How the responsible can avoid paying the mortgages of those who default

realitykeeper

Shortly the government will enact the Personal Insolvency Bill. Under this legislation, the banks will ultimately be forced to accept losses imposed by irresponsible borrowers. In other words the borrower can make a derisory repayment offer and if the bank cannot accept those terms the irresponsible borrower can default.

In this scenario, the bank will get the property back along with the negative equity. This negative equity will ultimately have to be paid by the responsible tax payers who did not over-borrow. If this happens on a large scale, the government may need another bailout for the banks and if they don`t get it, deposits can and will be seized by the state (there are plenty of precedents of this elsewhere).

The way to stop this legislation (or repeal it if it comes in) is for savers to withdraw their money from Irish banks. This will not only safeguard their savings but it will force the government to re-think their plan to bail out stupid people while penalizing responsible people.

Finally, politicians have always brought in legislation which is beneficial to themselves so it not difficult to deduce which cross-party group of politicians that will be supporting this legislation: The stupid of course.

hfallada

OP everything you have said in post is not in anyway factual. The point of the insolvency legalisation is unsecured debt eg credit cards etc. Not mortgages.

Also if the government has bailed out the banks so much do far, why would they not bail them out again as it will only a fraction of what they have put into them. Your idea of a run on a bank is ridculous as it would result in a bank bailout.

I don't think anyone in the boom borrowed the intention of screwing the tax payer over in 6/7 years. I think if you are doing your best at paying your mortgage, then maybe you can keep your house. Put if you havent paid your mortgage then you should have house repossessed.

OP you failed to acknowledge not all banks were bailed out. The banks with the worse balance sheet are ulster bank and danske bank

NIMAN

Would any future bank bail-outs (and it was recently reported that AIB and BoI may need another €25bn) not come from the European Fund that has been set up for that purpose (can't remember its name right now)?

Larbre34

Kinda cutting off one's nose to spite one's face. Those same responsible borrowers require a relatively functional banking system to carry on their lives, cash flow and credit into their employments, businesses, domestic commitments

The skew in the market of distressed assets and a stagnant housing market, including the negative equity hole can and will only be worked out through normalisation over a generational timescale by prudent oversight and asset management, not by further disabling the banking system

Due to the 2008 unilateral action by the last Government on guaranteeing banks, I cant see the EU leaving the decision making to our current Govt in the event of a further crisis of capital flight, the EU would rather cut loose any millstone banks than let our Govt infinitely shore them up, thereby endangering the integrity of the new deposits you suggest creating elsewhere by withdrawing them now from Irish banks

Corkbah

realitykeeper wrote: »

Shortly the government will enact the Personal Insolvency Bill. Under this legislation, the banks will ultimately be forced to accept losses imposed by irresponsible borrowers. In other words the borrower can make a derisory repayment offer and if the bank cannot accept those terms the irresponsible borrower can default.

In this scenario, the bank will get the property back along with the negative equity. This negative equity will ultimately have to be paid by the responsible tax payers who did not over-borrow. If this happens on a large scale, the government may need another bailout for the banks and if they don`t get it, deposits can and will be seized by the state (there are plenty of precedents of this elsewhere).

The way to stop this legislation (or repeal it if it comes in) is for savers to withdraw their money from Irish banks. This will not only safeguard their savings but it will force the government to re-think their plan to bail out stupid people while penalizing responsible people.

Finally, politicians have always brought in legislation which is beneficial to themselves so it not difficult to deduce which cross-party group of politicians that will be supporting this legislation: The stupid of course.

maybe you need to re-read it ....

also ..on a side note, negative equity only affects a property if/when it is resold (its similar to depreciation in that the building is not worth what was originally paid for after a period of time) ...so please explain how the negative equity will have to be paid for by the "responsible".

I didn't borrow in the boom (couldn't afford to being self employed it was too risky) .... I have personal debt - but I'm paying that off.

my main gripe with the personal insolvency bill is that it allows high paid officials back into directorships of companies within 3yrs (I'm open to correction on this) ..... businesses that have suffered as a result of bad decisions goto the wall and those that made the bad decisions are capable of taking up a role similar within 3yrs, granted economic circumstances played a part in the downturn, but I just think if you are responsible for the loss of hundreds of millions of euro in some cases then you shouldn't be allowed back into that sector anytime soon (of course, if someone is responsible its unlikely they will be hired but then again =- if they were at that level - they have made business connections with others who dont care about the business and will hire "friends")

noodler

realitykeeper wrote: »

Shortly the government will enact the Personal Insolvency Bill. Under this legislation, the banks will ultimately be forced to accept losses imposed by irresponsible borrowers.

No they cannot be forced - the banks retain the final say.

realitykeeper wrote: »

In other words the borrower can make a derisory repayment offer and if the bank cannot accept those terms the irresponsible borrower can default.

Again, no.

realitykeeper wrote: »

In this scenario, the bank will get the property back along with the negative equity. This negative equity will ultimately have to be paid by the responsible tax payers who did not over-borrow. If this happens on a large scale, the government may need another bailout for the banks and if they don`t get it, deposits can and will be seized by the state (there are plenty of precedents of this elsewhere).

The way to stop this legislation (or repeal it if it comes in) is for savers to withdraw their money from Irish banks. This will not only safeguard their savings but it will force the government to re-think their plan to bail out stupid people while penalizing responsible people.

Finally, politicians have always brought in legislation which is beneficial to themselves so it not difficult to deduce which cross-party group of politicians that will be supporting this legislation: The stupid of course.

Obviously, this is all pretty useless because it follows on from your initial wrong assumption.

hfallada wrote: »

OP everything you have said in post is not in anyway factual. The point of the insolvency legalisation is unsecured debt eg credit cards etc. Not mortgages.

Also untrue, the third insolvency option allows for the write-down of secured debt (i.e. mortgages).

See here. http://www.isi.gov.ie/en/ISI/Pages/PIA

NIMAN wrote: »

Would any future bank bail-outs (and it was recently reported that AIB and BoI may need another €25bn) not come from the European Fund that has been set up for that purpose (can't remember its name right now)?

25bn, I haven't heard anything even close to this tbh.

Are you sure you aren't confusing that figure with the amount we have put into both institutions to date?

rumour

realitykeeper wrote: »

deposits can and will be seized by the state (there are plenty of precedents of this elsewhere).

Thats all you need to understand. People who live off taking other peoples money will have no end of justification for this.

Dannyboy83

realitykeeper wrote: »

Shortly the government will enact the Personal Insolvency Bill.

It seems as tho they are preparing in advance for this:

http://www.breakingnews.ie/ireland/aib-to-increase-charges-598432.html
AIB is hiking its charges for personal and business customers from the end of August.

The charge for a current account holder using an ATM machine will go from €0.20 to €0.35 — a hike of 75%.

Business customers will see their ATM charges go from €0.15 to €0.35 — up over 133%.

For paper and staff assisted transactions - including cheques or withdrawals inside a branch or post office - current account holders will be charged an extra 9 cent, bringing the fee up to 39 cent.

Foreign currency charges will also jump from €4.44 to €7, while the price of setting up a standing order will go from zero to €4.50.

BornToKill

realitykeeper wrote: »

Shortly the government will enact the Personal Insolvency Bill.

Just for information, this legislation was enacted last year as the Personal Insolvency Act 2012 and was signed by the President on 26 December 2012.

rumour

OP Don't expect much debate here....you're on the right track..

Dob74

realitykeeper wrote: »

Shortly the government will enact the Personal Insolvency Bill. Under this legislation, the banks will ultimately be forced to accept losses imposed by irresponsible borrowers. In other words the borrower can make a derisory repayment offer and if the bank cannot accept those terms the irresponsible borrower can default.

In this scenario, the bank will get the property back along with the negative equity. This negative equity will ultimately have to be paid by the responsible tax payers who did not over-borrow. If this happens on a large scale, the government may need another bailout for the banks and if they don`t get it, deposits can and will be seized by the state (there are plenty of precedents of this elsewhere).

The way to stop this legislation (or repeal it if it comes in) is for savers to withdraw their money from Irish banks. This will not only safeguard their savings but it will force the government to re-think their plan to bail out stupid people while penalizing responsible people.

Finally, politicians have always brought in legislation which is beneficial to themselves so it not difficult to deduce which cross-party group of politicians that will be supporting this legislation: The stupid of course.

I think that should read irresponsible lenders.

Or bad lending allowed by poor regulation.

The loans where made by private banks so maybe these private banks should have been allowed go bust.

Dan_Solo

realitykeeper wrote: »

Shortly the government will enact the Personal Insolvency Bill. Under this legislation, the banks will ultimately be forced to accept losses imposed by irresponsible borrowers.

I see no mention in the Insolvency Bill of "irresponsible borrowers".
You are pretending all who cannot meet their debts are irresponsible then I assume? So if I take out a million Euro mortgage while I'm on the dole and then win the lotto I am, by your reasoning, a responsible borrower?

Dan_Solo

Dob74 wrote: »

I think that should read irresponsible lenders.

Or bad lending allowed by poor regulation.

The loans where made by private banks so maybe these private banks should have been allowed go bust.

No no no, giving money to banks is good, giving money to people is bad. Haven't Fianna Fail and Fianna Gael taught you the priorities? :-)

Dob74

Dan_Solo wrote: »

No no no, giving money to banks is good, giving money to people is bad. Haven't Fianna Fail and Fianna Gael taught you the priorities? :-)

Sorry your right, banks and property developers should be given as much money as they want.
It's only fair that a property developer who borrowed millions for a few arces of land be allowed go to England, US or Switzerland. And take as much loot as he can to set up in his new life.

Those greedy people who bought an overpriced house should be screwed for every penny.

realitykeeper

Dob74 wrote: »

Sorry your right, banks and property developers should be given as much money as they want.

I appreciate your humour. From a compassionate perspective there is something to be said for debt forgiveness but the problem with that is it can lead to moral hazard for example. You could give young children everything they demand with kind intentions but it would not be good for them.

Even if we do forgive the debts of the developers, bankers and the little people (due to our charitable traits as a nation) - that does not mean others like the Lutheran Dutch and Germans would be as willing to forgive us our debts. People of a puritanical pedigree tend to believe that it is possible to kill with kindness so it would be bad for the Irish if they were to forgive us our debts.

Lets be honest, if the Anglo executives had been forced to face the consequences of their actions - they would be better people for it today, because they would have lots on time on their hands to think about how they had ruined the lives of so many people and how they could reform to be better people in the future.

Therefore, debt forgiveness should not be an option for countries, banks, developers or the little people. With few exceptions, debt forgiveness is just as bad for the borrower as it is for the lender - but for different reasons. In this country debt forgiveness for the little people is especially unjustified because so many have stopped paying their mortgages altogether without even attempting to pay down their debts. This moral bankruptcy is very wrong.

Dan_Solo

realitykeeper wrote: »

In this country debt forgiveness for the little people is especially unjustified because so many have stopped paying their mortgages altogether without even attempting to pay down their debts. This moral bankruptcy is very wrong.

"So many"?
There's only two people in the country who can pay their mortgage but refuse to. I know this for a fact as I just made it up like you did with your "so many".

micosoft

Are you Irish OP? You use a strange grammar that suggest you are not. Don't mind non Irish involving themselves in the discussion but... try to have some understanding of the country and climate at the time where people were expected to buy a home.

In any case, like any extremist/simplest in the current situation you pose a simple dogmatic solutions to an extremely complex problem.

This:

" Lets be honest, if the Anglo executives had been forced to face the consequences of their actions - they would be better people for it today, because they would have lots on time on their hands to think about how they had ruined the lives of so many people and how they could reform to be better people in the future.

Therefore, debt forgiveness should not be an option for countries, banks, developers or the little people. With few exceptions, debt forgiveness is just as bad for the borrower as it is for the lender - but for different reasons. In this country debt forgiveness for the little people is especially unjustified because so many have stopped paying their mortgages altogether without even attempting to pay down their debts. This moral bankruptcy is very wrong."

is a bizarre non sequitur. Anglo Irish Executive =/ Average Mortgage Holder

I'd suggest like a lot of other commentators on this topic that you attend a basic course on economics (not internet) where you will have your simple arguments quickly and efficiently demolished by somebody that knows a little of economics. With this little learning may should engage in the debate about what is to be done with the knowledge that you add something to the debate and not just spout simplist jargon/slogans (from either side)

Dob74

realitykeeper wrote: »

I appreciate your humour. From a compassionate perspective there is something to be said for debt forgiveness but the problem with that is it can lead to moral hazard for example. You could give young children everything they demand with kind intentions but it would not be good for them.

Even if we do forgive the debts of the developers, bankers and the little people (due to our charitable traits as a nation) - that does not mean others like the Lutheran Dutch and Germans would be as willing to forgive us our debts. People of a puritanical pedigree tend to believe that it is possible to kill with kindness so it would be bad for the Irish if they were to forgive us our debts.

Lets be honest, if the Anglo executives had been forced to face the consequences of their actions - they would be better people for it today, because they would have lots on time on their hands to think about how they had ruined the lives of so many people and how they could reform to be better people in the future.

Therefore, debt forgiveness should not be an option for countries, banks, developers or the little people. With few exceptions, debt forgiveness is just as bad for the borrower as it is for the lender - but for different reasons. In this country debt forgiveness for the little people is especially unjustified because so many have stopped paying their mortgages altogether without even attempting to pay down their debts. This moral bankruptcy is very wrong.

Why do people in Ireland not understand what is meant by the term Moral Hazard?
We have developers just heading off to the UK declaring bankrupt owing hundreds of millions to the banks. the banks didn't left a finger to pursue them. No Moral hazard for developers.
The banks went bankrupt and had to be bailed out by the taxpayer. They drove up prices of houses by over lending to home buyers. The more they lent, the better there profits looked in the short term. But in the long term they where actually losing money on the monies they lent. But they got to keep there bonuses. No moral Hazard for bankers.
The central bank and finanical regulator did nothing to stop over lending. They all kept there jobs. No moral hazard.

The 45 year old with three kids who lost his job or had to take a pay cut. Who bought a modest house for 300k. Is still on the hook for his mortgage. Moral hazard for the working man and do as you please for our betters.

hmmm

Dob74 wrote: »

Why do people in Ireland not understand what is meant by the term Moral Hazard?

I'm afraid you're mixing up Moral Hazard and whataboutery. "Moral Hazard" includes letting tens of thousands of people walk away from their debts and leaving everyone else pay for them. Whataboutery includes talking about bankers and regulators every time we try to have a sensible discussion about the former group.

The 45 year old who lost their job or had their salary reduced I feel sympathy for. Unfortunately, riding on their coat-tails is a crew of property investors and other chancers who want to get their get-rich-quick debts paid off by the ordinary taxpayer. Until someone comes up with a plan to separate the two groups, there is going to be little on relief to the 45 year old and his family.

Instead of berating the rest of us for not wanting to pay the debts of everyone who bought property, perhaps you could put a bit of energy into coming up with a plan that allows relief to be targeted only at those deserving of it. There's no way for one that I'm going to pay the mortgage of my neighbour down the road in her bigger house and fancy car, while I cut back to pay for the mortgage on my smaller house.

experiMental

Don't blame the people. Blame the culture. Western culture is about owning things. Naturally, people want to live up to cultural standards, so this is why they invested in mortgages and their own property. Another thing is, housing, especially in Irish climate, is a fundamental human right.

So it's clear that people did their best to get mortgages, because renting is never a stable option.
So the responsible are paying for mistakes made by property valuers who have massively inflated housing prices.

Dan_Solo

What I don't get about this whole thread is that the banks borrowed the money in the first place.
So it's OK for AIB to borrow money they can't pay back to the ECB (uncle FF/FG will bail them out) but it's a hanging offense for Joe O'Bloggs to take out a mortgage he can't pay back to the AIB?
Really?

Dan_Solo

Dan_Solo wrote: »

What I don't get about this whole thread is that the banks borrowed the money in the first place.
So it's OK for AIB to borrow money they can't pay back to the ECB (uncle FF/FG will bail them out) but it's a hanging offense for Joe O'Bloggs to take out a mortgage he can't pay back to the AIB?
Really?

Two wrongs do not make a right

AlekSmart

experiMental wrote: »

Don't blame the people. Blame the culture. Western culture is about owning things. Naturally, people want to live up to cultural standards, so this is why they invested in mortgages and their own property. Another thing is, housing, especially in Irish climate, is a fundamental human right.

So it's clear that people did their best to get mortgages, because renting is never a stable option.
So the responsible are paying for mistakes made by property valuers who have massively inflated housing prices.

I would differ on the "fundamental right" bit,as I'm not certain as to whether the Constitution actually protects the accquisition of property per se,although it certainly appears to facilitate hanging on to it once accquired.

However your remark about Renting NEVER being a "stable option"is 100% On Target in the Irish context.

The great,and still unanswered,question is WHY this situation and perception still remains inQ2 of Century 21.

It is the great differentiator between ourselves and the rest of Europe,if not the World.

If the vast bulk of mainland Europe has been able to endure Two World Wars and still regain it's sanity whilst possessing Affordable,Socially Beneficial,Fair and STABLE rental systems,why has Ireland not even nodded in this direction ?

You are indeed correct in highlighting the Cultural element,but even stranger was/is this specifically Irish cultural fixation with owning your own house at all costs....the lazier amongst us simply sit and point to "The Imperial Occupation",and all that hoohah,but I feel thats an easy option.

Sadly,in all of the steps being currently takes to revive Ireland and it's people,owning property remains centre-stage....

OMD

AlekSmart wrote: »

You are indeed correct in highlighting the Cultural element,but even stranger was/is this specifically Irish cultural fixation with owning your own house at all costs....the lazier amongst us simply sit and point to "The Imperial Occupation",and all that hoohah,but I feel thats an easy option.

Sadly,in all of the steps being currently takes to revive Ireland and it's people,owning property remains centre-stage....

Again and again people show evidence that home ownership in Ireland is average for Europe. More than Germany (which is the outlier), but less than many others (such as Ronania which is near 100%). Yet again and agin people ignore this and come out with nonsense about Ireland being obsessed with home ownership and "why can't we be more like Europe".

AlekSmart

OMD wrote: »

Again and again people show evidence that home ownership in Ireland is average for Europe. More than Germany (which is the outlier), but less than many others (such as Ronania which is near 100%). Yet again and agin people ignore this and come out with nonsense about Ireland being obsessed with home ownership and "why can't we be more like Europe".

I'm far from ignoring the ownership figures,however,there's no valid comparison with either Germany or Romania that will explain,or justify,the huge numbers of Young Irish couples who entered the mortgage market full-on.

Then we also have the significant percentage of oldsters (50+) who just could'nt stay out of the "market" and dived headlong into re-financing and speculation on foreign properties.

The reality in other European Countries tended to be of property purchase being only entered into after significant consideration of the ongoing downsides such as Local Taxes and property related charges.

For most of the Irish dalliance with residential property purchase,those added and ongoing costs did'nt exist and would never exist,something now disproven and weighing heavily upon those who managed to clamber onto the "Property Ladder"

The German,Romanian and Greater European property purchaser was a very different animal to the Irish one.

One of the most headscratching evenings I ever had was on a visit to Berlin,where whilst dining with some German friends I learned of a Family disagreement centreing around the adult children (22 +28) being disgusted at their parents (55+) revelation that they were going to BUY a new apartment.

The kids regarded this as sheer madness,as they couldn't see any sense in their parents taking on financial loadings over and above their modest rental outgoings at the time.

I remember thinking that only in Germany would one witness Children scolding their Parents for being feckless !!!!

And yes,it's one area where we might gain significantly by being "More like Europe"

Cookie_Monster

There is only one way you can avoid paying the mortgages of the stupid and that's emigration and escape from the tax net.

Head The Wall

Gone a year and a half and couldn't be happier

Tea drinker

@ Head the wall, life doesn't pause and wait for Ireland to recover. You have to get on with it. Was away 2 years and looking to get away again. FF going up in the polls..... wtf is wrong with these people.

gaius c

Chief Risk Officer of Ulster Bank on RTE Drive Time yesterday. Says that 35% of mortgages in 90+ days arrears are paying zero toward the mortgage. He pulled no punches that he believes a lot of this is strategic defaulting and UB will move to repossess on all of this category as soon as the legal loophole is plugged.

Looks like the initial estimate of a third of mortgages in strategic default could be conservative and until the problem is tackled it's going to grow and grow until you'll basically be an idiot for paying your mortgage.

micky mouse90

Anybody who bought a house and I will use after 2002 say should not pay the full price for their house.
The price of their house was unfairly inflated by govt. and banks actions.

People should pay mortgage on value of their house today.

Bail your fellow citizens and neighbours and family out not bankers.

Valetta

micky mouse90 wrote: »

Anybody who bought a house and I will use after 2002 say should not pay the full price for their house.
The price of their house was unfairly inflated by govt. and banks actions.

People should pay mortgage on value of their house today.

Bail your fellow citizens and neighbours and family out not bankers.

Q. What was the value of their house when they bought it?
A. What they paid for it.

Q. What is the value of their house now?
A. What someone else is willing to pay for it.

By not paying thier mortgage in full (if they are able to) then they are not bailing out fellow citizens and neighbours and family.

They are in fact doing the opposite.

Godge

micky mouse90 wrote: »

Anybody who bought a house and I will use after 2002 say should not pay the full price for their house.
The price of their house was unfairly inflated by govt. and banks actions.

People should pay mortgage on value of their house today.

Bail your fellow citizens and neighbours and family out not bankers.

Can I do the same for my car? Ìt is worth less than I paid the garage for it, will they give me a refund.

Also that computer I bought ten years ago for €1,000 is now less powerful than an iPhone so can I have that €1,000 back too?

As for the clapped-out washing machine and radio (as essential as a house) can I have the money back for them as well, they are not worth what I paid for them.

Godge

experiMental wrote: »

. Another thing is, housing, especially in Irish climate, is a fundamental human right.

This is the key mistake Irish people made. Housing is a fundamental human right but owning a house is not. So few Irish realise the difference.

Dan_Solo

gaius c wrote: »

Chief Risk Officer of Ulster Bank on RTE Drive Time yesterday. Says that 35% of mortgages in 90+ days arrears are paying zero toward the mortgage. He pulled no punches that he believes a lot of this is strategic defaulting and UB will move to repossess on all of this category as soon as the legal loophole is plugged.

Looks like the initial estimate of a third of mortgages in strategic default could be conservative and until the problem is tackled it's going to grow and grow until you'll basically be an idiot for paying your mortgage.

Oh great, another slew of cheap houses on the market. That'll work for the FF/FG property boom economic model, won't it.

AlekSmart

Godge wrote: »

This is the key mistake Irish people made. Housing is a fundamental human right but owning a house is not. So few Irish realise the difference.

:eek: BULLSEYE ! :eek:

Going Forward

gaius c wrote: »

Chief Risk Officer of Ulster Bank on RTE Drive Time yesterday. Says that 35% of mortgages in 90+ days arrears are paying zero toward the mortgage. He pulled no punches that he believes a lot of this is strategic defaulting and UB will move to repossess on all of this category as soon as the legal loophole is plugged.

Looks like the initial estimate of a third of mortgages in strategic default could be conservative and until the problem is tackled it's going to grow and grow until you'll basically be an idiot for paying your mortgage.

How are the "payers" going to fare in this scenario?

We're going to have another nama, where the cute hoors, who despite being broke, still live the life.

Very disheartening to hear of the scale of strategic defaulting.

AlekSmart

Going Forward wrote: »

How are the "payers" going to fare in this scenario?

We're going to have another nama, where the cute hoors, who despite being broke, still live the life.

Very disheartening to hear of the scale of strategic defaulting.

Very disheartening indeed,and the 21st Century's example of an "Irish Problem" requiring an "Irish Solution".

gaius c

Going Forward wrote: »

How are the "payers" going to fare in this scenario?

We're going to have another nama, where the cute hoors, who despite being broke, still live the life.

Very disheartening to hear of the scale of strategic defaulting.

There'll be some comeback against the folk salting the cash away somewhere they think is out of reach of the authorities but what do you do with folk who have spent the cash that should have gone on mortgage repayments?

Last Christmas, everybody commented that Dublin was rocking in the lead up with no sign of recession. Is the penny dropping about where this cash actually came from?

maninasia

noodler wrote: »

No they cannot be forced - the banks retain the final say.




Again, no.

25bn, I haven't heard anything even close to this tbh.

Are you sure you aren't confusing that figure with the amount we have put into both institutions to date?

The figure I have heard is 16 billion, it seems quite realistic due to the amount of mortgages currently in arrears.