though. It would deal with the moral hazard argument, although it would tie up a lot of capital in a very, very illiquid form. How do the banks cash out? And do the banks derive an income from the half of the property they own? (the rent for 100k of property would almost certainly exceed the interest on a 100k mortgage at present)

Monty Burnz

Unrealistic wrote: »

That isn't a necessarily a barrier. If you have a €300k mortgage on a €200k home you are in negative equity. But if you can still fund a €200k mortgage you could give half of the equity in the house to the bank for a €100k writedown and then continue to pay down a €200k mortgage although you'll only own half a house at the end.

This entails changing a 300k mortgage into a 200k mortgage for half the amount of property. Net debt remains the same.

It's certainly not the worst potential solution though. It would deal with the moral hazard argument, although it would tie up a lot of capital in a very, very illiquid form. How do the banks cash out? And do they derive an income from the half of the property they own? (the rent for 100k of property would almost certainly exceed the interest on a 100k mortgage at present)

Maura74

Sleepy wrote: »

I can't believe that the nurse in question had her debts written off. Reading the thread in Accommodation and Property she chose to move from her Dublin job which paid 70k a year (which would have made the mortgage a rather sensible 3.5 times gross earnings) to one in Galway paying 50k a year because she fancied the move.

There must be something missing from the reporting on this, a serious ****-up by the bank in relation to their procedures for dealing with idiots who think jingle mail exists in this country or something? I honestly can't see how, based on the facts presented, they'd allow her to set such a precedent for their other customers. Surely it's something to do with the debate on the date at which the house was sold?

Nurse on 70k that cannot correct - she must have been very well qualified and could well have managed her mortgage like the rest of Ireland, why was she given so much leeway. She must have known what she was doing when she purchased her home at the prices she was paying. And now that she want to move she can just do it with impunity.

http://www.rcn.org.uk/support/pay_and_conditions/pay_rates_201213

Farmer Pudsey

Sleepy wrote: »

I can't believe that the nurse in question had her debts written off. Reading the thread in Accommodation and Property she chose to move from her Dublin job which paid 70k a year (which would have made the mortgage a rather sensible 3.5 times gross earnings) to one in Galway paying 50k a year because she fancied the move.

There must be something missing from the reporting on this, a serious ****-up by the bank in relation to their procedures for dealing with idiots who think jingle mail exists in this country or something? I honestly can't see how, based on the facts presented, they'd allow her to set such a precedent for their other customers. Surely it's something to do with the debate on the date at which the house was sold?

Nurses in Ireland are paid much the same where ever they work in the country. She had a job in Dublin and may have worked overtime, extra shifts with an agency etc to be allowed enough money to get a mortgage it always went on not just in the Noughties before some one gives out about it.
She then found the Morgtage unsustainable as the agency or overtime dried up this is happening to a lot of Public Service workers, Guards, Nurses Council workers etc as there was a lot of overtime in the boom. Or she might have found the livestyle unsustainable working 60 hour weeks ans spending another 12 hours a week getting to and from work.

As for setting a precedent if you cannot pay back a loan you cannot pay it back. The bank allowed her to borrow over 4 times an inflated wage at the height of the boom. Wake up and smell the coffee in the USA what she did was standard practice she gave back the keys. She will find it near impossible to get another loan and if she can and she defaults again it is the banks fault. I am not saying what she did was right and condoning it but I can understand how it happened, and if we were not bailing out the German and French banks it would not be an issue.

Banking is a simple job you just have to make sure you get your money back. We all have been bankers at times. Do you remember when you started work or in college. There is always someone who is skint you may have been skint youself. In my day 'have you a fiver until friday' nowadays it is '50 until the end of the month' you found out fast the lad who would not pay it back either by getting caught or word of mouth. Also there was the lad you had to ask for it and made you feel as if you were tightfisted.

Maura74

Farmer Pudsey wrote: »

Nurses in Ireland are paid much the same where ever they work in the country. She had a job in Dublin and may have worked overtime, extra shifts with an agency etc to be allowed enough money to get a mortgage it always went on not just in the Noughties before some one gives out about it.
She then found the Morgtage unsustainable as the agency or overtime dried up this is happening to a lot of Public Service workers, Guards, Nurses Council workers etc as there was a lot of overtime in the boom. Or she might have found the livestyle unsustainable working 60 hour weeks ans spending another 12 hours a week getting to and from work.

As for setting a precedent if you cannot pay back a loan you cannot pay it back. The bank allowed her to borrow over 4 times an inflated wage at the height of the boom. Wake up and smell the coffee in the USA what she did was standard practice she gave back the keys. She will find it near impossible to get another loan and if she can and she defaults again it is the banks fault. I am not saying what she did was right and condoning it but I can understand how it happened, and if we were not bailing out the German and French banks it would not be an issue.

Banking is a simple job you just have to make sure you get your money back. We all have been bankers at times. Do you remember when you started work or in college. There is always someone who is skint you may have been skint youself. In my day 'have you a fiver until friday' nowadays it is '50 until the end of the month' you found out fast the lad who would not pay it back either by getting caught or word of mouth. Also there was the lad you had to ask for it and made you feel as if you were tightfisted.

She should have had the intelligence to know that extra working would dry up or she could be become ill and not be able to meet such commitments. Why did she not take out insurance for unemployment? Sorry it not about unemployment it about being greedy, make hay while the sun shine mentality.

This nothing to do about borrowing fiver until the next pay day, it is hundreds of thousands of pounds and as a nurse her judgement was lacking, would not like someone like her to look after someone who is seriously ill.

Tigerandahalf

I just did a calculation there on back of paper. Let us say roughly 100,000 mortgages will be wrote down by 100,000. That is 10 billion of a write down. It is a lot but when you compare the losses with NAMA and what has been put into the banks, it is not as bad. I would guess now that most people will stay in their homes and get a writedown.
At least something is being done now and the country can move forward, however broke we might be.

daltonmd

Sleepy wrote: »

I can't believe that the nurse in question had her debts written off. Reading the thread in Accommodation and Property she chose to move from her Dublin job which paid 70k a year (which would have made the mortgage a rather sensible 3.5 times gross earnings) to one in Galway paying 50k a year because she fancied the move.

There must be something missing from the reporting on this, a serious ****-up by the bank in relation to their procedures for dealing with idiots who think jingle mail exists in this country or something? I honestly can't see how, based on the facts presented, they'd allow her to set such a precedent for their other customers. Surely it's something to do with the debate on the date at which the house was sold?

She bought the house in 2005 when she earned 70k per week (In a private nursing home), 50k basic and 21 hours O/T. She joined the prison service as a nurse and her salary fell to 40k. She then found it difficult to repay the mortgage, she appears to be originally from the west and wanted to return home (transfer to a jail there?).

She handed the keys back to the bank and from what I have heard they delayed in selling it. This delay in the bank selling the house, where it would have covered the debt is the core problem.

As I said in another thread, fair play to her - she lost the house, she's to repay 18k, she will, in all likliehood never be able to borrow from a bank again - I reckon given this experience and the lucky break she got, that she'll live with that punishment very easily.

Tigerandahalf

Are we going to see a change where a significant amount of people (bankrupt) may end up renting for the rest of their lives. Will their credit rating prevent them from buying after bankruptcy period ends?

daltonmd

Tigerandahalf wrote: »

Are we going to see a change where a significant amount of people (bankrupt) may end up renting for the rest of their lives. Will their credit rating prevent them from buying after bankruptcy period ends?

It doesn't in the US or the UK, so it shouldn't - but this is Ireland. :rolleyes:

I think if people learn from their mistakes and work hard to clean up their rating over 5 years - then they should be considered in the future.

Tigerandahalf

Tigerandahalf wrote: »

I just did a calculation there on back of paper. Let us say roughly 100,000 mortgages will be wrote down by 100,000. That is 10 billion of a write down. It is a lot but when you compare the losses with NAMA and what has been put into the banks, it is not as bad. I would guess now that most people will stay in their homes and get a writedown.
At least something is being done now and the country can move forward, however broke we might be.

While we're at it, could we just borrow yet another 10 billion to raffle off 100k gifts to those who are not in NE? This money is all free, right?

100,000 mortgages owned by how many people, exactly? I don't feel comfortable knowing that speculators will be given 1m+ write-downs across numerous properties.

What are those of us who will be entering the property market in the next few years to do? Start saving? Get ready for the government dick to be up the preverbal arse of the Irish property sector for the next however long?

The gov should be staying the hell out of these industries and simply be sitting on the sidelines setting the rules and ensuring these rules are abided by. Nothing more, nothing less. Because the chances of things going tits-up certainly tend to rise in a parallel trend to government involvement.

Tigerandahalf

Rojomcdojo wrote: »

Tigerandahalf wrote: »

I just did a calculation there on back of paper. Let us say roughly 100,000 mortgages will be wrote down by 100,000. That is 10 billion of a write down. It is a lot but when you compare the losses with NAMA and what has been put into the banks, it is not as bad. I would guess now that most people will stay in their homes and get a writedown.
At least something is being done now and the country can move forward, however broke we might be.

100,000 mortgages owned by how many people, exactly? I don't feel comfortable knowing that speculators will be given 1m+ write-downs .

Those write downs were going to happen. We have already seen it with the major developers. Whether people are bankrupted or not people are not capable of paying back the full amount.
More pay cuts in public service could now be a possibility given that debt is being written off.