Mortgage debt forgiveness is here, Dublin nurse gets €152k debt write-down

EricPraline

Solair wrote: »

In any transaction like that, you have to assume that a normal person is absolutely not a financial expert. The bank however is supposed to be!

It's a damning indictment of the level of numeracy of the average Irish person if they are incapable (or unwilling) to reasonably estimate whether or not they can afford their single largest monthly outlay. Is this person, who has completed the Leaving Cert and a degree, unable to perform simple budgeting?

As has been said here before, it seems that many people spent more time planning holidays than they did researching a property purchase. Is that the fault of the banks?

In relation to this particular case, I'm not sure how much of a precedent it sets. There may be a very specific set of circumstances. This line in the IT stands out:

Her lawyers argued the property should have been sold more quickly, before the market fell further, though there was a dispute over when it was surrendered.

Solair

If the debts are unsustainable what exactly do you propose to do ?
Starve people? Lock them up perhaps in stocks on O'Connell Street ?

All that not allowing the debts to be written off / written down is doing is preventing economic recovery as these people are left with no disposable income and no prospects or, worse case scenario they will flee the loans entirely and just disappear abroad.

At EU level, the problem is that a) if the regulation hadn't been so poorly thought through this situation would never have happened in the first place.

b) The ECB in particular does not seem to be able to face the reality that the Euro is not the Deutsche Mark - its value has to reflect a basket of countries, some of which are currently basket cases. If it continues to refuse to monetise the debts, the situation is going to just get worse and worse as the countries and banking systems exposed to these debts will simply never be able to pay them down anyway.

As it stands in Ireland for example, banks are starving businesses and consumers of normal sustainable lending streams i.e. cutting flexible credit, etc which is killing the economy.

Nothing seems to add up and there appears to be absolutely no overarching policy it's all still blind panic and bickering about moral hazards which the Eurozone slowly drifts ever closer to a huge cliff.

Also, the tax payer only bears the costs of writing off these debts because the ECB and Irish Government decided that the best way to approach this was market interference and nationalizing bankrupt banks...

The tax payer should absolutely not be absorbing this debt.

Also with regard to the Euro's value. The Eurozone is one of the world's largest single economic blocs and does most of its trade with itself, so for most things the value of the currency is irrelevant as it is internal trade much like the US does.
Not only that, but when it comes to energy imports, the EU's members impose vast tax on those. So, if you devalue the Euro by a quite a few % by quantitative easing, the net result would be EU exports to China etc get cheaper, imports from the far east get a bit more expensive (helping EU companies), the price of energy would increase a bit, which could be counteracted by just reducing some of the energy taxes and the consumer market / business community wouldn't actually face that much of an adjustment.

I don't think the EU has gotten beyond thinking like a small country.

Forest Demon

Gurgle wrote: »

'They' should be training at something that will give them a hope of getting a job.
There really isn't much benefit to spending their days on boards whinging about the public sector. It doesn't add anything to the CV.

My points are valid. I don't appreciate your response. Since when did contributing your opinion on a forum become whinging. And you a mod. tut tut.

Are you typing it from your civil service job in between a games of solitaire?

I have a diploma in IT, degree in Engineering, a Masters and 17 years experience. But you are right, its more training I need so I have applied to FAS for a saddle making internship as there is a growing market for private sector workers to be rode in Ireland at the moment.

Maybe I should go and train to be a nurse or teacher or guard? Wait a second, we cant afford to employ any more of those.

Solair

EricPraline wrote: »

It's a damning indictment of the level of numeracy of the average Irish person if they are incapable (or unwilling) to reasonably estimate whether or not they can afford their single largest monthly outlay. Is this person, who has completed the Leaving Cert and a degree, unable to perform simple budgeting?

As has been said here before, it seems that many people spent more time planning holidays than they did researching a property purchase. Is that the fault of the banks?

In relation to this particular case, I'm not sure how much of a precedent it sets. There may be a very specific set of circumstances. This line in the IT stands out:

That is *EXACTLY* what happens when banks take the controls off lending. It is what happened in the United States, in the UK and in plenty of other markets that have been through these kinds of credit bubbles.

The average consumer is absolutely not financially astute and there is plenty of psychological research out there that would show that people are extremely poor at evaluating risk, long term probability etc etc.
That is why most sensible countries have pretty serious controls of bank lending policies and why, historically, banks were very careful, conservative and prudent about what they lent. They went absolutely insane in the late 90s and through the 00s.

There was also a problem in Ireland where people had become quite used to high inflation. That was true in Spain too.
Our parents generation bought houses they couldn't afford then inflation took care of their mortgages i.e. they bought a house for £24,000 in 1978 and that loan was laughably small by 1999.
So, that also entered into a lot of people's notions of how the market operated and membership of the Eurozone changed that game's rules drastically as we entered a situation where inflation behaved more like France and Germany.

Monty Burnz

Solair wrote: »

If the debts are unsustainable what exactly do you propose to do ?
Starve people? Lock them up perhaps in stocks on O'Connell Street ?

All that not allowing the debts to be written off / written down is doing is preventing economic recovery as these people are left with no disposable income and no prospects or, worse case scenario they will flee the loans entirely and just disappear abroad.

If you can't pay the debt, you go bankrupt. It's pretty simple - you say goodbye to your assets, say goodbye to your debts, and start again. Bankruptcy right now is ridiculously tough, but hopefully in a few months the reforms will come through and this will be a good option for those who can't pay. Those who won't pay will find it unattractive.

Solair wrote: »

Also, the tax payer only bears the costs of writing off these debts because the ECB and Irish Government decided that the best way to approach this was market interference and nationalizing bankrupt banks...

The tax payer should absolutely not be absorbing this debt.

Right right right, there's no point in going on about 'shoulda woulda coulda' stuff - the banks largely belong to the taxpayer. That's the situation today so we need to deal with it.

Forest Demon

Monty Burnz wrote: »

If you can't pay the debt, you go bankrupt. It's pretty simple - you say goodbye to your assets, say goodbye to your debts, and start again. Bankruptcy right now is ridiculously tough, but hopefully in a few months the reforms will come through and this will be a good option for those who can't pay. Those who won't pay will find it unattractive.

Right right right, there's no point in going on about 'shoulda woulda coulda' stuff - the banks largely belong to the taxpayer. That's the situation today so we need to deal with it.

Completely agree. The sooner the better they change the bankruptcy laws. Let people pay a price for their mistakes and move on. Its the only realistic way forward. The tax payer is picking up the bill anyway.

Solair

Monty Burnz wrote: »

If you can't pay the debt, you go bankrupt. It's pretty simple - you say goodbye to your assets, say goodbye to your debts, and start again. Bankruptcy right now is ridiculously tough, but hopefully in a few months the reforms will come through and this will be a good option for those who can't pay. Those who won't pay will find it unattractive.

Right right right, there's no point in going on about 'shoulda woulda coulda' stuff - the banks largely belong to the taxpayer. That's the situation today so we need to deal with it.

Unfortunately, I don't think that we are capable of dealing with it as a nation, a community of European nations, as a banking system or as an economy. The European Commission and ECB are basically showing themselves to be utterly incompetent, incapable of reacting to the crisis as it develops, incapable of identifying what the problem actually is and totally out of touch with reality and the Irish Government is locked into a situation that is totally unsustainable thanks to the previous administration's knee-jerk approach to dealing with the crisis in the first place.

I would predict that the wheels will eventually fall off. I don't know how that will pan out, but we are currently lurching from one minor crisis to another and the whole thing is being held together with the financial equivalent of chewing gum, glue and sellotape.

Something very big has to change and it has to change soon. If it doesn't, it will be changed for us by outside forces of economic reality.

Spiritofthekop

No problem with this in severe case's as long as...

They hand back the keys of the house & assets bought from top ups etc and they are banned from signing for any other loans or mortgages in this country for 15/20 years so they then can go out & rent & save some money like the rest of us did.

Lantus

Just to be clear as I'm not an expert in these matters...

Bank of Ireland lent a quarter of a million euro's to a person who it later transpires can only afford around €250 per calendar month in repayments.

I appreciate that as many have pointed out there are a lot of nuances here that the story does not tell but surely this in itself is the root cause of the problem.

If you asked a bank today for this money they would say off you go and without a smile. But at the time these 'financial experts' were all so punch drunk on the mortgage market they gave vast sums to any old person that had decided to cash in the never ending gravy property train.

People have a level of responsibility to take in what they borrow but it is the banks that asses each case and using their financial skill make the decisions. The banks need to give the money to the applicant, ultimatley they are resonsible for their actions. All people do is ask for it and hope....

Zamboni

This nurse is on Newstalk 106 right now with Eddie Hobbs and Jonathon Healy.

riclad

THIS is a nurse,she should be smart enough to know, i borrowed x amount,i have to pay x amount per month,can i afford it .I hear nurse,s wages are pretty good.
IF she work that out,i would,nt trust her to hand out medication.You need a good education and leaving cert to become a nurse.
I dont think the banks can afford to do this with everyone whos having trouble paying a mortgage.
I didn,t know 3 bed houses are going for 70k, so who would buy a 1bed apartment ,if i can buy a house for 70k?
IF a nurse cant pay a mortgage god help the people on lower wages who dont have strong unions to protect them.

Monty Burnz

Lantus wrote: »

Just to be clear as I'm not an expert in these matters...

Bank of Ireland lent a quarter of a million euro's to a person who it later transpires can only afford around €250 per calendar month in repayments.

She was earning 70k at the time - 3.5 times earnings. Then she quit to go to a job she preferred paying 50k.

I don't know where the €250 per month figure comes from. Probably a comfy figure for her to pay after her rent, and living expenses.

Lantus wrote: »

People have a level of responsibility to take in what they borrow but it is the banks that asses each case and using their financial skill make the decisions. The banks need to give the money to the applicant, ultimatley they are resonsible for their actions. All people do is ask for it and hope....

Sounds to me like the bank did nothing wrong at all in this case.

Solair

This is exactly the problem - people are incredibly naive about financial products and long term risk.

Most people just see the monthly payment at the interest rate they sign up to and hope they can make those payments and, especially at the top of the market, were just desperate to get onto the property ladder and accommodate themselves.

A lot of people are also vastly over-optimistic about their economic prospects. That's good in so far as it means people are generally ambitious, but it is not necessarily reflective of reality or prudent.

Human psychology does not do prudent decision-making very well. That is why strict financial regulation is in place to prevent markets from going crazy. Stock markets go nuts based on whims, housing markets, you name it.. once something becomes accepted practice, people all jump on the band wagon.

Also, never under-estimate the heard instinct in humans. We do make decisions by ourselves sometimes, but for a lot of issues in life, we group-think. That is what our brains are evolved to do because in a lot of situations it works well.

If a lot of people think something's correct, we tend to just accept the group's view. For a lot of things this works well, but for some things it's massively dangerous e.g. it can result in market bubbles, election of extremist organisations e.g. the Nazi party's electoral success in Germany before WWII being the most terrifying example, or the formation of cult-like views.

It is very hard to shift people's opinions when lots of people are telling them that something's correct.

In Ireland, the accepted reality was that you HAD to get on the property ladder and that prices could only increase. That's how all bubbles operate and that is exactly why you need serious and prudent regulation to prevent them and why banks are supposed to be doing their job by managing people's ability to access crazy levels of financing.

Throwing money at consumers without any notion of how they are going to ever pay it back is totally unreasonable and financial suicide and I do think the banks (and ultimately by the looks of it the entire system) will just have to accept that that is what happened. Thus, these write-downs are going to have to happen.

riclad wrote: »

THIS is a nurse,she should be smart enough to know, i borrowed x amount,i have to pay x amount per month,can i afford it .I hear nurse,s wages are pretty good.
IF she work that out,i would,nt trust her to hand out medication.You need a good education and leaving cert to become a nurse.
I dont think the banks can afford to do this with everyone whos having trouble paying a mortgage.
I didn,t know 3 bed houses are going for 70k, so who would buy a 1bed apartment ,if i can buy a house for 70k?
IF a nurse cant pay a mortgage god help the people on lower wages who dont have strong unions to protect them.

She's a *nurse* - she makes medical decisions, looks after patients, knows about diseases, illnesses, is probably a very caring, nice person, very people-focused, and has all sorts of great positive things to contribute etc etc.

However, she is not a trained actuary, banker, economist or financial expert.

I would not go to a bank with a broken leg, or to get an injection! Nor, would I expect a nurse to be a financial expert.

Gurgle

Forest Demon wrote: »

My points are valid.

Arguable at best.

Forest Demon wrote: »

I don't appreciate your response. Since when did contributing your opinion on a forum become whinging. And you a mod. tut tut.

Since 2008, all misinformed opinions based on rabble rousing media reports which claim that all public sector workers have it better than private sector are classified as whinging.
(I'm not a mod here.)

Forest Demon wrote: »

Are you typing it from your civil service job in between a games of solitaire?

Nope, typing it from my private sector job while the squishy bit at the back of my brain tries to figure out whether code or silicon is to blame for my current bug.

Forest Demon wrote: »

I have a diploma in IT, degree in Engineering, a Masters and 17 years experience.

Similarly, I've an M.Eng and 14 years experience. I'm in a good job with decent money, approx 20% more than I'd get e.g. teaching in a secondary school.

If you're unemployed then there is something seriously wrong. There are jobs out there, is it an issue of not offering what you previously earned?

Forest Demon wrote: »

But you are right, its more training I need so I have applied to FAS for a saddle making internship as there is a growing market for private sector workers to be rode in Ireland at the moment.

Are you dissin' saddlers?
They're well trained professionals you know, and can earn good money.

Forest Demon wrote: »

Maybe I should go and train to be a nurse or teacher or guard? Wait a second, we cant afford to employ any more of those.

Whinging again, see above.

Monty Burnz

Solair wrote: »

She's a *nurse* - she makes medical decisions, looks after patients, knows about diseases, illnesses, is probably a very caring, nice person, very people-focused, and has all sorts of great positive things to contribute etc etc.

However, she is not a trained actuary, banker, economist or financial expert.

I would not go to a bank with a broken leg, or to get an injection! Nor, would I expect a nurse to be a financial expert.

If she has the intelligence to take people's lives in her hands, she has the intelligence to ask herself 'is it feasible for me to pay €800 to €1200 per month for the next 30 years'. It's really not rocket science, is it?

Can you explain the difficulty in asking oneself that question?

riclad

How does someone who,s working full time become bankrupt ,is that possible ?maybe she,s not working ,and is planning to move in with her parents ,in the west.
i, presume the bank went easy on her ,cos shes not working fulltime ,or her income was reduced.

Solair

Monty Burnz wrote: »

If she has the intelligence to take people's lives in her hands, she has the intelligence to ask herself 'is it feasible for me to pay €800 to €1200 per month for the next 30 years'. It's really not rocket science, is it?

Can you explain the difficulty in asking oneself that question?

Unfortunately, that is just not how people operate and I will say it for the 10th time, that is why banks are supposed to be prudent lenders and that is why states are supposed to have proper regulations in place to protect consumers from themselves in some cases.

When someone applies for a mortgage they give a vast amount of detail about their income, financial situation, assets, earning potential, insurance situation, even life expectancy to the bank. They ask for a LOT of information.

The bank is supposed to make an assessment of how much they will be able to lend you, based on the information that you supplied.

We have no idea what this nurse's circumstances are, perhaps they changed drastically, maybe her hours were cut, who knows?!

If the bank is grossly over-optimistic and grants you a huge loan that is too big for you to be able to pay back, and they are supposedly the financial experts, then the majority of the blame rests with the bank as they had a duty of care to carry out a proper assessment of your financial position and were provided with all the facts they asked for.

While it would be wonderful if we were all financially-astute and all made perfect decisions and were great at assessing financial risk, the reality is that most people are really REALLY bad at that kind of thing and tend to take an over-optimistic view of the markets (especially during a bubble).

The Irish banks failed and failed SPECTACULARLY ! This was quite simply because they were totally incapable of assessing risk and lent way too much money to almost everything they touched.

Monty Burnz

Solair, you haven't answered the question - why do you need to be an actuary or accountant to ask yourself 'can I pay this sum every month'?

I can understand why you want to avoid this simple and obvious point, because you are trying to place the blame for bad borrowing on the banks.

Solair

Monty Burnz wrote: »

Solair, you haven't answered the question - why do you need to be an actuary or accountant to ask yourself 'can I pay this sum every month'?

I can understand why you want to avoid this simple and obvious point, because you are trying to place the blame for bad borrowing on the banks.

The problem is that in most cases where mortgages have went horribly wrong the person was able to pay the mortgage when they took it out. However, people being optimists by nature, did not factor in what they might do should their income reduce. The boom looked totally sustainable to the average person who did not see behind the smoke and mirrors.

In many cases, Irish banks played to this optimistic view of the world and lent money to people based on their maximum possible income. I know of cases where banks and brokers encouraged people to include things like bonuses, commission, etc in their applications and while the banks were fully aware these were not steady income streams, calculated the loan amounts based on them anyway.

In other cases, people's partners may have lost jobs, a lot of people have had pretty serious hours / wage cuts too.

A normally regulated banking system factors these kind of things into a mortgage and does not lend to the level that people will be unable to pay should they face minor financial setbacks. However, in Ireland that was absolutely not the case in the latter years of the boom and the banks lent totally irresponsibly.

It is the banks' duty to point out the risks and to be aware of them. Our banks' did none of that during the boom.

They were out of line with their more prudent counterparts in other EU countries and way out of line with what had been their own normal lending practices only a few years earlier too. I mean, reality and human psychology did not change, only the banks lending policies did.

Dempo1

bobbysands81 wrote: »

Great news, delighted for her. Hopefully many similar stories to come as it seems that mortgage holders are taking the brunt of very poor decisions made by management within banks (For the record I think shareholders and employees also carry a large burden whilst the actual bank is getting off scot free).

Could not agree more, of course expect some reactions of horror from quarters not affected however the bank in this case had little option but to face reality. The nurse, whom I might add went on morning Ireland this morning to explain her situation did everything anyone could do in this situation ultimately selling the property but with a hefty balance left owing. Given the debt was near impossible to manage let alone service a compromised was reached and it would seem a logic and practical solution. The banks in the current and indeed its looking like the long term situation have no mechanisms to recoup either mortgage or personal debt. The district courts are not granting installment orders, Massive amounts of judgments being registered with not a hope in hell of them ever being satisfied. In the situation the nurse clearly had no means by way a judgment could be registered.

I do not subscribe to debt forgiveness in its definitive meaning however begrudgers need to wake up and have a strong coffee, the Mortgage debt crisis is about to implode but more alarming is the personal debt crisis, some, any compromises are required whether people like it or not. It is clear a large percentage of Irish society are struggling and yes, even those lucky enough to still be in employment. The Economy is stagnant, absolutely no movement partially aided by consumers not having a red cent left at the end of the month.

Monty Burnz

Solair wrote: »

The problem is that in most cases where mortgages have went horribly wrong the person was able to pay the mortgage when they took it out.

Then how is it bad lending by the bank? You think they have a crystal ball?

Solair

Monty Burnz wrote: »

Then how is it bad lending by the bank? You think they have a crystal ball?

No, but they should perform a reasonable risk-assessment which our banks absolutely did not in a huge % of mortgages and commercial loans as is evidenced by their dire financial situation and nationalisation!

If you think our banks behaved sensibly or responsibly, then seriously you are living on another planet entirely.

Absolutely every aspect of our current economic disaster was caused by imprudent lending, regulatory capture and loss of sense of economic reality by what were a bunch of small, local, financial institutions with sudden access to vast amounts of wonga via the Euro membership and the derivatives market.

This nurse's situation is just one of many many similar cases.

You're going to see lots of write-downs and bankruptcies over the coming years. There is just no alternative.
Ultimately the tax payer will take the cost of it either directly or through devaluation of the Euro (preferable). But, either way it's going to happen as otherwise the economy will just collapse in a heap.

Monty Burnz

Solair wrote: »

No, but they should perform a reasonable risk-assessment which our banks absolutely did not in a huge % of mortgages and commercial loans as is evidenced by their dire financial situation and nationalisation!

What would have been involved in such an assessment that did not require knowledge of future events?

Solair wrote: »

If you think our banks behaved sensibly or responsibly, then seriously you are living on another planet entirely.

I think they lent (and continue to lend) at multiples that are too high, but there's no bad lending without bad borrowing.

Solair

Monty Burnz wrote: »

What would have been involved in such an assessment that did not require knowledge of future events?

I think they lent (and continue to lend) at multiples that are too high, but there's no bad lending without bad borrowing.

Banks have teams of economists, actuaries, market analysts, financial planners, underwriters, etc etc etc..

Predicting the future of the markets and assessing risks IS THEIR JOB! They are paid vast amounts of money to do that.

You're borrowing money from a well-resourced bank with the ability to assess these things (in theory), not Mrs Murphy's Money Lenders & Grocery Shop.

jetfiremuck

Rojomcdojo wrote: »

What a stupid precedent to set. How is this woman a qualified nurse if she can't even understand the basics of a mortgage? Seriously.

This is somebody who has squirmed out of a debt because essentially they "didn't feel like paying it." Somebody who wants mortgage forgiveness for families who are struggling and the like should most certainly not be applauding this woman.

Put it this way, there won't be enough money to bail everyone out. It will probably turn out, just like most things in this country, to be a case of only the most ignorant and selfish need apply.

The bank is losing the interest on the money over 20yrs. The principal will be paid back ffs. The bank may lose a bit. Think this through ffs.

Gurgle

Monty Burnz wrote: »

Solair, you haven't answered the question - why do you need to be an actuary or accountant to ask yourself 'can I pay this sum every month'?

People didn't ask themselves the question 'can I pay this sum every month?'.

They had spent years watching house prices rise and rise seemingly without limit. They asked themselves 'how much profit can I make if I hold this place for a year or two and then sell it on?'

Monty Burnz

Solair wrote: »

Banks have teams of economists, actuaries, market analysts, financial planners, underwriters, etc etc etc..

Predicting the future of the markets and assessing risks IS THEIR JOB! They are paid vast amounts of money to do that.

It may astonish you to learn that nobody - not even educated people - can see the future.

Solair

Monty Burnz wrote: »

It may astonish you to learn that nobody - not even educated people - can see the future.

Yeah, but it's a bit like the difference between a weather forecast done by a professional meteorologist using all the best tools available and some guy in the pub going "Woohoo! It's going to be sunny forever - I'm burning all my winter clothes and investing in shorts and suncream!"

Personally, I'd go for the high-tech meteorologist with their computer models, satellites, forecasting technology than the lad down the back of the pub.

The Irish banks seem to have very much in the "woohooo!" school of economic modelling.

If you look at the the history of modern banking, the Irish banks' collapse is right up there with the very worst economic melt downs and it's entirely down to lack of ability to assess risk and forecast market trends.

The main role of a bank is risk assessment. If that system goes horribly wrong, then your organisation will not be in banking for very long! That's why we no longer have any normally functioning banks in Ireland.

Forest Demon

Gurgle wrote: »

If you're unemployed then there is something seriously wrong. There are jobs out there, is it an issue of not offering what you previously earned?

I am unemployed for the first time in my life as I was made redundant . TBH it is very difficult to get work as a professional at the moment without Pharma or recent IT experience. You are dead right about not getting offered what I previously earned. I am in the process of starting my own business at the moment.

Well back on topic . I do not agree with debt forgiveness except in a debt for equity swap in the case of a family that wants to stay in the home (and can demonstrate an ability to pay going forward).

Its not punishment I want for the Nurse. Its just more of a deterrent. Too many people would jump at such a deal because it is convenient and the tax payer will pick up the bill.

I suppose its the old cant pay/wont pay question all over again.

Gurgle

Solair wrote: »

Yeah, but it's a bit like the difference between a weather forecast done by a professional meteorologist using all the best tools available and some guy in the pub going "Woohoo! It's going to be sunny forever"

1. The MET office don't often get it right, they hide this fact by either giving retrospective forecasts or forecasting everything.
2. Global economics is much more comparable to the guy in the pub.