Negative equity-Whats the big deal?

HeeBeeGeeBee

clairefontaine wrote: »

I'm sure this sounds pretty ridiculous, but of the government can buy stakes in a bankrupt bank, why can't they buy stakes in a private mortgage or the bank buy stakes or shares in the private mortgage? So that would cut off some of the mortgage burden from the individual buyers but if and when the house is resold they stake holder would share some of the profit?

Finally someone with an actual valid constructive suggestion.

clairefontaine

The Corinthian wrote: »

KELTICKNIGHTT, given you don't seem to actually read any of my posts to you, I'll extend the same courtesy and just sum up our discussion.

You have given us a small amount of information about your own case which has been questioned by more than one person. Rather than elaborate or respond to some of these queries, you've simply become belligerent and avoided doing so. So no, I don't believe that you acted responsibly when purchasing and I doubt many others here do.

You are in complete denial about borrower responsibility. As much as you've tried to claim falsely that others are pushing all the blame on the borrowers, no one has said this. However, you're at this stage bleating this line out as a means to avoid even questioning if borrowers have any responsibility.

You've done nothing to date other than plead or even demand (on the basis of the long term democracy, patriotism or whatever) that life should be made easier for those so trapped in NE mortgages. When asked how, you've suggested freezing interest - which ultimately is lost money. That money ends up being paid by AIB, which is now a state asset - so it's ultimately the taxpayer bailing you out in that scenario, despite you claiming you didn't want to be bailed out.

As for your follow up post where buying instead of renting is down to Irish culture - other than being utter bullshìt (because everyone buys when they move out of mommy and daddy's in Ireland - not), it is one of the single most stupid things I've ever heard coming out of someone.

Honestly, given the offensive language you've used, your lack of literacy and general, almost sociopathic, inability to see yourself as anything other than a victim, I've no doubt that if you don't get your bail out, you'll happily leave the key to your property in the door and skip the country before long - and have justified it to yourself because you're such a victim.

I've lost all interest engaging with you further in this discussion.

In the country it is quite the norm to rent or live with your parents while you are getting planning permission for building a house and then for the duration of the construction.

It is my understanding people in agricultural careers don't really rent land. They own it for their farming or their horse stables or what have you.

FREETV

The Corinthian wrote: »

Indeed I don't believe in them, which is why I posted that bit of satire in response to your little conspiracy rant.

I don't think you understood my post at all.

I did The Corinthian, I understand the most complex things, I studied Electronics in College.

FREETV

clairefontaine wrote: »

Exactly. But that's the key phrase in there.....THE PUBLIC JUST WENT ALONG WITH ....

Sheep, slaves, serfs, group thinkers.... same people who still pay their tv license to that brainwashing machine.

That is all the people are when you elect a group of incompetent, immoral, power and wealthy hungry garbage, you are seen as statistics, sheeple, a nuisance and they milk us for all they can get.

They want to raise taxes for a flawed economic system and we the people have no say in the matter,"oh but we were elected by a democratic system" (The mainly fat obese gobdaws in power say)

It isn't democracy when one has no say in the most important issues, mainly the finances, the economy which effects us all but not so much the politicians, brown paper filled bags and all of the expenses and the exorbitant pensions, chauffeurs for the Ministers, many of whom are not qualified to decide anything and are clueless, ignorant snobs.

I never voted , may never and I would never vote for FF, FG or Labour.
Tax the rich who have more expendable income. No? Oh I get it fat, redfaced Politician you are more afraid, feel more threatened by them as they are the Elite of society and you are in league with them and they give you all of those lovely perks, the bribes. No wonder you can afford holiday homes abroad and a top of the range Mercedes Benz while people queue up in the street to get food bags and go to soup kitchens. :pac:

SBWife

FREETV not voting is saying even you don't value your own opinion, if that's the case, how can you expect to have any credence in any argument?

FREETV

SBWife wrote: »

FREETV not voting is saying even you don't value your own opinion, if that's the case, how can you expect to have any credence in any argument?

I don't believe in the present monetary system and politics in general, there are other ways of running the planet. I will not vote for a corrupt system.
Two parties always run the US, pretty similar here too, it doesn't work, they are all the same.

Have you not seen the rise in the unemployed, homeless and people unable to pay for their houses? I'm sure you have, it is time for a new fairer system with a period of transition where everyone has an equal say and benefits accordingly.

No more Politicians in twenty years time hopefully. Look at Fas, useless, the roads, the lack of credit, businesses closing all of the time, particularily retailers, families losing their homes here and abroad.
The system has failed and has been progressively failing for decades now.

skafish

clairefontaine wrote: »

I'm sure this sounds pretty ridiculous, but of the government can buy stakes in a bankrupt bank, why can't they buy stakes in a private mortgage or the bank buy stakes or shares in the private mortgage? So that would cut off some of the mortgage burden from the individual buyers but if and when the house is resold they stake holder would share some of the profit?

This is a good suggestion, which has been around for a while. And it may be a suitable option for some people.

The big drawback with it is,of course, the Irish home ownership ideal, whereby we all seem to have an urge to own the property we live in. Then consider the possibility that you sell the bank (in return for a reduction in the mortgage) a portion of your property.

Firstly, they are unlikely to pay any more than the current value (eg, house bought with 80% mortgage in 2006 for €400 000. Mortgage of €320 000. Current value €200 000. Bank buys a 50% stake for 50% of the current value or €100 000. New mortgage value €220 000 less 7 years repayments) which may not reduce the debt value sufficiently to allow the mortgagee continue normally. I can't imagine too many people willingly giving up ownership of more than half their home, can you?
Secondly, what would happen if the bank changed ownership. The original contract may not be binding on the new owners of the bank ad they could possibly look for repayment or sale of the property in a shorter time scale than originally intended.

BTW, I think it is a good idea, just playing devils advocate.

The Corinthian

HeeBeeGeeBee wrote: »

What exactly is ridiculous about buying your first home with your fiancé?

Not what you first said; you said that you wanted to move out of home and had to by buying rather than renting your own place - that alone is ridiculous.

clairefontaine wrote: »

I'm sure this sounds pretty ridiculous, but of the government can buy stakes in a bankrupt bank, why can't they buy stakes in a private mortgage or the bank buy stakes or shares in the private mortgage? So that would cut off some of the mortgage burden from the individual buyers but if and when the house is resold they stake holder would share some of the profit?

Except that they probably wouldn't. Why should the government buy any of the property at anything other than current value? If the property has depreciated by 50%, then if the government buys the negative equity, they own it - when they sell, the original owner gets nothing. Why should they?

Even if the deal was more generous and the government was willing to take less equity for every Euro of negative equity they pay, that would still leave many owning well under 50% of the property - something that many would be unable to stomach, as skafish suggested, given they apparently didn't do anything wrong but were duped by all those evil bankers and politicians.

And all assuming that doing something like that would not further cripple the nation with additional taxes to pay for such a scheme. What would that do to the economy? Push those who can pay their mortgages at present and don't qualify, over the edge so they can no longer pay either? Anyone fancy paying another 5% income tax so HeeBeeGeeBee can keep his love nest?

Personally, I feel the best solution may be some level of debt purchase in a small number of the worst of cases, but to instead concentrate on reducing the current levels of taxation and austerity and reignite the economy so that people in such debt can better afford their debts.

SBWife

The Corinthian wrote: »

Personally, I feel the best solution may be some level of debt purchase in a small number of the worst of cases, but to instead concentrate on reducing the current levels of taxation and austerity and reignite the economy so that people in such debt can better afford their debts.

Back in the olden days the solution would be a nice bit of inflation pity our German friends are so terrified of the concept.

Godge

FREETV wrote: »

I did The Corinthian, I understand the most complex things, I studied Electronics in College.

Electronics, based on a simple binary system as opposed to something like Hungarian, a language notoriously complicated?

K-9

The thread is going very off topic, please stay on topic and relevant to the Negative Equity question.

clairefontaine

The Corinthian wrote: »

Not what you first said; you said that you wanted to move out of home and had to by buying rather than renting your own place - that alone is ridiculous.

Except that they probably wouldn't. Why should the government buy any of the property at anything other than current value? If the property has depreciated by 50%, then if the government buys the negative equity, they own it - when they sell, the original owner gets nothing. Why should they?

Even if the deal was more generous and the government was willing to take less equity for every Euro of negative equity they pay, that would still leave many owning well under 50% of the property - something that many would be unable to stomach, as skafish suggested, given they apparently didn't do anything wrong but were duped by all those evil bankers and politicians.

And all assuming that doing something like that would not further cripple the nation with additional taxes to pay for such a scheme. What would that do to the economy? Push those who can pay their mortgages at present and don't qualify, over the edge so they can no longer pay either? Anyone fancy paying another 5% income tax so HeeBeeGeeBee can keep his love nest?

Personally, I feel the best solution may be some level of debt purchase in a small number of the worst of cases, but to instead concentrate on reducing the current levels of taxation and austerity and reignite the economy so that people in such debt can better afford their debts.

I agree that the better solution is to promote growth and reducing those things that are inhibiting people's ability to pay, but I can't see that happennng. AIB just raised interest rates yesterday, which won't help either.

This government seems to think you can tax your way out of a recession.

Anyway, I think it might work to some extent and I can't think of anything else.

I agree no one was FORCED to by and there was an avaricious status hunger behind the frenzy, but on the other hand, renting affords you very little enforcable rights, so it is understandable to not want to deal with a landlord.

The Corinthian

clairefontaine wrote: »

I agree that the better solution is to promote growth and reducing those things that are inhibiting people's ability to pay, but I can't see that happennng.

I can. The political mood in the EU has been moving against austerity for a while now, with Germany's disastrous approach to Cyprus being a bit of a watershed. Quietly we're already seeing the noose of austerity being loosened by the EU, as loans to Ireland and Portugal being extended attests.

Decreasing the levels of taxation and austerity is a win-win; more disposable income, making paying mortgages easier, not to mention the increase in tax revenues from an invigorated economy.

Moral hazard aside, I don't think any widespread debt forgiveness is realistic, if only because we can't afford it. If you forgive debt or even freeze interest, that's money that has to be paid by someone, and there seems to be a lack of thought as to where this money would magically appear from those seeking it.

Additionally, there appears to be a bit of a myth circulating (that you even fell for earlier) than the banks were bailed out with no strings attached - there were strings and that's why those banks are now at least partially if not fully owned now by the state. Property owners looking to "get the same as the banks" should expect exactly that, and that means that many of them will likely lose ownership of their properties, in return for assistance. You may get debt purchase, but I very much doubt you'll get debt forgiveness.

If we could afford it in the first place, of course, which we can't. At least not as a widespread policy.

K-9 wrote: »

The thread is going very off topic, please stay on topic and relevant to the Negative Equity question.

Aye, but that got answered a good while back. Negative equity is really only a problem when you can't pay your mortgage. Otherwise, in the short term, it may not be nice as it effectively traps one with an asset they probably cannot afford to sell, but in the long term (and I mean very long term) prices will climb up again and that negative equity will resolve itself.

So ultimately, it's the ability to pay, not the negative equity, that's really the problem.

KELTICKNIGHTT

K-9 wrote: »

The thread is going very off topic, please stay on topic and relevant to the Negative Equity question.

was off topic for a while now , instead of dealing with negative value , some rather attach and blame borrowers

I tihink the original question was if a property was bought for 500k and now only 300k

Its was best i seen so far on this thread so far said at post 318
Gets A PLUS
with this :


This is as honest as you'll get mate:

I wanted to own my own place.
- Is that a sin? No
- Was I trying to become a property tycoon? No
- Could I have rented and waited? Yes
- Did I? No
- Am I in negative equity? Yes
- Are there worse things in life? Yes
- Will I get over it? Yes
- Do I expect the banks to write off my negative equity? Certainly not. I will pay every penny I owe.
- Would I like a small bit more space in time? I would of course.
- Does that make me a greedy individual with excessive needs?
No, I just need another room to store all my expensive clothes and fine jewellry

Geuze

clairefontaine wrote: »

I'm sure this sounds pretty ridiculous, but of the government can buy stakes in a bankrupt bank, why can't they buy stakes in a private mortgage or the bank buy stakes or shares in the private mortgage? So that would cut off some of the mortgage burden from the individual buyers but if and when the house is resold they stake holder would share some of the profit?

A mortgage is a liability to the household.

It is an asset to the lending bank.

You suggest that the bank buy the private mortgage.

But they already own the mortgage.

I think what you suggest is that the bank swap some of the mortgage loan for a share in the house??

clairefontaine

@The Corinthian

Well yes and no. The day the ECB lowers interest rates, the same day AIB raises them.

At the same time debt write offs are alive and well. I am trying to find it online, but I saw a news announcement while waiting in a queue that Independent media got 140 million written off its debt.

There is an article on it here but it does not include the figure.
http://uk.reuters.com/article/2013/04/26/uk-independentnews-idUKBRE93P09Y20130426


Well duh it's the ability to pay the mortgage that is the problem, but current policy is inhibiting that ability, even if you do have job. And their draconian bankrupt laws are ridiculous. Why would you NOT go to the UK? Why would you go through 12 years of penury all for the privaledge of living in Ireland?

Geuze

Yes, it's bad that large firms like INM can negotiate debt writedowns, while it's nearly impossible for housholds.

See here:

http://namawinelake.wordpress.com/2013/04/21/the-thomas-crosbie-debt-write-off/

http://namawinelake.wordpress.com/2013/03/27/who-will-control-inm-after-the-mooted-debt-for-equity-swap/

clairefontaine

SBWife wrote: »

Back in the olden days the solution would be a nice bit of inflation pity our German friends are so terrified of the concept.

Well, I think the flashbacks might be too terrifying a prospect.

SBWife

clairefontaine wrote: »

Well yes and no. The day the ECB lowers interest rates, the same day AIB raises them.

What are you on about? The ECB hasn't touched interest rates since last July.

And what does INM have to do with distressed home owners?

The Corinthian

clairefontaine wrote: »

Well yes and no. The day the ECB lowers interest rates, the same day AIB raises them.

When did this happen? Did I miss something?

At the same time debt write offs are alive and well. I am trying to find it online, but I saw a news announcement while waiting in a queue that Independent media got 140 million written off its debt.

There seems to be nothing in that article saying that Independent media got 140 million 'written off'. It's decreased its debt, but that doesn't mean it's a no-strings-attached 'write off'.

I think there's a bit of confusion in what a write off is here. Outside of unsecured debts in bankruptcy, there are very few cases where there is not a price to pay - typically the debtor will lose equity or something similar for the write-down.

There appears to be a bit of denial, fuelled by the myth that the banks paid no price, about that.

Well duh it's the ability to pay the mortgage that is the problem, but current policy is inhibiting that ability, even if you do have job. And their draconian bankrupt laws are ridiculous. Why would you NOT go to the UK? Why would you go through 12 years of penury all for the privaledge of living in Ireland?

I agree. But this is down to how bankruptcy laws are drawn up in different jurisdictions; there has to be a consequence to bankruptcy, otherwise everyone would go bankrupt whenever they ran up a bill and different countries deal with this in different ways - Ireland being one of the more hawkish countries.

clairefontaine

I thought I read it in yesterday's Independent. Maybe I misread it and it was speculative.

Yes I know there is nothing in the article that mentions the figure- and I did point that out. But it was on a news announcement in the credit union.

Here is a better one.
http://www.broadsheet.ie/2013/04/26/a-e140-million-write-off-from-bank-of-ireland-and-aib/

So you mention myths floating around. Yes I would say this is more than likely in Tir Na Nog, where I see news announcements in the credit union queue but I can't verify them online.

So... doesn't Ireland have a very low repossession rate? What would the banks do with all those houses? Who would they sell them to? Is it because they are in so much negative equity that the banks would rather wait to repossess and sell them when they have resumed some value?

SBWife

The INM deal is a debt for equity swap with the percentage of equity involved contingent on the restructuring of the pension deficit and the company raising some new equity.

BUT the headline at RTE says €140m write off. It's always a problem when you have a financially illiterate sub-ed, who then gets quoted by the masses.

gaius c

Geuze wrote: »

Yes, it's bad that large firms like INM can negotiate debt writedowns, while it's nearly impossible for housholds.

See here:

http://namawinelake.wordpress.com/2013/04/21/the-thomas-crosbie-debt-write-off/

http://namawinelake.wordpress.com/2013/03/27/who-will-control-inm-after-the-mooted-debt-for-equity-swap/

You are aware that the end result of that deal was that the O'Reillys no longer control INM, i.e. they relinquished control of their asset (through dilution of their shareholding)?

You may not realise it but you've just advocated for repossessions and negotiation over any outstanding amounts.

gaius c

Geuze wrote: »

A mortgage is a liability to the household.

It is an asset to the lending bank.

You suggest that the bank buy the private mortgage.

But they already own the mortgage.

I think what you suggest is that the bank swap some of the mortgage loan for a share in the house??

They also hold the deeds to the house as well. Why would they give away money to buy a stake in an asset that they effectively own already?

y0ssar1an22

Thanks for all the replies. The country is certainly divided on this point. Some of the answers went over my head as I'm not an economic/finance expert.
What I do know is that economics is based upon supply and demand. Did we, the people, not create this bubble? We supplied the demand that caused the massive increase in house prices. In a country of ~4m (?) surely this demand was not sustainable and house prices would eventually fall? Just seems common sense to me.

As for the people in negative equity...I can sort of identify 4 categories of people:

1. People who bought to let, as an investment. Thats just a bad investment.

2. People who wanted to start a life with their partner or whatever, with a view to selling and up scaling in a few years. Crucially they may have known the mortgage was not sustainable and relied on the house price rising. Still an investment, really.

3. People who, whether due to tax rises/pay cuts, are unable to pay a mortgage. Mortgage was sustainable before pay cut/tax increases. Possibly over extended themselves and should have considered renting. Depends on amount of pay cuts and tax rise. But surely before you take out a mortgage you should consider your income decreasing by 10% and assess whether you can still afford repayments.

4. The people I feel sorry for-people who got laid off. What can these people do? Move into a smaller house? I don't really know. But I dont think this represents a large majority of the people in NE.

Anyway, as I know this is a sensitive issue, I will say this: These are the opinions of someone who is not an expert and may be wrong. Also, whatever happened to renting? Did every one in the country get a hard-on for owning their own house. I always thought you did that when you were in a secure job, and you only buy 1 or 2 houses in your life. Houses seem to have become like cars-wanting to up scale every few years.

Geuze

SBWife wrote: »

The INM deal is a debt for equity swap with the percentage of equity involved contingent on the restructuring of the pension deficit and the company raising some new equity.

BUT the headline at RTE says €140m write off. It's always a problem when you have a financially illiterate sub-ed, who then gets quoted by the masses.

Debt writ-down = 138m

Company worth 20m mkt cap this week.

Debt is reduced, shareholders inject new equity.

Banks end up with a 10m stake.

http://www.irishtimes.com/business/sectors/media-and-marketing/banks-write-off-138m-of-inm-debt-1.1374477

clairefontaine

y0ssar1an22 wrote: »

Thanks for all the replies. The country is certainly divided on this point. Some of the answers went over my head as I'm not an economic/finance expert.
What I do know is that economics is based upon supply and demand. Did we, the people, not create this bubble? We supplied the demand that caused the massive increase in house prices. In a country of ~4m (?) surely this demand was not sustainable and house prices would eventually fall? Just seems common sense to me.

As for the people in negative equity...I can sort of identify 4 categories of people:

1. People who bought to let, as an investment. Thats just a bad investment.

2. People who wanted to start a life with their partner or whatever, with a view to selling and up scaling in a few years. Crucially they may have known the mortgage was not sustainable and relied on the house price rising. Still an investment, really.

3. People who, whether due to tax rises/pay cuts, are unable to pay a mortgage. Mortgage was sustainable before pay cut/tax increases. Possibly over extended themselves and should have considered renting. Depends on amount of pay cuts and tax rise. But surely before you take out a mortgage you should consider your income decreasing by 10% and assess whether you can still afford repayments.

4. The people I feel sorry for-people who got laid off. What can these people do? Move into a smaller house? I don't really know. But I dont think this represents a large majority of the people in NE.

Anyway, as I know this is a sensitive issue, I will say this: These are the opinions of someone who is not an expert and may be wrong. Also, whatever happened to renting? Did every one in the country get a hard-on for owning their own house. I always thought you did that when you were in a secure job, and you only buy 1 or 2 houses in your life. Houses seem to have become like cars-wanting to up scale every few years.

What happened to renting?

Renting was for losers, that's what happened to renting. Like a lot of markets, it works when it convinces them if they don't buy X than they as a person, deep down to the core suck ****. So...buy this... and you won't suck anymore.

In a status driven culture, it works a treat.

So they buy X and fail to notice that in so doing prop up demand and blow a little bit of air into that bubble.

I feel bad for the people who didn't buy anything and are still getting ripped to pieces with the USC.

I despair over people I know who are still moaning and whinging about being broke, while still yapping on their iphones and booking their skiing holidays and paying their three mortgages. I just don't know what to say if that is some people's idea of poverty and being broke and their NE houses.

clairefontaine

Looking through the property pages, it looks to me like there is still a bubble in very boring parts of the southside.

The prices are astronomical and for what?

One was sold in D6 for 300K over its asking price.

Does anyone have a clue of what the prices of housing actually should be?

riclad

Theres a shortage of houses in certain areas, if lots of people wanna live in dublin 6, small no of houses for sale ,demand will cause prices to rise.

Thats how markets work,,houses are not like cars,
in theory someone could make 500k bmws model x,if the demand is there.
Theres no way of making more land,or more sites to build houses ,
in dublin 6 without knocking down existing buildings.
TRY even finding a suitable, site in dublin,6, and getting planning permission to build a house.

The type of person who buys in dublin 6 ,is not gonna buy a house in finglas ,or coolock,no matter how cheap it is.
The price of houses in a certain area reflects the demand, the supply in that area ,
and how easy is it to get a mortgage from an irish bank at the moment.

You could say the same thing, why does someone pay 50k, for a bmw ,
when you can buy a ford car for 15k?
Why do some women spend 300 euro on a designer handbag?

clairefontaine

So if your local council restricts zoning and building, perhaps also warehousing apartments, then you can keep the prices up?