Debt Forgiveness

clear thinking

The legislation:
AND WHEREAS IN THE ACHIEVEMENT OF THE WINDING UP OF IBRC THE COMMON GOOD MAY REQUIRE PERMANENT OR TEMPORARYINTERFERENCE WITH THE RIGHTS, INCLUDING PROPERTY RIGHTS, OF PERSONS

I'm simply saying that if an inbs customer writes in and offers a repayment schedule that offers book value plus one additional euro then the liquidator has no choice but to accept the offer unless someone else offers more.

It will only apply if you are already on an agreed lower payments repayment plan.

The debt has already been writen down if you signed up to a repayment plan.

The fact that there is a mortgage is irrelevant, your property value and loan repayment cash flow will determine the value the loan is actually booked at.

gaius c

clear thinking wrote: »

The legislation:
AND WHEREAS IN THE ACHIEVEMENT OF THE WINDING UP OF IBRC THE COMMON GOOD MAY REQUIRE PERMANENT OR TEMPORARYINTERFERENCE WITH THE RIGHTS, INCLUDING PROPERTY RIGHTS, OF PERSONS

I'm simply saying that if an inbs customer writes in and offers a repayment schedule that offers book value plus one additional euro then the liquidator has no choice but to accept the offer unless someone else offers more.

It will only apply if you are already on an agreed lower payments repayment plan.

The debt has already been writen down if you signed up to a repayment plan.

The fact that there is a mortgage is irrelevant, your property value and loan repayment cash flow will determine the value the loan is actually booked at.

:rolleyes:

I just offered book value plus two euro for your house.
The sherrif will be around tomorrow to help you move out.

cosbloodymick

The Corinthian wrote: »

True, but that does not imply that debt forgiveness is going to help.

After all, it would be foolish to believe that home owners with mortgages (one third of home owners have none) are the single most important influence on consumption in the Irish economy - they're a fraction of the size of the total workforce, after all, and it is because that total workforce has less disposable income that the economy has been affected, not because those with heavy mortgages have.

All other things being equal (i.e. debt forgiveness or another approach, we still have to be in a position to afford it), it makes far more sense to reduce the tax burden and introduce economic incentives for the whole economy, not just a fraction of it. To instead put inordinate resources into just that minority for 'the good of the economy' makes no sense.

If someone overstretched themselves financially, whereby 40%+ of their salary was going to cover the mortgage; ignoring the distinct possibility that we may have recessions, higher interest rates or taxes in the future, banked on rent from a lodger being a 'safe revenue stream' or worse still gambled on capital appreciation, then I wouldn't so much say they're 'stupid', as much as they probably should not be allowed to breed.

The milk of human kindness overfloweth!!

The Corinthian

cosbloodymick wrote: »

The milk of human kindness overfloweth!!

I'm sorry, maybe bleating "won't someone think of the children" may work better for you?

lucky john

"After all, it would be foolish to believe that home owners with mortgages (one third of home owners have none) are the single most important influence on consumption in the Irish economy - they're a fraction of the size of the total workforce, after all, and it is because that total workforce has less disposable income that the economy has been affected, not because those with heavy mortgages have."

I would think that the demographics of the one third would show a lot of pensioners and single person house holds. I also would imagine the best savers in the country.

the banks gave out around 300,000 mortgages between '05 '06 '07. The vast number of these are in negitive equity now. for sure plenty are keeping up payments(just), but 95,000 and rising are 90 days behind. http://www.centralbank.ie/press-area/press-releases/Pages/ResidentialMortgageArrearsandRepossessionsStatisticsQ42012.aspx
Thats hardly equates to a tiny part of the workforce . If say 1.5 people live in these 95,000 houses that 142,000 people.
Some working, some not but all most likley to be in the part of the population that you need spending in the country. AND they will carry this with them for years to come. Economic zombies, regardless of any future stimiluse.

"All other things being equal (i.e. debt forgiveness or another approach, we still have to be in a position to afford it), it makes far more sense to reduce the tax burden and introduce economic incentives for the whole economy, not just a fraction of it. To instead put inordinate resources into just that minority for 'the good of the economy' makes no sense."


100% agree, a wider economic stimilus would make a huge difference. But unless we do like the US and start printing money or devalue the Euro it never going to be enough. 2% of the VAT rate? 2% of the tax rate? Great but unlikely.
On the other hand the banks have been given the money to cover the mortgage write downs already. So if their hand was forced to deal with this would it not make sence?

clear thinking

gaius c wrote: »

:rolleyes:

I just offered book value plus two euro for your house.
The sherrif will be around tomorrow to help you move out.

Now you've got it. What do you think McKillen was offering €179m for, the original loan value? If he goes to €186m he might even get it. The tax payer has funded the rest.

Absolutely no reason why people with housing loans can't do the same.

The Corinthian

lucky john wrote: »

for sure plenty are keeping up payments(just), but 95,000 and rising are 90 days behind. http://www.centralbank.ie/press-area/press-releases/Pages/ResidentialMortgageArrearsandRepossessionsStatisticsQ42012.aspx
Thats hardly equates to a tiny part of the workforce . If say 1.5 people live in these 95,000 houses that 142,000 people.

Even presuming your 1.5 members of the workforce (not simply 'people') do live in these 95,000 properties, given the employed workforce is 1.848 million, that means they represent 7.6%. Pretty small, I'm afraid.

100% agree, a wider economic stimilus would make a huge difference. But unless we do like the US and start printing money or devalue the Euro it never going to be enough. 2% of the VAT rate? 2% of the tax rate? Great but unlikely.

Yet for the potential cost of such levels of debt forgiveness quite a bit could be done to alleviate taxation - even partial debt write-offs would cost us billions or tens of billions of Euro. You can do a lot of damage to tax with that.

Additionally, it would be better spread out throughout the economy, his giving more even effects, and not require the same level of costly administration as any formal mechanism of debt forgiveness.

As for where the money to do so comes from it depends ultimately either way on what we can negotiate with the EU, vis-a-vi repayments and austerity.

On the other hand the banks have been given the money to cover the mortgage write downs already. So if their hand was forced to deal with this would it not make sence?

The money is actually borrowed. If it's not been spent, then that's probably a good thing, IMHO.

Xenophile

Sell off State assets with the proceeds going to NAMA to help distressed mortgages. By the way I am the OP of this post if anyone might like to know just how it started out!

SBWife

Xenophile wrote: »

Sell off State assets with the proceeds going to NAMA to help distressed mortgages. By the way I am the OP of this post if anyone might like to know just how it started out!

Why would the proceeds go to NAMA?

Apart from a small number of IBRC mortgages no individual mortgages loans were transferred to NAMA. The loans transferred were those over a certain size made to developers. In the main the distressed mortgage debt assets remain at the banks.

Xenophile

SBWife wrote: »

Why would the proceeds go to NAMA?

Let NAMA now buy distressed private mortgages which may even be repayable by the next generation.

SBWife

Xenophile wrote: »

Let NAMA now buy distressed private mortgages which may even be repayable by the next generation.

So you want to increase the size of NAMA and extend its lifespan beyond 2018?
Do you work for them?

Xenophile

SBWife wrote: »

Since when is a credit card the only form of credit, last I checked my home mortgage fell into this category.

Try bringing this form of credit to Paddy Power to place a bet on a horse!

Xenophile

SBWife wrote: »

So you want to increase the size of NAMA and extend its lifespan beyond 2018?
Do you work for them?

Yes to first question and no to the second question.

K-9

The Corinthian wrote: »

If someone overstretched themselves financially, whereby 40%+ of their salary was going to cover the mortgage; ignoring the distinct possibility that we may have recessions, higher interest rates or taxes in the future, banked on rent from a lodger being a 'safe revenue stream' or worse still gambled on capital appreciation, then I wouldn't so much say they're 'stupid', as much as they probably should not be allowed to breed.

Mod:
Cut out the hints at Social Eugenics please, this isn't a Liveline type discussion forum, thank you.

SBWife wrote:

So you want to increase the size of NAMA and extend its lifespan beyond 2018?
Do you work for them?

Just a fair warning that asking questions like that are specifically against the charter of the forum.

gaius c

clear thinking wrote: »

Now you've got it. What do you think McKillen was offering €179m for, the original loan value? If he goes to €186m he might even get it. The tax payer has funded the rest.

Absolutely no reason why people with housing loans can't do the same.

You're the one not getting it. The bank will go for public sale on the open market in order to maximise the return for it's owners, which is them. Your notion that the bank might give you a preferential deal on the house you can't afford is fanciful stuff.

clear thinking

gaius c wrote: »

You're the one not getting it. The bank will go for public sale on the open market in order to maximise the return for it's owners, which is them. Your notion that the bank might give you a preferential deal on the house you can't afford is fanciful stuff.

The owner is the minister of finance. Open market means open: if the SL is flogging the loans to the highest bidder - and there won't be many - there is nothing to stop the mortgagee bidding too. The SL would have to accept the highest offer.

I'dd agree that it is a long shot, but not fanciful. Restructured loans are already written down in a banks books, the borrower know what he/she's paying so working out the value of the loan is not too difficult.

Most of these ibrc/inbs mortgages will end up in NAMA and managed by some agency, while its a long shot if i was an inbs customer i would make the effort at least to try to get the the loan value transferring across to the new creditor written down to its book value.

Surely that is better than doing nothing.

As for fanciful, debt forgiveness is very quickly going to be a reality with the new insolvency laws and the banks will be realisieng losses big time. have a read of todays FT for a good summary of it.

lucky john

As I said I totally agree with a general tax stimulus to the economy. But every cent of that would be extra borrowing and either stop us closings the deficit or widen it more. Its a different thread really after that.

The money is actually borrowed. If it's not been spent, then that's probably a good thing, IMHO.[/quote]at.

Yes the money HAS been actually borrowed and for this actual reason. Lifting the boot from the neck of 7%+ the working population will be a one off cost and depending on how its done may be recovered over a time.
To be honest we are forgetting the human cost of the present predicament people find themselves in. Its like life in the Joy with little hope of release. Even a murderers get a shorter sentence.
Its not an economic point but the stress, illness and unfortunately suicide associated with this does have a cost.

gaius c

clear thinking wrote: »

The owner is the minister of finance. Open market means open: if the SL is flogging the loans to the highest bidder - and there won't be many - there is nothing to stop the mortgagee bidding too. The SL would have to accept the highest offer.

I'dd agree that it is a long shot, but not fanciful. Restructured loans are already written down in a banks books, the borrower know what he/she's paying so working out the value of the loan is not too difficult.

Most of these ibrc/inbs mortgages will end up in NAMA and managed by some agency, while its a long shot if i was an inbs customer i would make the effort at least to try to get the the loan value transferring across to the new creditor written down to its book value.

Surely that is better than doing nothing.

As for fanciful, debt forgiveness is very quickly going to be a reality with the new insolvency laws and the banks will be realisieng losses big time. have a read of todays FT for a good summary of it.

How is the insolvent mortgagee going to bid? They are insolvent remember.

lucky john wrote: »

Yes the money HAS been actually borrowed and for this actual reason. Lifting the boot from the neck of 7%+ the working population will be a one off cost and depending on how its done may be recovered over a time.
To be honest we are forgetting the human cost of the present predicament people find themselves in. Its like life in the Joy with little hope of release. Even a murderers get a shorter sentence.
Its not an economic point but the stress, illness and unfortunately suicide associated with this does have a cost.

Four times as many households renting as there are households in arrears. How does having them bear the cost of bailing out their own landlords help the wider economy?

The Corinthian

K-9 wrote: »

Mod:
Cut out the hints at Social Eugenics please, this isn't a Liveline type discussion forum, thank you.

Apologies, however promoting social eugenics was not my intention. I was simply underlining, using black humour, how stupid it was to overstretch oneself to such levels during a boom period ignoring the inevitability that circumstances would become worse not better in the real World.

lucky john wrote: »

As I said I totally agree with a general tax stimulus to the economy. But every cent of that would be extra borrowing and either stop us closings the deficit or widen it more. Its a different thread really after that.

And, as I pointed out, either option would require spending; either of money borrowed that we've thankfully not yet spent or from some other source.

And, as I also pointed out, tax cuts and spending designed to stimulate the economy would be significantly more efficient, both in effect and in cost.

Yes the money HAS been actually borrowed and for this actual reason.

But not spent, as I've repeatedly pointed out. Which is better; repaying a debt you've spent or one you have not?

Lifting the boot from the neck of 7%+ the working population will be a one off cost and depending on how its done may be recovered over a time.

As would not doing so and instead concentrating on improving the economy (which alleviating the debt of only 7% of the population will not do).

To be honest we are forgetting the human cost of the present predicament people find themselves in. Its like life in the Joy with little hope of release. Even a murderers get a shorter sentence.

And back we go to appeals to emotion.

Its not an economic point but the stress, illness and unfortunately suicide associated with this does have a cost.

So does borrowing, especially when done so irresponsibly.

Look, I do believe that some equity for debt deal (not debt forgiveness) by the government will have to be carried out in the worst of cases. I also believe that the banks should ultimately shell out to a degree as one cannot argue that borrowers borrowed irresponsibly without accepting that lenders lent so too.

However - and this was my principle point - arguing that somehow debt forgiveness for those with crippling mortgages will help the economy is a BS justification. It won't and if we're going to spend money to help the economy there are far better ways to do so.

KyussBishop

I haven't followed the whole discussion, but worth noting that Ireland alone (while still in the Euro) can't engage in debt forgiveness, due to the financial instability it would cause.

We would need the help of Europe to engage in that while in the Euro, and that isn't likely to become politically possible; would probably need use of monetary policy, to engage in a debt jubilee (one of many such methods available for alleviating debt), and probably more flexibility with cutting the size of mortgage balances (especially as seeing there are uninvestigated indications, of in some cases, banks fraudulently pumping house prices; only fair they take a hit on the principle they inflated).

The latter kind of debt relief would probably lead to irrecoverable balance sheet problems with some banks, which is probably best resolved by enacting depositor insurance, and burning everyone above €100,000, and winding down the banks (this would have to be implemented using monetary policy, not the ridiculously punitive way it was done in Cyprus); it'd be best to return private banks to full reserve then, and provide a public bank which is the only one capable of utilizing money creation (since money creation really should be under public control).

Note that much of this involves usage of money creation, so don't draw conclusions from the described policies above, as if they would be done with debt - that would effectively be a completely different situation and set of policies.


Again, none of this is possible with Ireland acting alone (not while within the Euro), and none of it is likely to become politically possible within Europe (even if it is economically possible); we'll probably see the end of the Euro first, at which point, regaining control over monetary policy makes it all possible.

Doubtless this will attract the usual naysayers on this topic (where the wider argument gets ignored, to nitpick rhetorically at concluding sentences like this), but it's one of the main viable wide-scale ways of engaging in debt forgiveness, while maintaining economic stability.

hmmm

KyussBishop wrote: »

Doubtless this will attract the usual naysayers on this topic

I like the way you dismiss people who might disagree with your idea to wipe out consumer and business deposits above 100k as "the usual naysayers". All to bail out a select few property owners.

KyussBishop

hmmm wrote: »

I like the way you dismiss people who might disagree with your idea to wipe out consumer and business deposits above 100k as "the usual naysayers". All to bail out a select few property owners.

It's actually pre-empting the usual trite dismissals other posters bring up, whenever I mention the topic of public money creation; consider it an encouragement to engage in actual counterarguments, rather than such dismissals.

Notably, you have also done exactly what I've quoted, in quoting a concluding sentence while ignoring the rest of the wider arguments.

KyussBishop

On a wider point, you don't even necessarily need to eliminate deposits over 100k, as you could just as easily guarantee them when the bank becomes insolvent, by fully nationalizing it (as part of the terms on insolvency) and incorporating it as part of the public bank; all deposits could be guaranteed (backed by money creation), and all debts would be free to be adjusted by the money-creation backed government.

You could even have the money-creation backed public bank take on the non-performing debts to help restore the banks balance sheets, but then I don't see any reason why profligate banks should be given such favorable behaviour, when all depositors could be guaranteed by other means.

annsmithx

Debt forgiveness is a fantastic thing for many people, as it means less than the whole of a debt has been compensated though the debt has been satisfied. However, it's considered taxable income and the mistake of a debt forgiveness tax break for foreclosures or short sales of homes is set to bite some taxpayers.

gaius c

annsmithx wrote: »

Debt forgiveness is a fantastic thing for many people, as it means less than the whole of a debt has been compensated though the debt has been satisfied. However, it's considered taxable income and the mistake of a debt forgiveness tax break for foreclosures or short sales of homes is set to bite some taxpayers.

You're wrong. The link you've provided is for the US.
This is the Irish situation.

jmayo

Xenophile wrote: »

Ordinary people = Common Honest Decent People.

I think your definition is probably more along the lines of ...

Ordinary people = Common Honest Decent People who are in debt which they can't or sometimes don't want to pay back.

I just love the fact that most proponents of debt forgiveness appear to think the most important people in this country are those in massive debt.

Xenophile wrote: »

Sell off State assets with the proceeds going to NAMA to help distressed mortgages. By the way I am the OP of this post if anyone might like to know just how it started out!

Shure why not ressurect the construciton bubble while we are at it.

Why oh why do some people seem to think that everything in this economy should revolve around peoples' property ?
Oh wait, let me guess, they own property.

K-9 wrote: »

Mod:
Cut out the hints at Social Eugenics please, this isn't a Liveline type discussion forum, thank you.


Just a fair warning that asking questions like that are specifically against the charter of the forum.

Actually the mod note about asking about if someone is involved with NAMA leads me nicely onto the point about NAMA secrecy.

Is NAMA Ireland's answer to MI5 or MI6 ?
We know it exists, we know where they are involved, we know some of the people who work there, but we are not allowed really know the stuff behind closed doors or the deals they make with persons unknown on our behalf.

And if we are lucky we might find out about it in 30 years time.

KyussBishop wrote: »

On a wider point, you don't even necessarily need to eliminate deposits over 100k, as you could just as easily guarantee them when the bank becomes insolvent, by fully nationalizing it (as part of the terms on insolvency) and incorporating it as part of the public bank; all deposits could be guaranteed (backed by money creation), and all debts would be free to be adjusted by the money-creation backed government.

Guaranteed with what and by whom ?
You do know we can't create money, we are part of Eurozone ?

KyussBishop

jmayo wrote: »

Guaranteed with what and by whom ?
You do know we can't create money, we are part of Eurozone ?

That was a follow on post to this one, where I discuss it as an EU-wide policy:
https://www.boards.ie/vbulletin/showpost.php?p=84397659&postcount=51

gaius c

Tiresome stuff. Distressed and over-borrowed folk want us to pour petrol on the entire economy and flick a lit match onto it to relieve their own debt burden.

RichardAnd

carpejugulum wrote: »

Making others pay for your mistakes is the oldest trick ever.

That it is. I believe we call it "society"

The Corinthian

RichardAnd wrote: »

That it is. I believe we call it "society"

No it's not. While in modern Western societies we endeavour to help those less fortunate, we also demand that people are responsible for their own decisions and actions.

A person with a gambling problem may fall on hard times financially and we may assist them so they don't end up on the street, but we don't pay his or her gambling debts - that's ultimately their responsibility. If they are, or choose to be, declared bankrupt, that too comes with consequences that are also tied to their own decisions and actions.

On this particular subject, there appears to be quite a bit of waxing lyrical about 'society', attempting to widen the definition of what 'society' agrees to collectively share. In reality society limits how far it will cover the mistakes of others - always has, always will. And claiming otherwise frankly smacks of a mendicant chancing their arm.