Writing off mortgage debt

Lantus

Blowfish wrote: »

Naturally, actually socialising the debt was a huge mistake by Ireland. This doesn't mean however that we should just go ahead and make another mistake by socialising the losses of mortgage holders too, which given the Irish people now effectively own the banks is what people are suggesting.

We own the massive debt but we dont have any actual ownership on the banks in terms of control. Even the government can only try to 'persuade' banks to change variable rates. They dont have any real control.

Unrealistic

Lantus wrote: »

We own the massive debt but we dont have any actual ownership on the banks in terms of control. Even the government can only try to 'persuade' banks to change variable rates. They dont have any real control.

I think you need to make a distinction between the banks saying 'fuсk you, I won't do what you tell me' and the banks explaining to the government that reducing variable rates by X will have a negative effect of Y million per month on the their cash flows, a difference that will need to be funded by the state.

Monty Burnz

Unrealistic wrote: »

I think you need to make a distinction between the banks saying 'fuсk you, I won't do what you tell me' and the banks explaining to the government that reducing variable rates by X will have a negative effect of Y million per month on the their cash flows, a difference that will need to be funded by the state.

Yes, exactly. The main problem is that the state can't be sure when the bank management are blowing smoke up their arses.

golfwallah

Blowfish wrote: »

Naturally, actually socialising the debt was a huge mistake by Ireland. This doesn't mean however that we should just go ahead and make another mistake by socialising the losses of mortgage holders too, which given the Irish people now effectively own the banks is what people are suggesting.

There are strong views on both sides of the mortgage arrears debate and for good reason – socialising any more debt will not be welcomed by taxpayers, who have been prudent in their financial affairs.

But, however strongly people may feel about how it should be handled, the reality is that Government and the state’s independent Central Bank have been implementing policies aimed at helping those in arrears to resolve their own debt problems. It remains to be seen just how successful this approach will be and how much more it will cost the taxpayer.

On 25 May 2012, the Central Bank published its report on Residential Mortgage Arrears and Repossessions Statistics: Q1 2012 (http://www.centralbank.ie/press-area/press-releases/Pages/ResidentialMortgageArrearsandRepossessionsStatisticsQ12012.aspx).

This report covers statistics on arrears, restructuring arrangements and legal proceedings / repossessions. It also provides a link to the guide to completing the Standard Financial Statement (‘SFS’), used by lenders when assessing whether or not to offer alternative repayment arrangement and what type of arrangement is appropriate (under the Mortgage Arrears Resolution Process, ‘MARP’).

Honesty and good faith are cornerstones of the process. For example, the guide states that:
“it is important that you include all your basic living expenses in the SFS. You should fill out the form honestly and provide any documentation your lender asks for. If you do not, you can be classified as not co-operating with your lender and the 12 month waiting period (moratorium) for beginning legal action for repossession of your property will no longer apply to you”.

I’m tempted to be cynical about the honesty of the process and, certainly, it carries risks of abuse and corruption (as mentioned by other posters). But burdening people for life with unsustainable debt is no panacea either, as people can go to the UK to avail of bankruptcy laws that are much more benign than ours, resulting in even more cost to the taxpayer.

What other realistic options are there?

MysticalRain

Central Bank figures 'overstating' number in mortgage crisis

OFFICIAL figures on the "mortgage crisis" overstate the number of households in real trouble – and lack key insights into how deep the problem really is.

An investigation by the Irish Independent has revealed the Central Bank's figures include several types of borrowers who are no longer in trouble.

A large number of senior bankers right across the industry who spoke to the Irish Independent now insist the situation is improving.

http://www.independent.ie/national-news/central-bank-figures-overstating-number-in-mortgage-crisis-3147111.html

I see institutions like the central bank as part of the problem, not the solution.

The Corinthian

This particular topic has been debated at this stage for a number of years, yet it remains in political limbo largely because either introducing it or ruling it out definitively will result in a loss of votes, one way or another, for the government that does so. So, I wouldn't hold my breath that it will be tackled anytime soon.

Problem is, that as long as it does remain an undefined possibility, you're going to see people holding out for it, and naturally, this is not going to help us as a society.

The uncertainty surrounding this is now probably doing more harm than the consequences of actually choosing to do so or not as many of those holding out would either not qualify or simply not like the conditions of any such scheme, if we introduced one (some are hoping for a no-strings attached model and would balk at the thought of giving up equity for forgiveness), and would be forced to actually begin repaying their mortgages, given they can no longer hold out for a future white knight.

golfwallah

MysticalRain wrote: »

Central Bank figures 'overstating' number in mortgage crisis

OFFICIAL figures on the "mortgage crisis" overstate the number of households in real trouble – and lack key insights into how deep the problem really is.

An investigation by the Irish Independent has revealed the Central Bank's figures include several types of borrowers who are no longer in trouble.

A large number of senior bankers right across the industry who spoke to the Irish Independent now insist the situation is improving.

http://www.independent.ie/national-news/central-bank-figures-overstating-number-in-mortgage-crisis-3147111.html

I see institutions like the central bank as part of the problem, not the solution.

Interesting to see that a large number of senior bankers have been saying to the Irish Independent that the level of reporting by Central Bank is not deep enough. I take it this means they want even more stringent regulatory reporting requirements placed on their industry.

They also protest that the real figures are better than those published (even though, I'm quite sure they were well consulted by Central Bank people about the existing reporting requirements).

I see these “howls of protest” from bankers as good sign that the Central Bank is, indeed, on the right track. I trust they will stick to their task and maybe get the bankers to deliver on their desired higher standard of reporting as well.

What a change from their pre-bailout position of wanting only “lite regulation” – they now can’t get enough of it – are we witnessing an historic “St. Paul on the road to Damascus moment” from bankers?

I agree with The Corinthian’s point about the uncertainty being caused by delay in implementing the new Personal Insolvency legislation – the quicker the better the bill is published as the next step in resolving this issue.

In this regard, Alan Shatter, Minister for Justice, Equality & Defence, is reported in the Irish Times of 18th June as saying that the Personal Insolvency Bill (200 pages at the moment) will be published by the end of the month: http://www.irishtimes.com/newspaper/breaking/2012/0618/breaking51.html.

Sponge Bob

There is a big 'hidden' problem, this comes with 2 distinct strands. There are some €180bn+ of Mortgages in Ireland.

Half are not our problem. They are either held by non covered institutions, BOSI/UB/IIB/FA/NIB would be the bigger ones. Or else they are seuritised and held by a Debt Vehicle.

Half are our problem as they are on the books of the covered institiutions AIB/BOI/INBS/EBS

The data on this mess is variable in itself. Here is a pretty fair comment on it.

http://www.centralbank.ie/stability/Documents/Mortgage%20Conference/Session%201/Paper%201/Paper.pdf

This sample represents a substantial portion of the country’s total outstanding residential loans,
indeed Central Bank of Ireland (2011b) shows that at the end of December 2010 786,164 mortgage
loans remained outstanding in Ireland, these were worth approximately €117 billion. It must be
noted that this CBI figure does not include BTL loans. For comparison, the loan-level figures, net
of the BTL market segment, constitute 521,000 loans valued at €68 billion, i.e. approximately 60
per cent of the national figure at the end of 2010. Further, although the four FMP institutions
comprise a large proportion of the overall mortgage market in Ireland it is not expected that the
data examined here are necessarily representative of the non-FMP institutions.

So the arrears data we get is not fully representative of the entire market and indications are that the non reported sections are less managed and with worse arrears that the more managed and widely reported sections.

The single most stressed 'group' are the BTL Mortgagees whose interest only period has expired and who are expected to repay...and cannot. Then there is cross comtamination to primary residences from that...eg 74k loans are secured on 63k properties eg Topup Loans used to but in Bulgaria and the like.

The data contains approximately 74,000 loans in arrears at the end of 2010, associated with
63,000 properties. Of these, 24,011 properties have at least three months worth of repayments
outstanding on their mortgages. Unsurprisingly, the largest cohorts of borrower types (FTB- and
Mover-P&I borrowers) account for the majority of the 90DPD arrears balance (58 per cent), they are
in general better performing, with less than five per cent of their mortgaged properties in 90DPD,
than the groups which make up a smaller section of the mortgage book and whose repayments
are on an interest only basis. For example, BTL-IO borrowers have the highest arrears balance per
property (€2,100) of all borrower groups, this is of particular concern as these borrowers are the third
largest borrower group in the data, accounting for 12 per cent of all outstanding balances.

The cross contamination effect means that someone not in trouble on their main loan could be in trouble because they bought in Bulgaria....so what are we supposed to 'bail out' here???

Frankly I see writedowns being suitable for those with no further loans who got into trouble through unemployment or illness or both. The rest will have to go into administration or bankruptcy and that is that.

Bank of Ireland manages its mortgage book pretty well and therefore only has around half the arrears that eg BOSI has. Even in the more highly stressed cohorts (2006 Buyers) its arrears are below the market.

However if we look at their pre 1997 mortgages in arrears, 7000 of them for a gross value of €123m we see the average outstanding balance is €17.5k so chucking them out will cost the taxpayer more than a writedown might......and although we could probably sell the house and pay off the entire mortgage we will probably find them on the local housing list. We should look at something like a lien or registered interest in those cases like the Nursing Home clawback scheme.

Sand

MysticalRain wrote: »

Central Bank figures 'overstating' number in mortgage crisis

OFFICIAL figures on the "mortgage crisis" overstate the number of households in real trouble – and lack key insights into how deep the problem really is.

An investigation by the Irish Independent has revealed the Central Bank's figures include several types of borrowers who are no longer in trouble.

A large number of senior bankers right across the industry who spoke to the Irish Independent now insist the situation is improving.

http://www.independent.ie/national-news/central-bank-figures-overstating-number-in-mortgage-crisis-3147111.html

I see institutions like the central bank as part of the problem, not the solution.

An investigation by the Irish Independant eh? The same Irish Independant that has Brendan "Green Jersey" Keenan as Economics editor? The man who loudly told Morgan Kelly on live TV that "We know what the Irish banks bad loans are. They're going to be about 1% of their loanbook"

But that apart, lets see what the Irish Independants fearless investigation has turned up:

"A large number of senior bankers right across the industry who spoke to the Irish Independent now insist the situation is improving."

Oh right - the Irish Independant asked some bankers if they were in trouble. The bankers said everythings fine. Irish Independants fearless reporters strike again.

Jaysus.

K-9

Sand wrote: »

Oh right - the Irish Independant asked some bankers if they were in trouble. The bankers said everythings fine. Irish Independants fearless reporters strike again.

Jaysus.

Substitute the Irish Cental Bank for the Indo and we get the lead up to the banking crisis.

Jaysus, in a Vincent Browne tone!

golfwallah

K-9 wrote: »

Substitute the Irish Cental Bank for the Indo and we get the lead up to the banking crisis.

Jaysus, in a Vincent Browne tone!

Very amusing analogy but I’m not sure it’s very helpful in informing people’s understanding about current handling of the mortgage arrears issue.

However about the management of the Indo, I’d agree that the bank regulatory function in Ireland between 2003 and 2010 proved a disaster. In this regard, I wouldn’t fault the view expressed by UK MP, Nigel Farage, to the effect that “the banking collapse was caused, more than anything, by bad government policy and the total failure of bad regulation.”

Most of us didn’t know it at the time (or more suspected it but didn’t want to know), but between 2003 & 2010, the Financial Regulator and Government effectively slept on the job. Meanwhile, we had a spending splurge and property bubble, on borrowed cheap money. Not surprisingly, we are all a bit miffed now that the final bill has come in, while those that drove the collapse “walked” with truckloads of compensation for early retirement.

In Ireland (along with most other Eurozone states, except, perhaps, Germany) we voted for the politicians who promised to give us the most goodies, without worrying us about how these goodies would have to be paid for. We now know what we should have known all along and unfortunately, it has left us with a sizable number of people who can’t or won’t make their mortgage repayments.

We are now in a space where we have to get our financial affairs in order, face up to and deal with the problem.

I’m as pissed off as anyone else about how we got here. I’m also just as sceptical about the political will to see through the cure being overseen by the Central Bank.

But what’s the alternative? A re-vamped Financial Regulatory regime has been put in place and new people appointed to see it through. I too am tempted to resort to cynicism, but at this stage, I’m willing to give the new people a chance.

skafish

bbam wrote: »

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.

Are you suggesting that the banks forced these people to take out morgages they couldnt afford? Who put a gun to the heads of these people?

If a person borrowed money, they should repay it. Maybe not possible to do it in the time frame initally agreed, but that can be re negotiated. In other parts of the world, 50, 60 even 100 year morgages are not un common.

Personally, I'm paying my morgage; it isnt as affordable as I thought it would be when we started out (ie before sprog no.2 arrived, and then other half let go), but we are managing. I DO NOT want to pay for sombody else who took out a loan they now find difficulty in re paying, but who cant be arsed trying to find a workable solution

golfwallah

skafish wrote: »

Are you suggesting that the banks forced these people to take out morgages they couldnt afford? Who put a gun to the heads of these people?

If a person borrowed money, they should repay it. Maybe not possible to do it in the time frame initally agreed, but that can be re negotiated. In other parts of the world, 50, 60 even 100 year morgages are not un common.

Personally, I'm paying my morgage; it isnt as affordable as I thought it would be when we started out (ie before sprog no.2 arrived, and then other half let go), but we are managing. I DO NOT want to pay for sombody else who took out a loan they now find difficulty in re paying, but who cant be arsed trying to find a workable solution

You're quite right that people should repay their borrowings. As regards renegotiation of terms, options for banks to work on have been set out in the Keane report on Mortgage Arrears and, AFAIK, Central Bank has been urging banks to develop renegotiated solutions along the lines suggested (and to develop and resource other workable solutions themselves).

The key points are that there is no blanket debt forgiveness solution and each situation has to be dealt with on a case by case basis.

Issues in this regard are covered to some extent in earlier posts and, if you care to read it, in the Keane Report available from the Department of Finance website.

For those whose financial circumstances are impossible to handle within the above mentioned solutions, there is the Personal Insolvency Bill, due for publication tomorrow. But at 200 pages, this will take a bit of time to read and digest.

golfwallah

The long awaited Personal Insolvency Bill was published today. Progress at last – it’s early days and reaction from opposition parties will be interesting.

According to Department of Justice and Equality site today, Minister Shatter “stated that "the Bill provides concrete options for those genuinely unable to discharge their financial obligations as opposed to those who can but won’t do so." Moreover, he noted that if creditors fail to constructively engage in the DSA or PIA process or if agreement does not prove possible, the option of initiating an application for a court adjudication of bankruptcy is available both to creditors and to an insolvent debtor.
Minister Shatter also reiterated that the Bill does not provide for the automatic writing-off of negative equity, where such may exist. Where a person is in a position to service their mortgage or other debt obligations, they must continue to do so. This Bill does not relieve solvent debtors of their responsibility to meet their contractual obligations”.

The site also provides details of the main provisions of the bill plus a link to the text of the bill.
(http://www.inis.gov.ie/en/JELR/Pages/PR12000198)

Much of the contents of the bill have already been in the public domain and it remains to be seen how long it will take before it is finally passed into law.