Repossessed Properties

rodento

Looks like banks are stockpiling repossessed house's and as a result manipulating the property market

http://www.independent.ie/irish-news/banks-have-stockpile-of-1500-repossessed-properties-29917294.html

Raises questions on loads of fronts, like why don't the rent the properties to at least generate an income from them and sell them off to get the market moving again

Slideshowbob

It's quiet ironic that distressed owners probably had to give these back because they were not sweating these assets sufficiently ..... which is what the banks are doing now!

Or maybe the owners overpaid for the properties ...... on hold on didn't the banks get these values wrong too .....

gaius c

Slideshowbob wrote: »

It's quiet ironic that distressed owners probably had to give these back because they were not sweating these assets sufficiently ..... which is what the banks are doing now!

Or maybe the owners overpaid for the properties ...... on hold on didn't the banks get these values wrong too .....

Is this another "dem bloody banks" rant?

Godge

gaius c wrote: »

Is this another "dem bloody banks" rant?

Yes, the ones trying to get their money back to they can give us taxpayers our money back

OMD

rodento wrote: »

Looks like banks are stockpiling repossessed house's and as a result manipulating the property market

http://www.independent.ie/irish-news/banks-have-stockpile-of-1500-repossessed-properties-29917294.html

Raises questions on loads of fronts, like why don't the rent the properties to at least generate an income from them and sell them off to get the market moving again

The only question it raises is why do people read the independent. The report is based on figures in 3rd quarter of 2013
Repossessions in quarter 271
Properties sold in quarter 215

Much less of a story now isn't it? Probably why no other news agency bothered to report the figures.

Plates

Godge wrote: »

Yes, the ones trying to get their money back to they can give us taxpayers our money back

I don't tink dat u have a gud argumint dere

Atlantic Dawn

On account of the banks not having access to vast sums of foreign capital from which to lend their masterplan is flawed as the market of people with no requirement for a mortgage is limited.

OMD

Atlantic Dawn wrote: »

On account of the banks not having access to vast sums of foreign capital from which to lend their masterplan is flawed as the market of people with no requirement for a mortgage is limited.

There is no master plan. Banks are not stockpiling properties. Even if they were how many would they need to hold to genuinely influence the market? A reasonable guess would be 10,000 which would be about 25% of properties for sale. At the current rate, to reach even 2,000 properties it will take about 6 years. To reach 25% of the market and exert some real influence will take about 40 years. Some master plan.

Villa05

OMD wrote: »

There is no master plan. Banks are not stockpiling properties. Even if they were how many would they need to hold to genuinely influence the market? A reasonable guess would be 10,000 which would be about 25%.

Ahem, NAMA, ahem 40,000 in arrears of 2 years or more, cough, ahem

mr_seer

I don't think banks are overtly trying to manipulate the market but they are trying to serve their interests first and foremost. With European asset quality reviews coming up later this year, they don't want to crystallise losses on assets. That's why they have not put the assets on the market for sale. It is also worth mentioning that repossessions of family homes and BTLs haven't actually begun yet. The properties they hold were either taken from developers or situations where people handed back the keys. There are only about 500-600 houses actually for sale in the "bubble" area of South Dublin currently so even 300-400 repossessed properties hitting the market would put downward pressure on prices. It will happen in the second half of 2014

Frank Lee Midere

mr_seer wrote: »

I don't think banks are overtly trying to manipulate the market but they are trying to serve their interests first and foremost. With European asset quality reviews coming up later this year, they don't want to crystallise losses on assets. That's why they have not put the assets on the market for sale. It is also worth mentioning that repossessions of family homes and BTLs haven't actually begun yet. The properties they hold were either taken from developers or situations where people handed back the keys. There are only about 500-600 houses actually for sale in the "bubble" area of South Dublin currently so even 300-400 repossessed properties hitting the market would put downward pressure on prices. It will happen in the second half of 2014

Yes. I don't get where the idea that 1,000 properties wouldn't influence a market as there are about 2,800 on sale in Dublin at the moment.

Farmer Pudsey

So the banks have 50 odd property's on there hands that they have not sold. This will duly influence the market.

In reality they are repossing very little and it more than likly takes well over 3 months to sell same. I see an investment property being sold by a bank it is for sale for 3-4 months. It is in neither there's, your's or my interest that thet flog a property to the first bidder that comes along. In reality the market is nearly stabilised so banks have an idea of value's. Most of the time they sell at a discount to market and it is not in there interest to hold property as if it loses value it is they that lose while any improvment they cannot follow borrower for.

gaius c

Farmer Pudsey wrote: »

So the banks have 50 odd property's on there hands that they have not sold. This will duly influence the market.

In reality they are repossing very little and it more than likly takes well over 3 months to sell same. I see an investment property being sold by a bank it is for sale for 3-4 months. It is in neither there's, your's or my interest that thet flog a property to the first bidder that comes along. In reality the market is nearly stabilised so banks have an idea of value's. Most of the time they sell at a discount to market and it is not in there interest to hold property as if it loses value it is they that lose while any improvment they cannot follow borrower for.

Is it in their interest to sit on it, not earning a red cent (or having an impaired loan) while the bad loan taints the quality of their overall loan book?

Farmer Pudsey

gaius c wrote: »

Is it in their interest to sit on it, not earning a red cent (or having an impaired loan) while the bad loan taints the quality of their overall loan book?

Risk far out+weighs possible benefits. They are not in the business of property management. They would have to manage and maintain the stock. If they had large quanity's of houses the market will start to take this into account and it will prevent the recovery from continuing. The bad loans have already tainted there loan books and holding depreciating assets would not help either. Also holding on to houses might encourage those already in default not to take any action as the bank would be slow to hold a large stock while the spectacle of repossessed house being sole would concentrate the minds of the can pay won't brigade.

I might be worried if they had 3-4k houses unsold. 50 is hardly a huge stock and a few hundred would not matter

gaius c

Farmer Pudsey wrote: »

Risk far out+weighs possible benefits. They are not in the business of property management. They would have to manage and maintain the stock. If they had large quanity's of houses the market will start to take this into account and it will prevent the recovery from continuing. The bad loans have already tainted there loan books and holding depreciating assets would not help either. Also holding on to houses might encourage those already in default not to take any action as the bank would be slow to hold a large stock while the spectacle of repossessed house being sole would concentrate the minds of the can pay won't brigade.

I might be worried if they had 3-4k houses unsold. 50 is hardly a huge stock and a few hundred would not matter

Where are you getting the number 50 from?

An explanation of how continuing to accommodate borrowers with bad credit damages their credit rating taken from elsewhere (with permission):

Just had this conversation with a client in that very predicament.
He is a professional with a mortgage he couldn't service once it moved to I&C.
His question to me was :
'Why would the bank sell to someone else and be faced with a huge write-off, when they can just give me the same write-off, thus allowing me to make repayments'.

The answer is simple.

He cannot make his current repayments.
He now has bad credit.

If the bank write-off his debt and allow him to keep the property, they still have a loan on their books serviced by a client with bad credit.

If the bank sell the property and suffer a debt write-off in the process, at least the old loan is off their books.
Even if they fund the new mortgage, the new loan is serviced by someone with a clean/good credit rating.

Although suffering a similar loss write-off, the option of repossessing and selling the property improves the banks loan book and balance sheet.

Farmer Pudsey

OMD wrote: »

The only question it raises is why do people read the independent. The report is based on figures in 3rd quarter of 2013
Repossessions in quarter 271
Properties sold in quarter 215

Much less of a story now isn't it? Probably why no other news agency bothered to report the figures.

gaius c wrote: »

Where are you getting the number 50 from?

An explanation of how continuing to accommodate borrowers with bad credit damages their credit rating taken from elsewhere (with permission):

Alright so 56 is the figure from the third quarter of 2013. these six houses skew the figures completely

gaius c

That's from one quarter alone. With that kind of spin, you should be working for the government.

Farmer Pudsey

gaius c wrote: »

That's from one quarter alone. With that kind of spin, you should be working for the government.

Lets multiply it by 10 and you have 550 odd houses again will this destablise the market. I imagine that most of the houses the banks have unsold after 6-9 months are in area's that have limited market appeal or turnover. This would be like me taking cattle to the mart and taking a price that might be below average jsut because there is limited buyers around on that particular day.

The housing market is stabilising which is in most people interest. There are still bargins to be had but they are becoming fewer and fewer

Godge

Farmer Pudsey wrote: »

Alright so 56 is the figure from the third quarter of 2013. these six houses skew the figures completely

gaius c wrote: »

That's from one quarter alone. With that kind of spin, you should be working for the government.

This may be a complete non-story.

How long from the time a bank repossesses a property until the property is sold?

Hardly less than three months, even if the bank wishes to sell it immediately because of all the paperwork.

Therefore there is no way of showing, with that article that there is any stockpiling as the sale number of 215 may equal the repossession number from the previous quarter meaning that the banks have sold every repossessed property except for the ones most recently acquired.

Farmer Pudsey

Godge wrote: »

This may be a complete non-story.

How long from the time a bank repossesses a property until the property is sold?

Hardly less than three months, even if the bank wishes to sell it immediately because of all the paperwork.

Therefore there is no way of showing, with that article that there is any stockpiling as the sale number of 215 may equal the repossession number from the previous quarter meaning that the banks have sold every repossessed property except for the ones most recently acquired.

I agree and if repossessions rise the number of houses unsold after ever quarter will rise until after the number of repossessions falls. Even if the banks stragically sell houses it will not skew market as the only place it would make economic sence to hold houses is in the weeker part of the market. With houses selling well in Dublin they be stupid to hold property.

gaius c

Farmer Pudsey wrote: »

Lets multiply it by 10 and you have 550 odd houses again will this destablise the market. I imagine that most of the houses the banks have unsold after 6-9 months are in area's that have limited market appeal or turnover. This would be like me taking cattle to the mart and taking a price that might be below average jsut because there is limited buyers around on that particular day.

The housing market is stabilising which is in most people interest. There are still bargins to be had but they are becoming fewer and fewer

I notice that you carefully avoided responding to my explanation of why it is against a bank's best interests to repo and sell to a new credit worthy customer. Any chance you could respond this time?

Just had this conversation with a client in that very predicament.
He is a professional with a mortgage he couldn't service once it moved to I&C.
His question to me was :
'Why would the bank sell to someone else and be faced with a huge write-off, when they can just give me the same write-off, thus allowing me to make repayments'.

The answer is simple.

He cannot make his current repayments.
He now has bad credit.

If the bank write-off his debt and allow him to keep the property, they still have a loan on their books serviced by a client with bad credit.

If the bank sell the property and suffer a debt write-off in the process, at least the old loan is off their books.
Even if they fund the new mortgage, the new loan is serviced by someone with a clean/good credit rating.

Although suffering a similar loss write-off, the option of repossessing and selling the property improves the banks loan book and balance sheet.

Farmer Pudsey

gaius c wrote: »

I notice that you carefully avoided responding to my explanation of why it is against a bank's best interests to repo and sell to a new credit worthy customer. Any chance you could respond this time?

TBH I did not read that part of previous post. I think a big reason is fear that if they do it for those that can't pay they will also have to do for those that will not pay. Ideally this would be an ideal solution. Is this a family home or an investment property. I do not have the answer this is a busisness decision and it is hard to comment on an indvidual case unless one has all the facts.

gaius c

Fair enough.

OMD

gaius c wrote: »

I notice that you carefully avoided responding to my explanation of why it is against a bank's best interests to repo and sell to a new credit worthy customer. Any chance you could respond this time

Just had this conversation with a client in that very predicament.
He is a professional with a mortgage he couldn't service once it moved to I&C.
His question to me was :
'Why would the bank sell to someone else and be faced with a huge write-off, when they can just give me the same write-off, thus allowing me to make repayments'.

The answer is simple.

He cannot make his current repayments.
He now has bad credit.

If the bank write-off his debt and allow him to keep the property, they still have a loan on their books serviced by a client with bad credit.

If the bank sell the property and suffer a debt write-off in the process, at least the old loan is off their books.
Even if they fund the new mortgage, the new loan is serviced by someone with a clean/good credit rating.

Although suffering a similar loss write-off, the option of repossessing and selling the property improves the banks loan book and balance

Why? Money of course. But it depends on individual circumstances.

Reposing costs money mainly legal fees but also auctioneers fees

Selling a repossessed property is more difficult and likely to go for less than market value for a non repossessed property.

Person in property is likely willing to pay more if it is their family home. In other words, property loan 200K. Property nominally worth 100k. Bank will be lucky to walk away with 80k if they repossess. Person in property may not be able to cope with repayments on the 200k mortgage but if they had a 140k mortgage they may be able to pay (especially if they were coping with interest only as your post implies) and may want to do so to keep their home and avoid bankruptcy. In these circumstances it makes financial sense for the bank to offer a write down. Whether it makes overall business sense is a different matter but it is definitely not "a similar loss write off" as you maintain.

gaius c

OMD wrote: »

Why? Money of course. But it depends on individual circumstances.

Reposing costs money mainly legal fees but also auctioneers fees

Selling a repossessed property is more difficult and likely to go for less than market value for a non repossessed property.

Person in property is likely willing to pay more if it is their family home. In other words, property loan 200K. Property nominally worth 100k. Bank will be lucky to walk away with 80k if they repossess. Person in property may not be able to cope with repayments on the 200k mortgage but if they had a 140k mortgage they may be able to pay (especially if they were coping with interest only as your post implies) and may want to do so to keep their home and avoid bankruptcy. In these circumstances it makes financial sense for the bank to offer a write down. Whether it makes overall business sense is a different matter but it is definitely not "a similar loss write off" as you maintain.

You miss the entire point. That person has bad credit. They will taint the bank's loan book even if the mortgage is written down to what they can afford. It is better for the bank to take a larger write down and then lend a smaller amount to somebody with good credit.

OMD

gaius c wrote: »

You miss the entire point. That person has bad credit. They will taint the bank's loan book even if the mortgage is written down to what they can afford. It is better for the bank to take a larger write down and then lend a smaller amount to somebody with good credit.

I didn't miss the point of your post at all I was pointing out that it was a stupid point. Not only factually wrong but actually wrong. Loads of people are getting deals based on exactly the type of scenario I suggested. Did you not know that?

But God I love the way you think you couldn't be wrong so it must be people misunderstanding you. Hilarious.

Farmer Pudsey

gaius c wrote: »

You miss the entire point. That person has bad credit. They will taint the bank's loan book even if the mortgage is written down to what they can afford. It is better for the bank to take a larger write down and then lend a smaller amount to somebody with good credit.

If bank write down a mortgage to a borrower it is the same as taking a hit on repossession. The main fear of the banks is borrowers who may be jumping on the bandwagon. Because of this they may repossess some properties where it may make more since to give owner a discount

gaius c

OMD wrote: »

I didn't miss the point of your post at all I was pointing out that it was a stupid point. Not only factually wrong but actually wrong. Loads of people are getting deals based on exactly the type of scenario I suggested. Did you not know that?

But God I love the way you think you couldn't be wrong so it must be people misunderstanding you. Hilarious.

You didn't point out anything. You just repeated your fallacy and made no mention of the substantive point of my post, which is that borrowers with bad credit ratings increase bank borrowing costs and when I point out that you missed the point, you got all defensive.

gaius c

Farmer Pudsey wrote: »

If bank write down a mortgage to a borrower it is the same as taking a hit on repossession. The main fear of the banks is borrowers who may be jumping on the bandwagon. Because of this they may repossess some properties where it may make more since to give owner a discount

Nope because when they take the one-time hit on repossession, they then give a mortgage to somebody with good credit and their borrowing costs decrease & their margins improve.
The guy with bad credit "sits out" for a period of time to expurge his poor credit history and can come back later for a mortgage.

Your way sees the guy with bad credit remaining on the bank's books for the remainder of the entire mortgage. Unless he can pony up the arrears, that loan is marked "impaired" for the full lifetime of the mortgage and hangs around the bank borrowing costs like a bad smell.

OMD

gaius c wrote: »

You didn't point out anything. You just repeated your fallacy and made no mention of the substantive point of my post, which is that borrowers with bad credit ratings increase bank borrowing costs and when I point out that you missed the point, you got all defensive.

No. You have a theory why banks won't give write downs to people. That is fine in theory but it totally ignores the fact that banks are giving write downs to people.
You have twice said I missed the point if your list and again I repeat I have not missed the point. Your point is simply not borne out by facts.

gaius c

OMD wrote: »

No. You have a theory why banks won't give write downs to people. That is fine in theory but it totally ignores the fact that banks are giving write downs to people.
You have twice said I missed the point if your list and again I repeat I have not missed the point. Your point is simply not borne out by facts.

Really? Citations please.

Chazz Michael Michaels

gaius c wrote: »

Really? Citations please.

I work in a bank. I worked in two, actually. They do, always have.

OMD

gaius c wrote: »

Really? Citations please.

As the previous poster said Banks always have and currently are giving write diwns in particular situations.
Matthew Elderfield accepted this 12 months ago saying "some form of debt relief makes sense but it is up to each bank".

From a couple of weeks ago:
"The Department of Finance confirmed that 49,304 permanent mortgage restructures have been reached between financial institutions and their customers". Did you not understand that a large portion of these would have been given a write down? Otherwise it is not a permanent solution

Of course some May get easier write downs than others:
http://www.independent.ie/business/personal-finance/property-mortgages/property-investors-given-50pc-mortgage-writeoffs-29505899.html

"Some fortunate mortgage-holders are now being offered 50pc writedowns by foreign financial companies which recently bought bad loan books from Irish lenders."

"Karl Deeter of Irish Mortgage Brokers said: "It is happening and we'd better believe it. I have come across customers who have been offered even more than 50pc writedowns."

Villa05

OMD wrote: »

As the previous poster said Banks always have and currently are giving write diwns in particular situations.
Matthew Elderfield accepted this 12 months ago saying "some form of debt relief makes sense but it is up to each bank".

From a couple of weeks ago:
"The Department of Finance confirmed that 49,304 permanent mortgage restructures have been reached between financial institutions and their customers". Did you not understand that a large portion of these would have been given a write down? Otherwise it is not a permanent solution

Can you show me the write-downs in these "permanent" mortgage restructures

http://businessetc.thejournal.ie/mortgages-1154823-Oct2013/

Looks like a continuation of the can kicking exercise to me. How a central bank can put its name to report claiming that interest only is a long term solution. madness

gaius c

OMD wrote: »

As the previous poster said Banks always have and currently are giving write diwns in particular situations.
Matthew Elderfield accepted this 12 months ago saying "some form of debt relief makes sense but it is up to each bank".

From a couple of weeks ago:
"The Department of Finance confirmed that 49,304 permanent mortgage restructures have been reached between financial institutions and their customers". Did you not understand that a large portion of these would have been given a write down? Otherwise it is not a permanent solution

Are you sure that they didn't get the write-downs in return for giving up the asset the loan was secured against? I mean really really sure?

Of course some May get easier write downs than others:
http://www.independent.ie/business/personal-finance/property-mortgages/property-investors-given-50pc-mortgage-writeoffs-29505899.html

"Some fortunate mortgage-holders are now being offered 50pc writedowns by foreign financial companies which recently bought bad loan books from Irish lenders."

"Karl Deeter of Irish Mortgage Brokers said: "It is happening and we'd better believe it. I have come across customers who have been offered even more than 50pc writedowns."

You need to do a bit better than swallowing Indo headlines verbatim. To get that 50% writedown, they need to come up with the other 50% in cold hard cash. Loan resolution companies are not long term players. They go in low & hard. If you give them the quick cash they want, they'll play ball with you. Otherwise, they'll repossess, sell and still make a tidy profit on the impaired loan that they bought for buttons. Obviously, they'll make more profit if they don't have to go through the messy business of repossession but that's factored into the price they pay for impaired loans.

How many folks in arrears are going to have half the original loan value (probably not far off the current market value) in cash ready to go?
Of course they won't but because they've been offered a "solution", the repossession process will move along much quicker.

OMD

gaius c wrote: »

Are you sure that they didn't get the write-downs in return for giving up the asset the loan was secured against? I mean really really sure?.

Of course you are right. I forgot all about the 50,000 properties the banks repossessed. Surprised it didn't make the news to be honest.

gaius c

Of course there's write downs. There has to be to get beyond this debt crisis but where people are mistaken is thinking they can get debt writedowns AND keep the asset the debt is secured against in all but the most exceptional cases.

“About 26 of the deals involved the property being sold or surrendered. About half of those involved got the remaining debt completely written off. The rest involved monthly payments on the residual debt, following sale, for up to seven years,” he said.

Linky

OMD

gaius c wrote: »

Of course there's write downs. There has to be to get beyond this debt crisis but where people are mistaken is thinking they can get debt writedowns AND keep the asset the debt is secured against in all but the most exceptional cases.

Linky

Different quote about AIB.

http://www.rte.ie/news/2014/0204/502279-aib-split-mortgages/
AIB is to write off debt immediately for distressed borrowers who the bank selects for split mortgages.

In addition to having some debt written off at the beginning of the new arrangement, they will also have some of the warehoused portion of the loan written off if they stick with the split mortgage repayment schedule.

It is understood the new structure will contain features to reward the repayment of the warehoused portion of a loan in advance by writing off further amounts of debt.

The arrangement is expected to apply to a limited number of borrowers for whom normal forbearance, such as term extension, does not work.

AIB will select customers who can avail of the product based on their disposable income after living expenses.

It is understood it will be for cooperating customers only.

gaius c

OMD wrote: »

Different quote about AIB.

http://www.rte.ie/news/2014/0204/502279-aib-split-mortgages/
AIB is to write off debt immediately for distressed borrowers who the bank selects for split mortgages.

In addition to having some debt written off at the beginning of the new arrangement, they will also have some of the warehoused portion of the loan written off if they stick with the split mortgage repayment schedule.

It is understood the new structure will contain features to reward the repayment of the warehoused portion of a loan in advance by writing off further amounts of debt.

The arrangement is expected to apply to a limited number of borrowers for whom normal forbearance, such as term extension, does not work.

AIB will select customers who can avail of the product based on their disposable income after living expenses.

It is understood it will be for cooperating customers only.

Devil is in the detail. Write off is only on the portion warehoused (according to RTE news) and do they give up their tracker thus wiping out the gain of the write off?

Chazz Michael Michaels

gaius c wrote: »

Devil is in the detail. Write off is only on the portion warehoused (according to RTE news) and do they give up their tracker thus wiping out the gain of the write off?

Yeah. What a rip off. They should be handing out free lunches.

50% off the balance for all! Now, where will the capital come from... hmm.....

on the river

Chazz Michael Michaels wrote: »

I work in a bank. I worked in two, actually. They do, always have.

YOU WORK IN A BANK:eek::eek: . THEN YOU MUST KNOW ABOUT BANK EMOLOYEES GETTING DISCOUNTS ON THEIR LOANS WHILE THE ORDINARY PERSON SUFFERS :mad:. SOME THINGS NERVER CHANGE

Chazz Michael Michaels

on the river wrote: »

YOU WORK IN A BANK:eek::eek: . THEN YOU MUST KNOW ABOUT BANK EMOLOYEES GETTING DISCOUNTS ON THEIR LOANS WHILE THE ORDINARY PERSON SUFFERS :mad:. SOME THINGS NERVER CHANGE

What? You'll have to speak up!

on the river

Chazz Michael Michaels wrote: »

What? You'll have to speak up!

Ya just like your co workers did when they got their loans written off while everyone else was suffering. So ye definitly did SPEAK UP !!!!

Chazz Michael Michaels

on the river wrote: »

Ya just like your co workers did when they got their loans written off while everyone else was suffering. So ye definitly did SPEAK UP !!!!

LOL. That makes no sense. What a mental post.

ezra_pound

Do you remember the harry Enfield dime bar ads?

'Hey that bloke's a nutter.
Oi nutter!'

great ads.

OMD

gaius c wrote: »

Devil is in the detail. Write off is only on the portion warehoused (according to RTE news) and do they give up their tracker thus wiping out the gain of the write off?

For those who still do not understand what is happening in the banks these days. From RTE website.


"AIB has written off €150,000 from a €400,000 loan on a family home and allowed the homeowners to keep their property.

It is the largest writedown involving a family home which was not repossessed.

The agreement was negotiated informally between AIB and its customer through a third-party broker, the Irish Mortgage Holders Organisation.

Last November, AIB entered into an arrangement with the Irish Mortgage Holders Organisation, a group which was set-up to help struggling borrowers.

Since the arrangement was put in place, a number of deals have been done between the bank and its customers which involve debt writedown.

This latest deal involves a married couple, who have two children, with a mortgage of €400,000, which had become unmanageable.

Under the deal, AIB agreed to write off €150,000 of the loan, as well as parking a portion of it on condition that the owners continue to pay capital and interest on around €200,000."

everdead.ie

gaius c wrote: »

You need to do a bit better than swallowing Indo headlines verbatim. To get that 50% writedown, they need to come up with the other 50% in cold hard cash. Loan resolution companies are not long term players.

Sorry I just saw this thread now and I don't understand this.

My question is if you pay the other 50% in cash it isn't a write down you are just paying off the capital.

However what the loan companies do do is they buy distressed loans for less than the book value so AIB, NAMA, BOI etc all book that as losses and then the loan company can then offer write downs up to the reduced amount they bought the loans for.

So if company A buys a 250,000 loan from AIB for 200,000 then company A can offer a 50,000 write down still coming out on top.

This to my knowledge is no different from AIB dealing directly with a customer and offering them a 50,000 write down unless they don't believe the person can actually repay the 200,000 and the property is worth significantly less than 200,000 now so if they reposes they will have to book a bigger loss.

gaius c

OMD wrote: »

For those who still do not understand what is happening in the banks these days. From RTE website.


"AIB has written off €150,000 from a €400,000 loan on a family home and allowed the homeowners to keep their property.

It is the largest writedown involving a family home which was not repossessed.

The agreement was negotiated informally between AIB and its customer through a third-party broker, the Irish Mortgage Holders Organisation.

Last November, AIB entered into an arrangement with the Irish Mortgage Holders Organisation, a group which was set-up to help struggling borrowers.

Since the arrangement was put in place, a number of deals have been done between the bank and its customers which involve debt writedown.

This latest deal involves a married couple, who have two children, with a mortgage of €400,000, which had become unmanageable.

Under the deal, AIB agreed to write off €150,000 of the loan, as well as parking a portion of it on condition that the owners continue to pay capital and interest on around €200,000."

I wonder if anybody in that household works for AIB.
*whistles*

everdead.ie wrote: »

Sorry I just saw this thread now and I don't understand this.

My question is if you pay the other 50% in cash it isn't a write down you are just paying off the capital.

However what the loan companies do do is they buy distressed loans for less than the book value so AIB, NAMA, BOI etc all book that as losses and then the loan company can then offer write downs up to the reduced amount they bought the loans for.

So if company A buys a 250,000 loan from AIB for 200,000 then company A can offer a 50,000 write down still coming out on top.

This to my knowledge is no different from AIB dealing directly with a customer and offering them a 50,000 write down unless they don't believe the person can actually repay the 200,000 and the property is worth significantly less than 200,000 now so if they reposes they will have to book a bigger loss.

It is different because they have cut their losses and outsourced the messy bits to specialist companies who can make a killing.