Debt forgiveness and moral hazard.

Curly Judge

Given the speculation about the introduction of some form of debt and/or mortgage forgiveness and the danger of moral hazard I would like to suggest the following:
Let us assume that a couple have taken out a mortgage 4 years ago for 360.000 euro and sometime later they negotiate a deal with the bank for 260,000 euro.
The 100.000 lost to the bank is real money and it's absence will be felt by someone, be they shareholder, other customer or taxpayer.
Given that this country is so good at producing shysters who try to wriggle out of their obligations at every turn, it would surely be advisable that some form of checks be provided to ensure that this largess only goes to people who are in genuine need.
I can see a situation where a husband and wife might put on a deeply convincing weepy show to sway a bank executive. This executive would have no way of knowing that the wife had recently inherited a farm from her uncle in Aughnacliffe and was considerably wealthier than she was letting on.
My way round this is that anyone applying for debt forgiveness should have their names published at least 6 months prior in the local and national press.
Harsh perhaps, but it would be up to each couple to decide if they wanted the money or the privacy.

chris85

Curly Judge wrote: »

Given the speculation about the introduction of some form of debt and/or mortgage forgiveness and the danger of moral hazard I would like to suggest the following:
Let us assume that a couple have taken out a mortgage 4 years ago for 360.000 euro and sometime later they negotiate a deal with the bank for 260,000 euro.
The 100.000 lost to the bank is real money and it's absence will be felt by someone, be they shareholder, other customer or taxpayer.
Given that this country is so good at producing shysters who try to wriggle out of their obligations at every turn, it would surely be advisable that some form of checks be provided to ensure that this largess only goes to people who are in genuine need.
I can see a situation where a husband and wife might put on a deeply convincing weepy show to sway a bank executive. This executive would have no way of knowing that the wife had recently inherited a farm from her uncle in Aughnacliffe and was considerably wealthier than she was letting on.
My way round this is that anyone applying for debt forgiveness should have their names published at least 6 months prior in the local and national press.
Harsh perhaps, but it would be up to each couple to decide if they wanted the money or the privacy.

I don't necessarily agree with debt forgiveness unless for the few who will never have a chance to pay it back due to circumstances beyond their control. The ordinary Joe soap should not be forgiven debt on their negative equity just for the sake of it. You can be sure the banks won't allow this.

However a public name and shame tactic is deplorable. You just want debt forgiveness not to happen and this to deter people when in some minority cases this may be the best action for all sides. The people who need this are the most vulnerable and naming and shaming is a bad idea.

There should be checks in place obviously. How about a detailed statement of their finances with evidence to back up everything, land registry searches to see what assets they have, icb checks to see how other debts are being handled. This can be done comprehensively without embarrassing the unfortunate people who need this.

Curly Judge

chris85 wrote: »

I don't necessarily agree with debt forgiveness unless for the few who will never have a chance to pay it back due to circumstances beyond their control. The ordinary Joe soap should not be forgiven debt on their negative equity just for the sake of it. You can be sure the banks won't allow this.

However a public name and shame tactic is deplorable. You just want debt forgiveness not to happen and this to deter people when in some minority cases this may be the best action for all sides. The people who need this are the most vulnerable and naming and shaming is a bad idea.

There should be checks in place obviously. How about a detailed statement of their finances with evidence to back up everything, land registry searches to see what assets they have, icb checks to see how other debts are being handled. This can be done comprehensively without embarrassing the unfortunate people who need this.

I presume you have no problem with people being named in Stubbs Gazette.
Or farmer's name appearing in a list showing the subsidies they receive.
If I had my way everybody receiving public money would be listed.
And in that I would include both children's allowance and indeed my own pension.
You are probably the kind if person who wants openness and transparency so long as the light never shines on you.

BuffyBot

Moved from Banking & Insurance & Pensions as it falls outside the forum remit. I'm placing it here as it's the nearest place I can think it suitable, but whether it stays here will be up to the local mods.

Curly Judge

BuffyBot wrote: »

Moved from Banking & Insurance & Pensions as it falls outside the forum remit. I'm placing it here as it's the nearest place I can think it suitable, but whether it stays here will be up to the local mods.

Fair enough
I had thought of putting it in economy beforehand but decided on banking as I thought it more focused

Qualitymark

Moral hazard?

Nobody talked about moral hazard when people wanted to make a killing on Eircom shares.

Nobody talked about moral hazard when people got huge payoffs when their banks or building societies went private.

Nobody talked about moral hazard when people took advantage of scrappage schemes to get cheap cars.

Nobody talked about moral hazard when the Government paid out taxpayers' money to the middle classes euro for euro against their savings, when the poorest couldn't afford to join these savings schemes.

Nobody talks about moral hazard when the civil service and the politicians whose salaries are benchmarked against them continue to receive incremental pay raises year after year while others lose their jobs, and who receive €12,000 a year turning-up money while the country plunges into ever deeper financial trouble...

I can't understand how supporting people who bought a home to live in when the prices were generally considered to be what you had to pay without any choice should be considered 'moral hazard'. Putting a hand under these people so that they can work and earn their way out of trouble is only sensible. The 'moral hazard' argument seems to me personally to be pure gombeenism.

whatnext

In reply to the OP.

The whole debt forgiveness concept is desperately flawed.

Looking at my own circumstances, I would have no problem "organising things" to meet any set of requirements that would be needed to achieve the criteria needed to achieve debt forgiveness, and thats without even knowing what they are.

That said it would never be my intention to do so, but I could if I wished.

Bits_n_Bobs

By over-capitalising the banks, and indeed keeping them liquid the taxpayer has already picked up the tab for debt forgiveness. Whether the whole tab has been met or not will depend on the eventual amount of debt forgiven. As long as the banks continue kicking the can down the road this eventual amount cannot be known and the taxpayer will continue to be burdened with an unknown liability.

It's hard to believe we are almost 5 years into the 'crisis' and our elected idiots and the idiots in the Dept. Finance and the other idiots in the Central Bank continue to allow banks to drag their feet over this, all the while carefully avoiding meaningful bankruptcy legislation especially when you consider the unbelievable speed with which they managed to piss a pile of taxpayers money into these same banks by way of the guarantee.

Qualitymark

Has everyone read the piece in today's Irish Times by Kathy Sheridan (a superb journalist) about a garda family completely bollixed by mortgage payments?

http://www.irishtimes.com/newspaper/ireland/2012/1017/1224325338822.html

The couple’s financial problems had been brewing for about seven years, since they bought a well-located but modest, four-bed semi-detached house with an extra bedroom and a better choice of schools for their children. “It was when prices were at their peak . . . We didn’t know that,” she says.

ednwireland

Qualitymark wrote: »

Has everyone read the piece in today's Irish Times by Kathy Sheridan (a superb journalist) about a garda family completely bollixed by mortgage payments?

http://www.irishtimes.com/newspaper/ireland/2012/1017/1224325338822.html

The mortgage is over the next 25 years and her husband is over 50, Jean wrote.

hold on a second...... how were they planning pay their mortgage when they are 75 - seriously people say it gets less but ours is still over 800 a month with 2 years to go. sounds like they didnt do their sums

or please someone tell me i'm missing something when we took our mortgage we could have bought a big new build but we bought cheap in need of renovation which took us 10 years to get all the bits sorted (which we could pay on one wage if need be and it did even in the middle of the boom) - still need to retarmac the drive i just keep on filling potholes with cold tar

Theboinkmaster

Qualitymark wrote: »

Has everyone read the piece in today's Irish Times by Kathy Sheridan (a superb journalist) about a garda family completely bollixed by mortgage payments?

http://www.irishtimes.com/newspaper/ireland/2012/1017/1224325338822.html

Superb journalist?! I don't think so - that article just poses more questions rather than making any points. Doesn't explain how a family on €75kpa struggle to put food on the table.

Silly & pointless article IMO

creedp

Qualitymark wrote: »

I can't understand how supporting people who bought a home to live in when the prices were generally considered to be what you had to pay without any choice should be considered 'moral hazard'. Putting a hand under these people so that they can work and earn their way out of trouble is only sensible. The 'moral hazard' argument seems to me personally to be pure gombeenism.

What debt forgiveness is being sought though? Is is for people who income cannot reasonably be expected to repay the current mortgage repayment now or ever? Is it for people who can repay the mortgage but have sufferred negative equity at 10%, 20%, 40%, etc? Is negative equity related only to debt versus current value - so that if a person's mortgage is significantly higher than the value of the house but they have €100k in savings/other assets the persons benefits from a debt write down whereas if a person pumped all their assets into the house and has lower negative equity they don't? Children with negative equity better hope their parents hold on for a while before the inheritance kicks in so that the taxpayer will pick up their negative equity first allowing them to use the inheritance to enjoy life a bit more ... I could go on and on ...

It seems to me blanket debt forgiveness will inevitably lead to gaming at the expense of those who are already screwed from the seriously flawed debt forgiveness for developers. Two wrongs dont make a right here and although I do think that people should be assisted in making mortgage repayments more affordable in the short-term, any blanket debt forgiveness programmes for mortgages is a recipe for disaster for the already hard pressed taxpayer.

mozattack

Can someone help me on this.

How would I apply for mortgage debt foregiveness, if relevant.

Either we are benefit or no-one should, don't see why those not in full-time employment can have the "benefit" of getting a chunk of their loan written off while those who work and pay taxes get nothing... seems illogical.

I'd prefer to go unemployed for 3 years, get €100k off my loan and re-commence work after minding my children in 2015 than solder on working and probably only clear down €20k - €30k debt in the intervening 3 years.

mozattack

Theboinkmaster wrote: »

Superb journalist?! I don't think so - that article just poses more questions rather than making any points. Doesn't explain how a family on €75kpa struggle to put food on the table.

Silly & pointless article IMO

Biggest load of crap I have ever read... "7th guard in the last 10 days".. Ah poor you, what about poor me when you are retired in the mid-50s on €40k per annum! What a terrible country... maybe move somewhere who will pay you that kind of pension... opps maybe he won't get it anyway.

Disgrace for the likes of them to be moaning while 400k people are unemployed.

Curly Judge

Qualitymark wrote: »

Moral hazard?

Nobody talked about moral hazard when people wanted to make a killing on Eircom shares.

Nobody talked about moral hazard when people got huge payoffs when their banks or building societies went private.

Nobody talked about moral hazard when people took advantage of scrappage schemes to get cheap cars.

Nobody talked about moral hazard when the Government paid out taxpayers' money to the middle classes euro for euro against their savings, when the poorest couldn't afford to join these savings schemes.

Nobody talks about moral hazard when the civil service and the politicians whose salaries are benchmarked against them continue to receive incremental pay raises year after year while others lose their jobs, and who receive €12,000 a year turning-up money while the country plunges into ever deeper financial trouble...

I can't understand how supporting people who bought a home to live in when the prices were generally considered to be what you had to pay without any choice should be considered 'moral hazard'. Putting a hand under these people so that they can work and earn their way out of trouble is only sensible. The 'moral hazard' argument seems to me personally to be pure gombeenism.

The question of moral hazard has a very practical quotient as well as the social/emotional one portrayed by the above post.
And that, in my opinion, is why it requires very careful handling.
One of the consequences of "snuff at a wake" type debt forgiveness is that the cost of future credit will go through the roof. And that is surely not in anyone's interest.
So?: No debt forgiveness for "buy to let"?
No debt forgiveness for grandiose "trading up", especially where the total
monies realised on the first house were not put into the second mortage?

All this to be carried out under the full gaze of public scrutiny.

Farmer Pudsey

The biggest issue in Ireland is we have not got Non-recourse mortgages like in the US. The only choice for invidulas that cannot pay there debts is bankruptcy which at present means that these people cannot reenter the economy for 12 years. I do not believe that people should be allowed to hold onto houses however I also do not believe if they hand bach the keys the should be pursued by the banks.

Take the priory hall example these people are in limbo as are thuosands of other's all right some should have looked at issues longterm and some people are able to handle debt better than other's however the banks should have looked at the ability to pay and it was stupid giving 110% mortgages with loans to furnish houses as well, not taking car loans etc into account was this an attempt to spread debt from developers to ordinary inviduals. The also allowed mortgage's of 5-8 time's pay we need to move on people have to see light at the end of the tunnell and it must not be the headlight of thje oncoming train

Curly Judge

creedp wrote: »

What debt forgiveness is being sought though? Is is for people who income cannot reasonably be expected to repay the current mortgage repayment now or ever? Is it for people who can repay the mortgage but have sufferred negative equity at 10%, 20%, 40%, etc? Is negative equity related only to debt versus current value - so that if a person's mortgage is significantly higher than the value of the house but they have €100k in savings/other assets the persons benefits from a debt write down whereas if a person pumped all their assets into the house and has lower negative equity they don't? Children with negative equity better hope their parents hold on for a while before the inheritance kicks in so that the taxpayer will pick up their negative equity first allowing them to use the inheritance to enjoy life a bit more ... I could go on and on ...

It seems to me blanket debt forgiveness will inevitably lead to gaming at the expense of those who are already screwed from the seriously flawed debt forgiveness for developers. Two wrongs dont make a right here and although I do think that people should be assisted in making mortgage repayments more affordable in the short-term, any blanket debt forgiveness programmes for mortgages is a recipe for disaster for the already hard pressed taxpayer.

I would respectfully suggest that negative equity should not be used as a criteria.
Debt forgiveness should only be given to people who through no, or at least very little, fault of their own find themselves unable to repay the mortgage and are under threat of being put on the road.
Illness, job loss, family break up, mis-selling of mortgage , that sort of thing.

Idbatterim

Id be the first to say let the banks take a hit for their moronic lending, but the banks are now us! I dont really see why the debt should be forgiven, maybe park some of it, most people who bought during the boom, would have taken 25-30 year mortgages, these properties by that stage will have regained all if not more than their boom value, why cant the banks regain the "parked" amount of debt, when house is sold or the borrowers circumstance or income has improved?

avalon68

Curly Judge wrote: »

I would respectfully suggest that negative equity should not be used as a criteria.
Debt forgiveness should only be given to people who through no, or at least very little, fault of their own find themselves unable to repay the mortgage and are under threat of being put on the road.
Illness, job loss, family break up, mis-selling of mortgage , that sort of thing.

I dont feel debt forgiveness is a fair solution tbh. It means the taxpayer will be picking up the bill for people who made poor financial decisions (for the 2nd time!). I certainly dont support people keeping big houses and cars etc whilst receiving debt forgiveness. Reformed bankruptcy is probably the best option - they lose the house, car and anything else that can be used to pay down debt, and become inelligible to take on more debt for a defined period. It should be reduced from the current term though to something more realistic - say 3-5 years. None of this "think of the children/pensioners/insert whatever group here crap. Actions have consequences. People need to take some personal responsibility. Its really unfortunate if someone loses their job, but thats life. There is a pretty long grace period before repossession begins which gives people plenty of time to make arrangements.

whatnext

avalon68 wrote: »

I dont feel debt forgiveness is a fair solution tbh. It means the taxpayer will be picking up the bill for people who made poor financial decisions (for the 2nd time!). I certainly dont support people keeping big houses and cars etc whilst receiving debt forgiveness. Reformed bankruptcy is probably the best option - they lose the house, car and anything else that can be used to pay down debt, and become inelligible to take on more debt for a defined period. It should be reduced from the current term though to something more realistic - say 3-5 years. None of this "think of the children/pensioners/insert whatever group here crap. Actions have consequences. People need to take some personal responsibility. Its really unfortunate if someone loses their job, but thats life. There is a pretty long grace period before repossession begins which gives people plenty of time to make arrangements.

Spectacularly well put, and I agree 100%

But where would you stand re pension assets? I'm not sure on that one personally.

bbam

How about this.., just thinking out loud
The banks agree to park the mortgage.
Troubled mortgage holders agree to take out additional life cover to cover the value of the mortgage and the banks have their interest in the policy registered.
The mortgage holder pays the interest portion of the mortgage to the extent that it covers the cost of the mortgage to the bank.

By the time this currently heavily endebetted mortgage holders generation have demised the toxic mortgages till be taken care off, no hit to the tax payer, the banks don't use up their recapatilisation through right-downs.

avalon68

whatnext wrote: »

Spectacularly well put, and I agree 100%

But where would you stand re pension assets? I'm not sure on that one personally.

I would be in favor of drawing on the pension to pay down debt - though I think you would find that a lot of people dont have a pension anyway. If, when the time comes the individual finds their pension is unsuitable to live on - there is always the state pension to fall back on. Any available assets should be used to pay off debt. They can start re-accruing a pension again once they have entered bankruptcy. I would be furious to see someone sitting on a huge pension while Joe Soap the taxpayer gets screwed paying off other peoples houses/holiday homes/cars etc.

avalon68

bbam wrote: »

How about this.., just thinking out loud
The banks agree to park the mortgage.
Troubled mortgage holders agree to take out additional life cover to cover the value of the mortgage and the banks have their interest in the policy registered.
The mortgage holder pays the interest portion of the mortgage to the extent that it covers the cost of the mortgage to the bank.

By the time this currently heavily endebetted mortgage holders generation have demised the toxic mortgages till be taken care off, no hit to the tax payer, the banks don't use up their recapatilisation through right-downs.

But the mortgage holder gets the huge advantage of living in their house paying an interest only mortgage.....how is that fair to those people who are still paying their mortgage?

fliball123

avalon68 wrote: »

But the mortgage holder gets the huge advantage of living in their house paying an interest only mortgage.....how is that fair to those people who are still paying their mortgage?

That doesnt make sense they still owe what they owe...they are only paying interest on a amount that is not coming down...they will never own the house if its done indefinately and usually the bank insist on a life insurance to cover the house..so if a person dies the next of kin gets the house , the bank gets the money from the insurance, the person pays interest for the their life span while paying the mortgage.

bbam

avalon68 wrote: »

But the mortgage holder gets the huge advantage of living in their house paying an interest only mortgage.....how is that fair to those people who are still paying their mortgage?

Its fair as that way not all tax payers are picking up the tab for those mortgages that will be written down...

Maybe only a portion of the mortgage is parked and they pay to their ability...

TBH, Life's not fair. But given the option of picking up the tab for other families unpaid mortgages and not picking up the tab, I know what I'd choose... I live my life and could care less what others pay/don't pay. What I have to pay is VERY important to me.. (im from Cavan :P)

avalon68

fliball123 wrote: »

That doesnt make sense they still owe what they owe...they are only paying interest on a amount that is not coming down...they will never own the house if its done indefinately and usually the bank insist on a life insurance to cover the house..so if a person dies the next of kin gets the house , the bank gets the money from the insurance, the person pays interest for the their life span while paying the mortgage.

They owe what they owe, but will never be paying it. I still dont think thats a good idea. With proper bankruptcy laws they could be back on their feet and debt free within a few years, (which I think is better for the mortgage owner longterm) and the house can be sold to someone that can actually afford it. Id imagine life insurance premiums would go through the roof too.

bbam

avalon68 wrote: »

They owe what they owe, but will never be paying it. I still dont think thats a good idea. With proper bankruptcy laws they could be back on their feet and debt free within a few years, (which I think is better for the mortgage owner longterm) and the house can be sold to someone that can actually afford it. Id imagine life insurance premiums would go through the roof too.

this lingering thing in the back of my mind is that the Banks will never touch these people again.. they may be bankrupt and then debt free and homeless, then the banks shun them for ever !! where to then ??

avalon68

bbam wrote: »

Its fair as that way not all tax payers are picking up the tab for those mortgages that will be written down...

Maybe only a portion of the mortgage is parked and they pay to their ability...

TBH, Life's not fair. But given the option of picking up the tab for other families unpaid mortgages and not picking up the tab, I know what I'd choose... I live my life and could care less what others pay/don't pay. What I have to pay is VERY important to me.. (im from Cavan :P)

But what happens when "everyone" suddenly decides they cant afford their mortgage, and the banks need more money as they arent getting payments....I think this is more of a can kicking solution that a real solution.

avalon68

bbam wrote: »

this lingering thing in the back of my mind is that the Banks will never touch these people again.. they may be bankrupt and then debt free and homeless, then the banks shun them for ever !! where to then ??

Thats not how it works (in other countries anyway!). However, they should need to build a good credit record and be properly scrutinized for ability to pay this time around! They may never get another mortgage, or may be required to have a much larger down payment, but thats hardly the end of the world. Not eberyone needs to own property....and quite frankly, not everyone can afford to.

fliball123

avalon68 wrote: »

They owe what they owe, but will never be paying it. I still dont think thats a good idea. With proper bankruptcy laws they could be back on their feet and debt free within a few years, (which I think is better for the mortgage owner longterm) and the house can be sold to someone that can actually afford it. Id imagine life insurance premiums would go through the roof too.

Maybe but if they can prove say they were getting paid say 100k when they took out the mortgage and now due to redundancies they are down to 50k , the bank should be looking at % so thats 50% I would park 50% of the mortgage and let them pay the 50% plus interest..if both people find themselves on the dole then they should be allowed stay interest only..once they have a job the % should be used. I think its a crazy scenario where someone who has a mortgage expects a right down and not expect to lose their property its crazy

Curly Judge

The present crisis has at least four big consequences:

>Innocent people are having their lives ruined through worry and foreboding.
>The property market is frozen.
>The banks are constipated with indecision.
>People are having to be housed by local authorities while their original home becomes a haven for bats and jackdaws.

Whatever is worked out the prime directive must be to keep families together and in their homes.
I know that people who were prudent and worked hard to pay their way are none too happy to see their neighbor getting off lightly but it must be done somehow. For the long term good of everyone!

The purpose of this thread is to suggest that public scrutiny be used as a sieve to sort the deserving from the mere lazy or dishonest.

fliball123

Curly Judge wrote: »

The present crisis has at least four big consequences:

>Innocent people are having their lives ruined through worry and foreboding.
>The property market is frozen.
>The banks are constipated with indecision.
>People are having to be housed by local authorities while their original home becomes a haven for bats and jackdaws.

Whatever is worked out the prime directive must be to keep families together and in their homes.
I know that people who were prudent and worked hard to pay their way are none too happy to see their neighbor getting off lightly but it must be done somehow. For the long term good of everyone!

The purpose of this thread is to suggest that public scrutiny be used as a sieve to sort the deserving from the mere lazy or dishonest.

No it doesnt...why do they have to keep their homes....As I say if the banks offer interest only ... if anyone is truely under pressure and cant pay ..why should the tax payer pay for them to stay in their house...there is plenty of property around the place (less desirable maybe) put them in there sell the house and get on with it...This will sort the messers out from those who cant really pay ..as if your really under pressure you will not care where you live once you and your family are together..

Tea drinker

No sympathy whatsoever, they paid what they felt was the right amount of cash for them at the time, yer man has since got increments.
We are all feeling the pinch. They can always leave the house and come to arrangement with the bank. If they are willing to give up the asset I've no problem with most of the debt getting wrote off, same as normal bankruptcy in real countries.

I would have some sympathy but it's people like this who kept the prices high for everyone else who acted sensibly and seem to keep on expecting people to pay for their own greed/stupidity.
Oh and who cares that they can't afford to send their child to university - there's a very long list of people in that situation.

He needs to think about dropping his pension payments and any optional stuff for now. (he can sell the house and trade down later when kids are gone - I assume the house is in good area so a move here could leave him in the clear - effectively a pension - as arranged it already so he expects to pay till 75 yo)

Now, after computing the household figures, the Mabs adviser was focusing on the mortgage of nearly €1,400 a month.
The picture painted by the Mabs adviser is not quite as cheerful. She calculated the family’s net pay and child benefit total at €807.37.

807*4 - 1400 = 1828
Not a princely sum by any means but can they not manage in that?

avalon68

fliball123 wrote: »

Maybe but if they can prove say they were getting paid say 100k when they took out the mortgage and now due to redundancies they are down to 50k , the bank should be looking at % so thats 50% I would park 50% of the mortgage and let them pay the 50% plus interest..if both people find themselves on the dole then they should be allowed stay interest only..once they have a job the % should be used. I think its a crazy scenario where someone who has a mortgage expects a right down and not expect to lose their property its crazy

But what if the house is in an area where it has a good chance of selling within a year? Should the bank not be able to sell and recoup some of their losses? Just because your income drops 50% doesnt mean the value of your house does. If you were renting would you expect a 50% reduction if you had a pay cut? Or would you move to an area you could afford? As for people on the dole, I fully support giving them a chance to get back on their feet - and we do that already - there is a pretty long time gap between going into arrears and losing your home. If you cant afford it it should be repossessed - then the bank can either try and sell it or rent it for market value. Im not saying it should be an overnight thing, but if you are in arrears for say 3 years or something, you should be able to declare bankruptcy and hand the keys back. After they assess your other assets, you can get on with your life.

Scofflaw

Curly Judge wrote: »

The present crisis has at least four big consequences:

>Innocent people are having their lives ruined through worry and foreboding.
>The property market is frozen.
>The banks are constipated with indecision.
>People are having to be housed by local authorities while their original home becomes a haven for bats and jackdaws.

Whatever is worked out the prime directive must be to keep families together and in their homes.
I know that people who were prudent and worked hard to pay their way are none too happy to see their neighbor getting off lightly but it must be done somehow. For the long term good of everyone!

The purpose of this thread is to suggest that public scrutiny be used as a sieve to sort the deserving from the mere lazy or dishonest.

One of the things that's being conflated here is typically Irish - home ownership on the one hand, and having a roof over your head on the other. These are not synonymous. I don't want people to be thrown out of their homes, but in order for people to have a home it is not necessary that they retain the house in their ownership as an asset that has been part paid through the taxes of other people.

If what is needed is a "bailout" for homeowners, then let them have a bailout on the same basis as the banks - that the government takes ownership.

cordially,
Scofflaw

bbam

Curly Judge wrote: »

The purpose of this thread is to suggest that public scrutiny be used as a sieve to sort the deserving from the mere lazy or dishonest.

I disagree with your notion of public scrutiny.. How much different is it from when the priest read out a families contribution to the parish from the pulpit to shame them into paying...

Scrutiny surely but not at the hands of the public press, and why would it need to be public at all...

I've spoken to people who are on the very edge of their existence and through no real fault of their own, I think flogging them through the public press would just be a step too far for many of these people and I wouldn't like to see people further backed into a corner. Many of these people don't have much mental strength left.

Curly Judge

bbam wrote: »

I disagree with your notion of public scrutiny.. How much different is it from when the priest read out a families contribution to the parish from the pulpit to shame them into paying...

Scrutiny surely but not at the hands of the public press, and why would it need to be public at all...

I've spoken to people who are on the very edge of their existence and through no real fault of their own, I think flogging them through the public press would just be a step too far for many of these people and I wouldn't like to see people further backed into a corner. Many of these people don't have much mental strength left.

It is not from any sense of prurience that I have suggested the idea of public scrutiny.
It's just that I feel that in deserving cases debt forgiveness should, indeed must, take place.
For debt forgiveness to get off the ground it must, at the very least, have a robust method of interrogating the applicant. This is borne out, even in this short thread, by the number of posters who are totally opposed to it.
You can put all the systems you want in place but local knowledge is still, in my opinion, the least fallible way of discerning a persons real financial situation.

I'm old enough to remember the 1970's when a lot of farmers went mad buying land after we joined the EEC.
A neighbor of mine got into trouble with the ACC and entered a process of debt reconciliation with them.
The IFA provided him with the services of an expert negotiator for the final days knock down, balls out, head to head negotiations.
Things were very intense, and indeed abusive, throughout the day and coming towards the evening the the negotiator noticed that the farmer, who was in his mid fifties, was getting very pale and beginning to wilt.
The negotiator suggest an adjournment but the farmer insisted on the talks continuing to a conclusion.
They reached an agreement about 7 pm and after the bank people had departed the farmer asked the negotiator to stay for supper.
During the meal the negotiator wondered why the old man had insisted on continuing despite the stress he was so clearly showing.
"I didn't want it dragging on beyond today " he said. "I have a herd of prize bulls on an outfarm the other side of Tullamore. I'll be bringing them to the sales next Monday and I didn't want them bastards to find out about them".
Point taken?

everdead.ie

Qualitymark wrote: »

Moral hazard?

Nobody talked about moral hazard when people wanted to make a killing on Eircom shares.

Nobody talked about moral hazard when people got huge payoffs when their banks or building societies went private.

Nobody talked about moral hazard when people took advantage of scrappage schemes to get cheap cars.

Nobody talked about moral hazard when the Government paid out taxpayers' money to the middle classes euro for euro against their savings, when the poorest couldn't afford to join these savings schemes.

Nobody talks about moral hazard when the civil service and the politicians whose salaries are benchmarked against them continue to receive incremental pay raises year after year while others lose their jobs, and who receive €12,000 a year turning-up money while the country plunges into ever deeper financial trouble...

I can't understand how supporting people who bought a home to live in when the prices were generally considered to be what you had to pay without any choice should be considered 'moral hazard'. Putting a hand under these people so that they can work and earn their way out of trouble is only sensible. The 'moral hazard' argument seems to me personally to be pure gombeenism.

I'm just wondering what the moral hazard on some of these things were?

Nobody talked about moral hazard when people wanted to make a killing on Eircom shares.

People took a risk on eircom shares and plenty made a loss(massive loss in some cases)?

Nobody talked about moral hazard when people got huge payoffs when their banks or building societies went private.

Putting savings into these institutions is hardly risk free as we have recently found out?(although there is a deposit protection scheme at the time I think it was €20,000?)

Nobody talked about moral hazard when people took advantage of scrappage schemes to get cheap cars.

I don't even know how this constitutes moral hazard?

Nobody talked about moral hazard when the Government paid out taxpayers' money to the middle classes euro for euro against their savings, when the poorest couldn't afford to join these savings schemes.

Savings scheme pretty safe government could of defaulted I guess closest thing to moral hazard here.

Nobody talks about moral hazard when the civil service and the politicians whose salaries are benchmarked against them continue to receive incremental pay raises year after year while others lose their jobs, and who receive €12,000 a year turning-up money while the country plunges into ever deeper financial trouble...

What is the risk here?


Maybe I'm missing the point on moral hazard and if I am thats fine but my understandin(Correct me if i'm wrong) is that there is a genuine moral hazard here where people invest in property effectively are relieved of the investment risk and the bank is who takes the hit. So whats to stop them doing it again?

avalon68

everdead.ie wrote: »

Maybe I'm missing the point on moral hazard and if I am thats fine but my understandin(Correct me if i'm wrong) is that there is a genuine moral hazard here where people invest in property effectively are relieved of the investment risk and the bank is who takes the hit. So whats to stop them doing it again?

This is the real concern - if you dont force people to take responsibility for their poor decisions, and they were THEIR decisions, then they will carry on as before....blaming everyone but themselves when they land in a mess. There are some people who genuinely will not be able to pay, but they should lose the house and then rent.....like everyone else who cant afford a house. There are others driving around in nice cars, sometimes 2 per family - they should be stripped of assets to pay down debt and then relocate to somewhere they can afford. A proper reform of bankruptcy laws would facilitate this. Allowing people to remain in properties and writing down debt would be a ridiculous situation.

Qualitymark

everdead.ie wrote: »

Maybe I'm missing the point on moral hazard ?

What I'm saying is that there were a lot of get-rich-quick schemes.

I don't think people who genuinely gambled to make their fortune should be bailed out by the rest of us.

But people who bought their homes at the going rate were simply unfortunate. Also, saving them now will help the rest of us; the biggest problem the country faces at the moment is the enormous number of people desperately trying to live while crushed by home debt.

If we can free these people from debt - a relatively cheap action - they'll be back spending; jobs will be created from the increased circulation of money; the terror that is reeking in the air of the country will dissipate and we'll become our normal relaxed selves; the economy will begin to improve.

And then we can take action to stop this ever happening again, like Denmark, where it's illegal for land to change its value because of rezoning.

bbsrs

Curly Judge wrote: »

Or farmer's name appearing in a list showing the subsidies they receive.

Off topic I know sorry but I thought since 2010 the ammount of subsidies paid to individual farmers were not available to the public. Have they started publishing again?

Scofflaw

bbsrs wrote: »

Off topic I know sorry but I thought since 2010 the ammount of subsidies paid to individual farmers were not available to the public. Have they started publishing again?

No, you're correct - only businesses are now listed.

cordially,
Scofflaw

uberalles

OH knows a fellow who has stopped paying his mortgage a few months ago even though he is employed on 60K with no kids and 0 personal debt. He said loads of people are doing it and he know what he is doing.

Seems he knew a forgiveness package was on the cards.

How many other chancers are there out there.

It's disgusting IMO that the tax payer may have to pick up the tab

Qualitymark

uberalles wrote: »

OH knows a fellow who has stopped paying his mortgage a few months ago even though he is employed on 60K with no kids and 0 personal debt. He said loads of people are doing it and he know what he is doing.

Seems he knew a forgiveness package was on the cards.

How many other chancers are there out there.

It's disgusting IMO that the tax payer may have to pick up the tab

Dúirt bean liom
Gur dhúirt bean léi
Gur dhúirt bean eile
Gur inis bean di
Go bhfaca sí bean
Ag bun na sceiche
Ach an bhean, ní bean
Ach sí-bhean í.

fliball123

avalon68 wrote: »

But what if the house is in an area where it has a good chance of selling within a year? Should the bank not be able to sell and recoup some of their losses? Just because your income drops 50% doesnt mean the value of your house does. If you were renting would you expect a 50% reduction if you had a pay cut? Or would you move to an area you could afford? As for people on the dole, I fully support giving them a chance to get back on their feet - and we do that already - there is a pretty long time gap between going into arrears and losing your home. If you cant afford it it should be repossessed - then the bank can either try and sell it or rent it for market value. Im not saying it should be an overnight thing, but if you are in arrears for say 3 years or something, you should be able to declare bankruptcy and hand the keys back. After they assess your other assets, you can get on with your life.

Maybe..but I think if the person who bought the house is making a genuine effort even only paying back 20/30% of what they should be paying per month they should be allowed stay..It just means the mortgage will be over a longer period..The bank get more money in the long run. But it is a grey area. let me be clear on the 50% that would be paying 50% of what you should be paying per month, the other 50% still has to be paid it just increases the lifetime of the mortgage so the person owning the house still pays the full amount + a lot more interest

whatnext

avalon68 wrote: »

I would be in favor of drawing on the pension to pay down debt - though I think you would find that a lot of people dont have a pension anyway. If, when the time comes the individual finds their pension is unsuitable to live on - there is always the state pension to fall back on. Any available assets should be used to pay off debt. They can start re-accruing a pension again once they have entered bankruptcy. I would be furious to see someone sitting on a huge pension while Joe Soap the taxpayer gets screwed paying off other peoples houses/holiday homes/cars etc.

Where would you stand re the tax implications on this.
Would you see the asset handed over at the on the day value to the bank or would it have to be drawn down by the mortgagor taxed and the net cash value transferred?

This is where I have a problem.
Say 100k pension fund if taxed = c. 50k
However if compounded over 30 years at 4% = 325k
In pure accounting terms the asset value is 50k but is it the best use of the asset?

Qualitymark

It amuses me the way paying off a €200k mortgage for a family is seen as 'moral hazard' in Ireland, whereas a tax break of €116m is not considered so.

(Take a look at Iniúchadh ('Audit') on TG4 tomorrow at 7.15pm, or watch it on RTE Player when it arrives. It's about the planning of the O'Connell Street building site. There's a trailer on YouTube.)

everdead.ie

Qualitymark wrote: »

It amuses me the way paying off a €200k mortgage for a family is seen as 'moral hazard' in Ireland, whereas a tax break of €116m is not considered so.

(Take a look at Iniúchadh ('Audit') on TG4 tomorrow at 7.15pm, or watch it on RTE Player when it arrives. It's about the planning of the O'Connell Street building site. There's a trailer on YouTube.)

It isn't moral hazard.
I think you are confusing moral hazard with morality.

Moral Hazard is the exact same in every country.

Qualitymark

everdead.ie wrote: »

It isn't moral hazard.
I think you are confusing moral hazard with morality.

Moral Hazard is the exact same in every country.

Indeed and it is moral hazard to allow developers and politicians to be tempted to manipulate planning processes to the detriment of the country.

Curly Judge

Scofflaw wrote: »

No, you're correct - only businesses are now listed.

cordially,
Scofflaw

Yes. both you and bbsrs are correct and I was wrong.
The names of individual farmers were published until two cases: C-92/09 and C93/09 were brought against the Commission.
Since that ruling only companies and partnerships have had their names published. See: .http://curia.europa.eu/juris/document/document.jsf?text=&docid=79001&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=520486.
There is an effort afoot by the Commission to reintroduce the publication of names under new legislation but that has not been decided on yet.
In mitigation for my argument I would contend that the harm was done [from a farmers point of view] during the two years the names were published and it is hard to put the Genie back in the bottle.

everdead.ie

Qualitymark wrote: »

Indeed and it is moral hazard to allow developers and politicians to be tempted to manipulate planning processes to the detriment of the country.

Can you explain how this is moral hazard? A developer takes a risk and his company goes bust or losses a lot of money if it doesn't work out.

Corruption is not moral hazard.