Writing off mortgage debt

golfwallah

AltAccount wrote: »

When you say they are "to become more proactive in dealing with mortgage arrears", what are the suggested options exactly?

According to Irish Times article:

"The banks have been directed to “segment” their mortgage books into categories – loans that can be repaid with forbearance (such as interest-only for a period) and loans that will never be repaid. In the latter category, they will need to modify certain loans with new products and foreclose on others."

If you read the article, you'll find more details.

Maura74

Was it the recession or the over supply of house in Ireland that caused westlife singer empire to collapes and had gone bankrupt in UK. Or was it becasue he was too greedy.

http://uk.omg.yahoo.com/gossip/110--pop/westlife-shane-filan-declared-bankrupt-debts-18million-065545687.html

jmayo

Maura74 wrote: »

Was it the recession or the over supply of house in Ireland that caused westlife singer empire to collapes and had gone bankrupt in UK. Or was it becasue he was too greedy.

http://uk.omg.yahoo.com/gossip/110--pop/westlife-shane-filan-declared-bankrupt-debts-18million-065545687.html

No it was stupidity that caused it.
Anyone that wanted to build 92 houses in Dromahair FFS needs their head examining.
AFAIK the population is less than 1000.

meglome

jmayo wrote: »

No it was stupidity that caused it.
Anyone that wanted to build 92 houses in Dromahair FFS needs their head examining.
AFAIK the population is less than 1000.

It's a disgrace when you go around Ireland to see the number of houses that were built in small villages. The only option will be to pull them down.

Sponge Bob

http://www.breakingnews.ie/ireland/almost-14-of-mortgages-in-arrears-house-prices-due-to-drop-20-moodys-555466.html

14% of mortgages in arrears up from 12% in January. Could be higher by value.

Zamboni

meglome wrote: »

It's a disgrace when you go around Ireland to see the number of houses that were built in small villages. The only option will be to pull them down.

Give them free to people who are >1 year in arrears and unemployed.
People have an option to trade a life of debt for a gaf down the country.
The repossessed houses are released onto the market stimulating transactions and bringing the property prices down.

meglome

Zamboni wrote: »

Give them free to people who are >1 year in arrears and unemployed.
People have an option to trade a life of debt for a gaf down the country.
The repossessed houses are released onto the market stimulating transactions and bringing the property prices down.

Yes people are lining up to join the unemployment queues of Leitrim.

golfwallah

meglome wrote: »

It's a disgrace when you go around Ireland to see the number of houses that were built in small villages. The only option will be to pull them down.

I agree that dealing with the unsold / unfinished housing in villages needs to be addressed, but this is really off-thread to the mortgage arrears issue.

The growth in mortgage arrears points to an element of “strategic arrears” by people anticipating of some form of debt forgiveness. It appears to me that the banks have allowed this situation to develop and not done enough to correct it. This poses the risk of additional write downs that will ultimately fall on the taxpayer - that's the bit I don't like.

It is obvious from last Friday’s Irish Times interview with Fiona Muldoon, Director of credit institutions and insurance supervision at the Central Bank, that the Central Bank is far from happy with how the Banks have been dealing (or more failing to deal) with the mortgage arrears issue.

She said there would be “very robust conversations” with the banks about their responsibility to manage their own mortgage arrears problem. It wasn’t up to the Central Bank to do this for them by creating a “shop” of solutions and set up systems to deal with each type of borrower.

It is reported that the Central Bank has directed the banks to identify borrowers who cannot repay their mortgages and to develop new products such as split or trade-down mortgages for borrowers who cannot afford to repay loans in full and to repossess properties in the worst cases.

It seems the banks have been too busy dealing with other things – ah, sure why bother, won’t the taxpayer, the Germans or whoever pick up the tab if they don’t do their job? No wonder they went bust and had to be rescued by the state.

For links to reports see previous post #390 on previous page.

Zamboni

golfwallah wrote: »

I agree that dealing with the unsold / unfinished housing in villages needs to be addressed, but this is really off-thread to the mortgage arrears issue.

The growth in mortgage arrears points to an element of “strategic arrears” by people anticipating of some form of debt forgiveness. It appears to me that the banks have allowed this situation to develop and not done enough to correct it. This poses the risk of additional write downs that will ultimately fall on the taxpayer - that's the bit I don't like.

It is obvious from last Friday’s Irish Times interview with Fiona Muldoon, Director of credit institutions and insurance supervision at the Central Bank, that the Central Bank is far from happy with how the Banks have been dealing (or more failing to deal) with the mortgage arrears issue.

She said there would be “very robust conversations” with the banks about their responsibility to manage their own mortgage arrears problem. It wasn’t up to the Central Bank to do this for them by creating a “shop” of solutions and set up systems to deal with each type of borrower.

It is reported that the Central Bank has directed the banks to identify borrowers who cannot repay their mortgages and to develop new products such as split or trade-down mortgages for borrowers who cannot afford to repay loans in full and to repossess properties in the worst cases.

It seems the banks have been too busy dealing with other things – ah, sure why bother, won’t the taxpayer, the Germans or whoever pick up the tab if they don’t do their job? No wonder they went bust and had to be rescued by the state.

For links to reports see previous post #390 on previous page.

How are the banks supposed to deal with this seeing as the state denies them the ability to repossess?

Monty Burnz

Zamboni wrote: »

How are the banks supposed to deal with this seeing as the state denies them the ability to repossess?

Not just the state - 'de peeple' too. It's a pretty unpopular policy, kicking people out of 'their homes' (that they haven't paid for).

Of course, 'de peeple' are generally unable to draw the connection between the cost of keeping non-payers in 'their' homes and the closing down of hospitals, cutting teacher numbers, increased taxes and increasing national debt. I think if more people joined the dots, then the touchy feely glow of allowing people to continue to own something they haven't paid for might wear off beside the reality of people dying on hospital trolleys.

bbam

golfwallah wrote: »

I agree that dealing with the unsold / unfinished housing in villages needs to be addressed, but this is really off-thread to the mortgage arrears issue.

The growth in mortgage arrears points to an element of “strategic arrears” by people anticipating of some form of debt forgiveness. It appears to me that the banks have allowed this situation to develop and not done enough to correct it. This poses the risk of additional write downs that will ultimately fall on the taxpayer - that's the bit I don't like.

It is obvious from last Friday’s Irish Times interview with Fiona Muldoon, Director of credit institutions and insurance supervision at the Central Bank, that the Central Bank is far from happy with how the Banks have been dealing (or more failing to deal) with the mortgage arrears issue.

She said there would be “very robust conversations” with the banks about their responsibility to manage their own mortgage arrears problem. It wasn’t up to the Central Bank to do this for them by creating a “shop” of solutions and set up systems to deal with each type of borrower.

It is reported that the Central Bank has directed the banks to identify borrowers who cannot repay their mortgages and to develop new products such as split or trade-down mortgages for borrowers who cannot afford to repay loans in full and to repossess properties in the worst cases.

It seems the banks have been too busy dealing with other things – ah, sure why bother, won’t the taxpayer, the Germans or whoever pick up the tab if they don’t do their job? No wonder they went bust and had to be rescued by the state.

For links to reports see previous post #390 on previous page.

Surely the growth in those falling into arrears could just signal an increase in those who just can no longer make ends meet.

I think while there may be some level of strategic default the banks are quite happy to demonise anyone who they can as it lessens the appetite to deal with the real problem of toxic mortgages.
This is a legessy that will hamper any recovery in local economies, with ever lowering wages, increasing costs of living, increasing taxes people are genuinely just running out of money and then it's easy to loose interest in paying for a hugely overvalued poorly built houses.

Monty Burnz

bbam wrote: »

Surely the growth in those falling into arrears could just signal an increase in those who just can no longer make ends meet.

I think while there may be some level of strategic default the banks are quite happy to demonise anyone who they can as it lessens the appetite to deal with the real problem of toxic mortgages.

Nonsense, I would suggest - the banks would rather pretend that all the non-payers are hard-luck cases. That way they can avoid any repossessions (bad PR, driving prices down in the short term etc.) and can simply turn up at the government's doorstep again in a year or two and demand another few billion each in recapitalisation money.

BFDCH.

meglome wrote: »

It's a disgrace when you go around Ireland to see the number of houses that were built in small villages. The only option will be to pull them down.

or send the homeless down there...or those requiring housing and not in employment

BFDCH.

bbam wrote: »

Surely the growth in those falling into arrears could just signal an increase in those who just can no longer make ends meet.

I think while there may be some level of strategic default the banks are quite happy to demonise anyone who they can as it lessens the appetite to deal with the real problem of toxic mortgages.
This is a legessy that will hamper any recovery in local economies, with ever lowering wages, increasing costs of living, increasing taxes people are genuinely just running out of money and then it's easy to loose interest in paying for a hugely overvalued poorly built houses.

should those people not just move out into something they can afford then?

bbam

Nonsense maybe but tha banks and the government and the people of the country need at some stage to face the fact that there are too many mortgages out there that just shouldn't have been created.
If these are not dealt with the country will languish on and no real recovery will happen. It is a collective responsibility in this problem.

The government let developers create huge badly planned estates and then encouraged people to get into the property ladder before they were priced out of the market.

The banks lent money to people who didn't have an income to support the repayments or they arranged hugely inflated valuations of property in order to borrow more against it.

People signed up to payments they couldn't meet long term. They believed the hype that was spun to them about the longevity of the boom and the need to have property, even if it was a one bedroom appt in Leitrim.

This crisis is a collective one and heaping all expectations to pay for it on toxic mortgage holders is just crazy and isn't going to work.

BFDCH.

bbam wrote: »

Nonsense maybe but tha banks and the government and the people of the country need at some stage to face the fact that there are too many mortgages out there that just shouldn't have been created.
If these are not dealt with the country will languish on and no real recovery will happen. It is a collective responsibility in this problem.

The government let developers create huge badly planned estates and then encouraged people to get into the property ladder before they were priced out of the market.

The banks lent money to people who didn't have an income to support the repayments or they arranged hugely inflated valuations of property in order to borrow more against it.

People signed up to payments they couldn't meet long term. They believed the hype that was spun to them about the longevity of the boom and the need to have property, even if it was a one bedroom appt in Leitrim.

This crisis is a collective one and heaping all expectations to pay for it on toxic mortgage holders is just crazy and isn't going to work.

I bought a house during the boom, I’ve since sold it. I made a massive loss and now live in something I can afford. Why, as a tax payer, should I be expected to pay for someone else to live in a house they probably shouldn't of bought and cannot afford to keep? It's between the banks and the mortgage holders to sort out. No one else they were all adults.

as for the mismanagement of the country and bad advice from politicians in cahoots with developers, I would suggest punishing them rather than people who had nothing to do with it.

bbam

BFDCH. wrote: »

I bought a house during the boom, I’ve since sold it. I made a massive loss and now live in something I can afford. Why, as a tax payer, should I be expected to pay for someone else to live in a house they probably shouldn't of bought and cannot afford to keep? It's between the banks and the mortgage holders to sort out. No one else they were all adults.

as for the mismanagement of the country and bad advice from politicians in cahoots with developers, I would suggest punishing them rather than people who had nothing to do with it.

Indeed but the banks are going to have to right down huge chunks of their mortgage books as the value was fictional And didn't really exist in te first place.
It's happening already but needs to become more wholesale to fix the market.

And yes it will drive some of the banks to ask for more recapitalization. This is where the collective responsibility comes in.

If people want a recovery in the next ten years then it needs to be sorted. Otherwise a whole chunk of society will have no disposable income and no internal domestic recovery can happen. I know the notion of helping those who are in hard times is unpalatable to many, but it will have to happen, sooner or later.

Otherwise our children will grow up and see that nothing was done to create a recovery.

Monty Burnz

bbam wrote: »

Nonsense maybe but tha banks and the government and the people of the country need at some stage to face the fact that there are too many mortgages out there that just shouldn't have been created.

This is why we need bankruptcy reform in a hurry. You asked for a mortgage that you can't repay, so you declare bankruptcy, give up your valuable assets (house, car over a certain threshold value, etc) and live modestly for a few years. Then the debt is 'forgiven' (or more likely shared amongst us taxpayers now that we own most banks) and you start with a clean sheet.

What I can't abide is this notion that you get let off a huge amount of debt and keep the sh!t you outbid other people for with the borrowed money. That's an outrage.

swampgas

bbam wrote: »

Indeed but the banks are going to have to write down huge chunks of their mortgage books as the value was fictional. And didn't really exist in the first place.

Not quite - the value of the asset may have been misjudged, but the value of the loan hasn't changed. If the bank lent you €250,000, you owe €250,000.

If the property you bought has dropped in value since, that's negative equity, and a separate if related issue. It has no direct bearing on what someone owes, it only affects their ability to repay the mortgage quickly by selling the property.

I know this being a bit nit-picky, but it's important to realise that a bank has no obligation to write down debt just because an asset bought with that debt has changed in value.

BFDCH.

bbam wrote: »

Indeed but the banks are going to have to right down huge chunks of their mortgage books as the value was fictional And didn't really exist in te first place.
It's happening already but needs to become more wholesale to fix the market.

And yes it will drive some of the banks to ask for more recapitalization. This is where the collective responsibility comes in.

If people want a recovery in the next ten years then it needs to be sorted. Otherwise a whole chunk of society will have no disposable income and no internal domestic recovery can happen. I know the notion of helping those who are in hard times is unpalatable to many, but it will have to happen, sooner or later.

Otherwise our children will grow up and see that nothing was done to create a recovery.

why can those in trouble not sell up and buy something they can afford? why does someone else have to pay for them to stay in there?

If anyone should pay for them to continue living in the house it's the banks who took the risk in lending to them in the first place. Everybody (most people) want to help out where they can, but subsidising a stranger to live in a house he shouldn't be in, while simultaneously maintaining unnaturally high house prices is not my idea of a fair solution.

moycullen14

It's too complicated for a one size fits all solution. Debt management options are determined by the value of the underlying security AND the capability of the debt holder to service the debt.

Much and all as it pains me to admit it, the solution to this crisis has to be done on a case-by-case basis, and the best people to do this are the banks. The solutions have to be private or at least shielded form public scrutiny because they will differ from person to person and hand wringing about things being 'fair' and the need for an equitable solution will mean that nothing ever gets done - and that's exactly where we are at the moment!

If person A is in negative equity (and this matters because it affects his ability to sell the asset) and cannot pay and person B is in the same negative equity but can pay, they MUST be treated differently, it is the only practical solution. Trying to come up with a strategy that treats them the same will only mean that nothing gets done - Why? because there is NO common solution.

Also, right or wrong, there are a bucketload of property related debts out there that will NEVER be paid, they will be written off. If this offends people's sensitivities, then tough. Them's the breaks. One way or the other, the tax payer pays because they own the banks, the banks can't go bust and the banks can't be repaid by the debtors.

The moral hazard argument doesn't come into it, and even if it did, would it be better for someone to have debt written off and a carpet-bagger to benefit or to have the debtor benefit?

Anyway, it is happening - debt write-off/restructuring - but it is being done quietly and will continue to happen because it is the only sensible thing to do.

bbam

Fine.
But huge wright downs are already out there but just being kept quiet via the lender insisting on non disclosure documents being signed. The cases where it doesnt suit the bank for them to become public are being dealt with by this method.
I have a family member workin in AIB and up to €100k wright downs are happening provided the borrower retains a fair ammount of a mortgage going forward and doesn't fall into arrears.
Wake up folks, this is happening, I'm just suggesting a structure to it rather than just what suits the banks to do.

golfwallah

bbam wrote: »

Fine.
But huge wright downs are already out there but just being kept quiet via the lender insisting on non disclosure documents being signed. The cases where it doesnt suit the bank for them to become public are being dealt with by this method.
I have a family member workin in AIB and up to €100k wright downs are happening provided the borrower retains a fair ammount of a mortgage going forward and doesn't fall into arrears.
Wake up folks, this is happening, I'm just suggesting a structure to it rather than just what suits the banks to do.

To keep as many people as possible in their homes, minimise the cost to the state, avoid inappropriate mortgage holder behaviour, etc., a number of approaches, such as mortgage to rent, split mortgages, trade-down mortgages, sale by agreement are outlined in Inter-Departmental Mortgage Arrears Working Group report, published as long ago as September 2011: (http://www.finance.gov.ie/documents/publications/reports/2011/mortgagearr2.pdf) .

The banks seem to have been dragging their feet on implementing the recommendations in this report (on a widely known basis) and now the newly appointed Central Bank Director responsible, Fiona Muldoon, has been urging them to get on with the job.

Irish Times report of 8th June last reported that the Central Bank has directed the banks to identify borrowers who cannot repay their mortgages and to develop new products such as split mortgages or trade-down mortgages for borrowers who cannot afford to repay loans in full and to repossess properties in the worst cases.

Interesting to hear acecdotal reports that “up to €100k write downs are happening provided the borrower retains a fair amount of a mortgage going forward and doesn't fall into arrears”, which looks to me like one of the solutions in the above mentioned report, but being done under cover of “non disclosure” agreements. Ah, but maybe they're just "testing the water".;)

Monty Burnz

golfwallah wrote: »

To keep as many people as possible in their homes

These properties are no more their 'homes' than the properties that renters live in - yet nobody is falling over themselves to keep renters in properties that they can't afford anymore. Why not?

golfwallah

Monty Burnz wrote: »

These properties are no more their 'homes' than the properties that renters live in - yet nobody is falling over themselves to keep renters in properties that they can't afford anymore. Why not?

Hey, I'm only quoting what's in the Inter-Departmental Mortgage Arrears Working Group report published last September.

But this report remains just a report and the bill for the taxpayer grows until resources are put in place to do something about it.

Hence, I have also provided an update on the follow-up by the Central Bank, through Fiona Muldoon.

Hope she gets the banks to become more pro-active with regard to reducing arrears.

MysticalRain

bbam wrote: »

Fine.
But huge wright downs are already out there but just being kept quiet via the lender insisting on non disclosure documents being signed. The cases where it doesnt suit the bank for them to become public are being dealt with by this method.
I have a family member workin in AIB and up to €100k wright downs are happening provided the borrower retains a fair ammount of a mortgage going forward and doesn't fall into arrears.
Wake up folks, this is happening, I'm just suggesting a structure to it rather than just what suits the banks to do.

The truth of the matter is that there are a bunch of cute hoors here who are making this out to be a far bigger problem than it actually is because it suits their own vested interests to do so.

It can't be such a "huge problem" if only 15% of mortgage holders are either in arrears or have been restructured (a few tens of thousands of people at most). 85% of people are managing to pay their mortgages. I would be willing to bet that if the "won't pay crowd" were excluded, the real number would be closer to 10%.

If someone can't or won't pay their mortgage, I would be happy for the bank to reposess it and sell it cheaply to renters.

golfwallah

MysticalRain wrote: »

The truth of the matter is that there are a bunch of cute hoors here who are making this out to be a far bigger problem than it actually is because it suits their own vested interests to do so.

It can't be such a "huge problem" if only 15% of mortgage holders are either in arrears or have been restructured (a few tens of thousands of people at most). 85% of people are managing to pay their mortgages. I would be willing to bet that if the "won't pay crowd" were excluded, the real number would be closer to 10%.

If someone can't or won't pay their mortgage, I would be happy for the bank to reposess it and sell it cheaply to renters.

I guess that that’s why the abovementioned Mortgage Arrears report on Dept. of Finance site points out that each one of the suggested solutions will have consequences for the mortgage holder in arrears (up to and including loss of their homes) and that there will be no blanket “debt forgiveness” scheme (http://www.finance.gov.ie/documents/publications/reports/2011/mortgagearr2.pdf).

The report also describes the scale of the problem (as of last September, but this has grown a lot since then) and the broad challenges underpinning the group’s analysis:

• To keep people in their homes, where appropriate
• To avoid inappropriate mortgage holder behaviour thereby compounding the arrears problem
• To reduce the burden on home owners facing debt servicing difficulties
• To reduce the drag on the economy from a significant cohort of over-indebted people whose spending is constrained by mortgage debt obligations
• To strengthen and provide transparency on the loan portfolios of mortgage lenders
• To facilitate market funding of mortgage asset portfolios
• To minimise the cost to the State and to target scarce State resources for maximum efficiency

Looks to me like:
• The main part of the analysis phase on this issue has been over since September 2011.
• It has been well politicised and the next phase is implementation.
• That’s precisely the job Fiona Moloney of the Central Bank has been appointed to oversee and is now urging banks to take and continue to take the detailed actions needed for implementation (i.e. to find the “real bottom”).
• Reading the Irish Times article, the Central Bank has been resourced to ensure the banks carry out their responsibilities in this regard. Let’s hope this works.

bbam

Definitely the wont pay need to be identified and brought to rights, it would be hard going to identify these genuinely.
After that it needs to be looked at to see if te banks behaved appropriately. There are many many instances where the bank screwed round the numbers to give out mortgages where they shouldn't have. I wouldn't agree with evictions in these cases and a system of right downs would be appropriate rather than it just happen at the banks discression. Like it or not the state have responsibility as there was effectively no regulation or control of banking.
In the remainder of cases we definitely need a system in place where swift solutions are out in place. I'm not adverse to solutions that see families stay in the houses and the banks/state/nama retain part ownership.

Monty Burnz

bbam wrote: »

Definitely the wont pay need to be identified and brought to rights, it would be hard going to identify these genuinely.

Easy - don't incentivise people to lie by letting them stay in for years in property they are not paying for.

creedp

Monty Burnz wrote: »

These properties are no more their 'homes' than the properties that renters live in - yet nobody is falling over themselves to keep renters in properties that they can't afford anymore. Why not?

Renters have benefited from this property based recession as rents have fallen while mortgages have gone up. Some people are hell bent on getting people thrown out of their homes so that others can benefit from the carnage .. in nature these could be described as vultures. In my view if someone has genuinely fallen on hard times I see nothing wrong will trying to assist them during this period. However, where people are pulling the p1ss to see what they can get out of it for themselves they should be dealt with without delay and therefore remove the perverse incentive now building up in the system. There will always be those who like to make a fast buck at the expense of their neighbour and the problem in the media at the moment is the constant use of the words 'all' and 'everybody'. Those who wish to take advantage of others can hide behind 'everybody is sufferring', 'everybody has taken pay-cuts', etc, etc. Its time to sort out who needs help and help them and move on!