Scale of Irish mortgage default is unprecedented

sawdoubters

Scale of Irish mortgage default is unprecedented



http://www.irishtimes.com/business/sectors/financial-services/scale-of-irish-mortgage-default-is-unprecedented-1.1676749

Nino Brown

Two words come to mind. "Moral Hazard"

The_Conductor

Nino Brown wrote: »

Two words come to mind. "Moral Hazard"

If you're using that term- unfortunately you have to come to the conclusion that a significant cadre of people- on both sides of the equation, quite simply, do not have morals, period.

gaius c

A very poor analysis of the figures present.

On the basis of this rather pessimistic analysis, the banks should really be pushing people who have jobs but can’t afford their mortgages to sell up and trade down. But when you have 100,000 people in that situation – many of whom are in negative equity – that is not really a runner either.

He appears to have completely forgotten that the data he's referencing shows over half of the arrears are actually in positive equity.

jmayo

sawdoubters wrote: »

Scale of Irish mortgage default is unprecedented


http://www.irishtimes.com/business/sectors/financial-services/scale-of-irish-mortgage-default-is-unprecedented-1.1676749

I just loved some of the comments on that page.
Good old poster boobycocks thinks all the mortgage defaulters should just start squatting and then move to UK to dump their debts on the banks.

Except morons like him never appear to be able to join the dots far enough along to figure out the banks debts are the governments debts (i.e. the taxpayers) and/or the debts of all the other bank customers.

If there is going to be any massive debt forgiveness and writeoffs the money has to come from somewhere and who thinks we could be seeing Cyprus part deux ?

Surely something has to give at some stage, we can't live the rest of the century in limbo.

drumswan

jmayo wrote: »

I just loved some of the comments on that page.
Good old poster boobycocks thinks all the mortgage defaulters should just start squatting and then move to UK to dump their debts on the banks.

Except morons like him never appear to be able to join the dots far enough along to figure out the banks debts are the governments debts (i.e. the taxpayers) and/or the debts of all the other bank customers.

If there is going to be any massive debt forgiveness and writeoffs the money has to come from somewhere and who thinks we could be seeing Cyprus part deux ?

Surely something has to give at some stage, we can't live the rest of the century in limbo.

Its every man for himself tbh

The Spider

So lets see the government told people it was their patriotic duty to buy houses in the boom, Tom Parlon head of the construction federation was on the radio nonstop, as was bertie and his suicide remarks.

All these people go out and patriotically buy houses, then the new government raises taxes, and puts condition in place so that salaries are cut, preventing people paying for the houses they patriotically bought under the previous government.

Previous government wants to be re-elected, announces plans to cut the property tax and introduce debt forgiveness for [people underwater.

I wonder how many votes they'd get? I'd say they'd have a huge majority in a general election....and we begin the cycle again.

Nino Brown

The_Conductor wrote: »

If you're using that term- unfortunately you have to come to the conclusion that a significant cadre of people- on both sides of the equation, quite simply, do not have morals, period.

They have morals, they just convince themselves the problem is somebody else's, ie. the government made me borrow the money, the banks shouldn't have loaned me the money etc. And until people are made accept the consequences of their actions the moral hazard remains.

Muahahaha

There's a chart over on the Pin outlining the extent of Irish mortgage defaults. I'd like to see it again but can't find it, I just remember it as being truly frightening, the numbers more than 6 months behind on their mortgage are huge. If they all go into full default it's hard to see how we can avoid a second crash.

Unless our government has other plans for debt forgiveness, I.e. use taxpayer money to bail out 100.000 mortgages.

newmug

sawdoubters wrote: »

Scale of Irish mortgage default is unprecedented



http://www.irishtimes.com/business/sectors/financial-services/scale-of-irish-mortgage-default-is-unprecedented-1.1676749

In all fairness, this entire mess is not unprecedented at all. Far worse sh1t has happened to us in the past, and far worse things will happen again. Just thank God for every day that comes.

SpaceTime

Nino Brown wrote: »

Two words come to mind. "Moral Hazard"

Several other words come up too:

Banks need to be able to add and subtract!

They granted mortgages that were quite obviously unsustainable even under slight stress and they granted them on the basis of boom time peak incomes that were absolutely abnormal and unprecedented.

gaius c

GARDAI and teachers are among the biggest group of debtors enquiring about bankruptcy, despite the adverse impact on their careers of going bust.

Let's be honest, we all suspected this would be the case.

The_Conductor

gaius c wrote: »

GARDAI and teachers are among the biggest group of debtors enquiring about bankruptcy, despite the adverse impact on their careers of going bust.

Let's be honest, we all suspected this would be the case.

How so?
Why are you suggesting that Gardai, Teachers (and other public sector employees) are more likely than others to look at bankruptcy proceedings?
I'm guessing most public sector employees are down at least 30% and possibly 40% in their NET take home pay- between the salary cuts, the extra public sector levies, and the virtual abolition of overtime and other payments that were once viewed by banks and other lenders as part of their core pay.

Examining their options is prudent. Exercising them- particularly when it might destroy their career in Ireland- may not be prudent........

The first bankruptcy was a civil servant from Social and Family and Affairs in Donegal (if my memory serves me right).

Muahahaha

The_Conductor wrote: »

How so?
Why are you suggesting that Gardai, Teachers (and other public sector employees) are more likely than others to look at bankruptcy proceedings?
I'm guessing most public sector employees are down at least 30% and possibly 40% in their NET take home pay- between the salary cuts, the extra public sector levies, and the virtual abolition of overtime and other payments that were once viewed by banks and other lenders as part of their core pay.

Examining their options is prudent. Exercising them- particularly when it might destroy their career in Ireland- may not be prudent........

The first bankruptcy was a civil servant from Social and Family and Affairs in Donegal (if my memory serves me right).

I think it is probably because back in the boom banks were absolutely throwing money at public servants with secure jobs. Like they were throwing money at everyone but civil and public servants could have been approved for multiples what others in the private sector were approved for.

I'm not too sure about teachers but Gardai tend to have a history of property investment in Ireland. IIRC the Garda Credit Unions were telling their members that property investment was a fail safe option for their steadily increasing pay packets during the Celtic tiger years.

Last year I dated a Gard and a prison officer. Between the two of them they were €1.6m in debt and only 34/35 years of age. I don't know what the banks were thinking but prudent lending did not come into it.

Nino Brown

SpaceTime wrote: »

They granted mortgages that were quite obviously unsustainable even under slight stress and they granted them on the basis of boom time peak incomes that were absolutely abnormal and unprecedented.

That's strange, they didn't give me an unaffordable mortgage. Oh that's right, they only gave them to people who asked for them.

johnnyskeleton

gaius c wrote: »

A very poor analysis of the figures present.

He appears to have completely forgotten that the data he's referencing shows over half of the arrears are actually in positive equity.

People who are in arrears and have positive equity are exactly the type of person the banks should repossess against ie people who are asset rich but can't pay their debts and living beyond their means.

If I said I couldn't pay my mortgage but had 10k in the bank, should the mortgage company exercise forebearance towards me? If no, then why is it different with the asset of a house?

The banks could really fix their balance sheet with the sale of a house to repay an underperforming asset in full.

SpaceTime

Nino Brown wrote: »

That's strange, they didn't give me an unaffordable mortgage. Oh that's right, they only gave them to people who asked for them.

They basically didn't do any risk assessment.

One thing that is ridiculous though is that they're treating investment buy to let type setups as if they are regular mortgage holders.

Investment properties that are in arrears should be repossessed.

They should also insist on a bit of reality. Downsizing or downscaling etc should be a requirement. I don't want to see people out on the street but I also don't want to see people waltzing off with luxury homes that they couldn't ever afford.

There has to be a bit of sense and justice to it.

The_Conductor

SpaceTime wrote: »

They basically didn't do any risk assessment.

In many cases they didn't.
However....... (and playing devils advocate here)........
Even the most prudent of lenders wouldn't have foreseen 400,000 public sector employees having a 30-40% cut in their net pay.

Many silly loans were given out- but so too have circumstances beyond anyone's comprehension played a large part too.

Knock overtime and allowances off most employees, and they will hurt badly- and then compound it with paycuts and new taxes- and well- we all know what its like out there...........

gaius c

Muahahaha wrote: »

I think it is probably because back in the boom banks were absolutely throwing money at public servants with secure jobs. Like they were throwing money at everyone but civil and public servants could have been approved for multiples what others in the private sector were approved for.

I'm not too sure about teachers but Gardai tend to have a history of property investment in Ireland. IIRC the Garda Credit Unions were telling their members that property investment was a fail safe option for their steadily increasing pay packets during the Celtic tiger years.

Last year I dated a Gard and a prison officer. Between the two of them they were €1.6m in debt and only 34/35 years of age. I don't know what the banks were thinking but prudent lending did not come into it.

This. There was (and still is to some extent) serious group think amongst guards and teachers as to the virtues of property for investment.

gaius c

johnnyskeleton wrote: »

People who are in arrears and have positive equity are exactly the type of person the banks should repossess against ie people who are asset rich but can't pay their debts and living beyond their means.

If I said I couldn't pay my mortgage but had 10k in the bank, should the mortgage company exercise forebearance towards me? If no, then why is it different with the asset of a house?

The banks could really fix their balance sheet with the sale of a house to repay an underperforming asset in full.

The suspicion/speculation is that even moving on these will add enough supply to the market that prices would drop thus creating a new batch of NE arrears.

Balmed Out

gaius c wrote: »

This. There was (and still is to some extent) serious group think amongst guards and teachers as to the virtues of property for investment.

Anecdotes abound of guards buying a home wherever stationed and using it as a buy to let afterwards but I'm not aware of or heard of any teachers doing the same

strandroad

Balmed Out wrote: »

Anecdotes abound of guards buying a home wherever stationed and using it as a buy to let afterwards but I'm not aware of or heard of any teachers doing the same

Anyone renting in Dublin for a while would have come across a Garda landlord or two I think. More often than not with multiple properties.

The_Conductor

Perhaps I've underestimated the prevalence of these Garda/Teacher landlords- if so, I'm sorry, I don't have a lot of sympathy- repossess the properties, sell them- and if the person decides bankruptcy is a means to clear their debts- so be it- but I don't think it should be at a cost to them of their jobs- and if there are rules about bankrupts not being eligible to be a serving teacher or Garda- these rules should surely be looked at- as there is little to be gained from tossing them onto the dole queue.

OMD

We should put some figures on the extent of the arrears. Excluding the buy to let market:
The average person in arrears has arrears of €15,000.
For those in arrears less than 6 months the average amount of that arrears is a little over €2,400
For those over 6 months in arrears the average arrears is €24,500

Total arrears is €2.2 billion. To put that in context, in the last year overall mortgage debt reduced by €2.7 billion.

The_Conductor

When you dissect the figures like that- it rapidly becomes obvious- there are two very different approaches needed for the two different groups. In which case- aside from a reluctance on the part of lenders to crystalise their losses- why the hell are we not chasing the BTL arrears?

Nino Brown

The_Conductor wrote: »

When you dissect the figures like that- it rapidly becomes obvious- there are two very different approaches needed for the two different groups. In which case- aside from a reluctance on the part of lenders to crystalise their losses- why the hell are we not chasing the BTL arrears?

They are now, the banks are appointing receivers to BTL properties all over the place. Repossession is complicated, but receivership seems to be a lot more straight forward.

jmayo

The Spider wrote: »

So lets see the government told people it was their patriotic duty to buy houses in the boom, Tom Parlon head of the construction federation was on the radio nonstop, as was bertie and his suicide remarks.

I don't ever recall anyone saying it was your patriotic duty to buy property.
And what type of adult believes a word from a politican, nevermind a lying backstabbing two faced gimp ?
Oh yeah those who are bloody gullible and/or greedy.

The Spider wrote: »

All these people go out and patriotically buy houses, then the new government raises taxes, and puts condition in place so that salaries are cut, preventing people paying for the houses they patriotically bought under the previous government.

What are you on about ?
What is this cr** about patriotically buying houses ??
Are you trying to say that people who bought property at silly prices were somehow more patriotic than those who had the cop on to know it was a bloody massive bubble ?

For every much put upon first time buyer that we always hear about looking for a family HOME, there was some eejit wantabee landlord, someone who thought they should have a Southfork sytle house with stables.
A lot of people bought houses out of greed and also keeping up the with Jones.
Except the Jones often were buying the lifestyle with some ones elses money as well.

There was a major mindset at play.
"Shure hasn't Willie's house down the road doubled in value so it is time to get on the ladder, hasn't Mary got two investment properties already that have doubled in value, hasn't uncle Jimmy just remortgaged to add 1000 sq metres of decking with a hot tub, hasn't someones sister wice removed remortgaged twice to buy pads in Bulgaria and Cape Verde whereever the hell that is. "
There was a lot of sheer lunacy about.

The Spider wrote: »

Previous government wants to be re-elected, announces plans to cut the property tax and introduce debt forgiveness for [people underwater.

I wonder how many votes they'd get? I'd say they'd have a huge majority in a general election....and we begin the cycle again.

Dream on boy.
No matter how much you wish for it, we can't begin the cycle again.
We cannot create another bubble to get us out of the current fallout form the last one.
We have lost multiple banks, the foreign ones are trying to get out and the indegenous ones are sucking at the teat of the taxpayer.
Oh and there is no source of cheap credit world wide willing to give money to the Irish.

SpaceTime wrote: »

Several other words come up too:

Banks need to be able to add and subtract!

So do some borrowers.

gaius c wrote: »

GARDAI and teachers are among the biggest group of debtors enquiring about bankruptcy, despite the adverse impact on their careers of going bust.

Let's be honest, we all suspected this would be the case.

Shure the Gards had to buy more property seen that the taxi business was deregulated.

on_my_oe

We had nine apartments repossessed in our block, eight of which were BTLs; four have gone on the market. They were sold for 28% of their boom time price. The developer had a further 20 apartments not sold, and these are in Nama... None of these have appeared on the market (as yet).

So it does appear the BTLs are being repossessed... But those in negative equity, whether squatting or genuine, are being largely left alone.

Part of me is frustrated that I'm paying rent, scrimping for a deposit, yet there are people who are not paying their mortgage living in a house I would (potentially, based on location) like to the opportunity to buy!

SpaceTime

The_Conductor wrote: »

Perhaps I've underestimated the prevalence of these Garda/Teacher landlords- if so, I'm sorry, I don't have a lot of sympathy- repossess the properties, sell them- and if the person decides bankruptcy is a means to clear their debts- so be it- but I don't think it should be at a cost to them of their jobs- and if there are rules about bankrupts not being eligible to be a serving teacher or Garda- these rules should surely be looked at- as there is little to be gained from tossing them onto the dole queue.

No issue about bankrupt teachers.
It only applies to TDs and Gardai. The logic was that they could be 'bought' too easily.
However, maybe that no longer makes sense with modern bankruptcy. In the days that was legislated for, bankrupts were often absolutely destroyed by the system with 12+ years and possibly even debtors prison.

At one stage you were put in the debtors' house and if you wanted to go out to work or do business you had to leave a family member in jail as a deposit to ensure you returned!

In a modern sense, I would prefer to see a bankrupt garda with the possibly of rebuilding their life after a couple of years than a hopelessly insolvent Garda trying to hide their situation for fear of losing their job.

I think the current situation leaves people more open to blackmail and influence than just letting them use normal debt relief tools in an open way.

GavMan

The_Conductor wrote: »

In many cases they didn't.
However....... (and playing devils advocate here)........
Even the most prudent of lenders wouldn't have foreseen 400,000 public sector employees having a 30-40% cut in their net pay.

Many silly loans were given out- but so too have circumstances beyond anyone's comprehension played a large part too.

Knock overtime and allowances off most employees, and they will hurt badly- and then compound it with paycuts and new taxes- and well- we all know what its like out there...........

30-40%...really? I've an SIL who is a civil servant and its nothing like that. Not sure of her grade but somewhere mid level.

The_Conductor

GavMan wrote: »

30-40%...really? I've an SIL who is a civil servant and its nothing like that. Not sure of her grade but somewhere mid level.

I was going by an actual cut of 20-25% and then the removal of allowances, overtime and other payments- that were common place (and it would appear counted towards the multiples that lenders were willing to allow to Gardai etc). On top of that- where pension contributions, outside of the ordinary PRSI deductions for any employee- were not the norm in the public sector- now there is the levy towards pensions- and meanwhile the fund builtup to fund public sector pensions and PRSI pensions- has been depleted bailing out the banks- so thats gones......

All a mess, come what may.

The Spider

jmayo wrote: »

I don't ever recall anyone saying it was your patriotic duty to buy property.
And what type of adult believes a word from a politican, nevermind a lying backstabbing two faced gimp ?
Oh yeah those who are bloody gullible and/or greedy.



What are you on about ?
What is this cr** about patriotically buying houses ??
Are you trying to say that people who bought property at silly prices were somehow more patriotic than those who had the cop on to know it was a bloody massive bubble ?

For every much put upon first time buyer that we always hear about looking for a family HOME, there was some eejit wantabee landlord, someone who thought they should have a Southfork sytle house with stables.
A lot of people bought houses out of greed and also keeping up the with Jones.
Except the Jones often were buying the lifestyle with some ones elses money as well.

There was a major mindset at play.
"Shure hasn't Willie's house down the road doubled in value so it is time to get on the ladder, hasn't Mary got two investment properties already that have doubled in value, hasn't uncle Jimmy just remortgaged to add 1000 sq metres of decking with a hot tub, hasn't someones sister wice removed remortgaged twice to buy pads in Bulgaria and Cape Verde whereever the hell that is. "
There was a lot of sheer lunacy about.



Dream on boy.
No matter how much you wish for it, we can't begin the cycle again.
We cannot create another bubble to get us out of the current fallout form the last one.
We have lost multiple banks, the foreign ones are trying to get out and the indegenous ones are sucking at the teat of the taxpayer.
Oh and there is no source of cheap credit world wide willing to give money to the Irish.



So do some borrowers.



Shure the Gards had to buy more property seen that the taxi business was deregulated.

Ah well doesn't matter, debts are going to be written down anyway AIB have said they're going to write down the debt.

http://www.thejournal.ie/aib-split-mortgage-debt-write-off-1300195-Feb2014/

On the news last night they're going to do it for at least 10 thousand, this is the start of it.

Like I said from the beginning debts will be written down.

techdiver

The Spider wrote: »

Ah well doesn't matter, debts are going to be written down anyway AIB have said they're going to write down the debt.

http://www.thejournal.ie/aib-split-mortgage-debt-write-off-1300195-Feb2014/

On the news last night they're going to do it for at least 10 thousand, this is the start of it.

Like I said from the beginning debts will be written down.

I saw that on the news last night alright.

I suppose the lesson to be learnt here is never be prudent in this country as you will not be asked to live with your responsibilities. So just go out and borrow as much as you can regardless of your ability to re-pay.

The rest of us tax payers will pick up the tab though, whilst these people are allowed to live in houses they can't afford. Where is the incentive for neighbour A to pay their mortgage when neighbour B is getting part of their split mortgage written off?

Ireland is a great little country!

The_Conductor

Its only for split mortgage customers- who have a hope of repaying a lower amount, have made full disclosures to the bank- and the debt write down is a portion of the parked (delayed) portion of the mortgage, providing all terms and conditions of the first loan are adhered to.

Aka- its a tiny subset of customers- and not likely to be extended beyond this small group.

Its also predicted that of those who qualify for this limited offer, many will decide the terms associated with it are too onerous to make it a viable option.

Essentially- you'd be subject to pretty much the same rules as you would under a Personal Insolvency Plan- only the bank would be the sole lender involved. Many people may just say- 'bugger this for a lark- lets go the whole hog, and avail of a PIP instead'.

The Spider

techdiver wrote: »

I saw that on the news last night alright.

I suppose the lesson to be learnt here is never be prudent in this country as you will not be asked to live with your responsibilities. So just go out and borrow as much as you can regardless of your ability to re-pay.

The rest of us tax payers will pick up the tab though, whilst these people are allowed to live in houses they can't afford. Where is the incentive for neighbour A to pay their mortgage when neighbour B is getting part of their split mortgage written off?

Ireland is a great little country!

Simple fact is all boom time mortgages will be written down to their current value, this is being put out as a few customers, but eventually it'll go to everyone.

People can talk about moral hazard all they want, but the fact is, in the boom everyone was encouraged to buy property, from the government, the media and the banks.

Most people aren't on the internet looking at property sites, and even less were on it in 2002-2007, broadband was non existant, either were smartphones, so the only information the vast majority went on, was what they were being told from the pillars of society and they all said buy property.

The debts will be written down, and that's that.

The Spider

The_Conductor wrote: »

Its only for split mortgage customers- who have a hope of repaying a lower amount, have made full disclosures to the bank- and the debt write down is a portion of the parked (delayed) portion of the mortgage, providing all terms and conditions of the first loan are adhered to.

Aka- its a tiny subset of customers- and not likely to be extended beyond this small group.

Its also predicted that of those who qualify for this limited offer, many will decide the terms associated with it are too onerous to make it a viable option.

Essentially- you'd be subject to pretty much the same rules as you would under a Personal Insolvency Plan- only the bank would be the sole lender involved. Many people may just say- 'bugger this for a lark- lets go the whole hog, and avail of a PIP instead'.

Yeah at the moment, this is called flying a kite, eventually it'll be brought out to all other customers, it's either write down the debt or people can declare themselves bankrupt, and then the bank gets very little.

Guy from new beginning was on George Hook last night saying going bankrupt was the right thing for the vast majority as they'd get to keep the family home, unless it was a massive trophy house, if that happens the banks'll get even less.

The bankrupt route would allow the economy to reboot.

The_Conductor

The Irish Times have an excellent worked example here:

http://www.irishtimes.com/business/sectors/financial-services/aib-to-write-off-debt-for-some-homeowners-in-arrears-1.1679593

Essentially:

Say a borrower has outstanding mortgage obligations of €300,000 but the current value of their property is assessed at €200,000, that €200,000 figure becomes the first tranche, the balance of €100,000 parked for repayment.

It is understood that AIB will, in addition, write off up to 20 per cent of the first tranche.

That means up to €40,000 of the €200,000 in the example above will be written off by the bank immediately – leaving troubled homeowners servicing a mortgage of €160,000, nearly half the €300,000 outstanding.

Those who meet the terms of the new mortgage payments for the first five years will also receive a 5 per cent write off on the balance.

If they continue to meet the terms of the loan for another five years, they will be given a 5 per cent write off on the warehoused portion of the loan.

Its thought that there is potentially 1,100 possible customers who may qualify for this product- in addition to around 430 current split mortgage customers who are in good standing- just over 1,500 customers in total.

techdiver

The Spider wrote: »

People can talk about moral hazard all they want, but the fact is, in the boom everyone was encouraged to buy property, from the government, the media and the banks.

Most people aren't on the internet looking at property sites, and even less were on it in 2002-2007, broadband was non existant, either were smartphones, so the only information the vast majority went on, was what they were being told from the pillars of society and they all said buy property.

This is irrelevant. People need to take responsibility for their actions. Blaming the government etc is typical immature Irish reaction when something goes wrong for some one in this country. People borrowed the money, now I have to help pay it back for them!

What's the excuse going to be for the people who are paying way over the odds at the moment in Dublin? They have broadband and access to information. I'm sure they will find some one else to blame next time. I wonder who it will be then? The message they are receiving now is that it is ok not to honour your commitments. How can we have a functioning system when that's the message?

The Spider wrote: »

The debts will be written down, and that's that.

I hope this is not the case, but with the way things are going I wouldn't be surprised.

I just think it is wrong that you can have debt written off whilst maintaining ownership of the asset, added to that, the tax payer is on the hook for the debt that is written off. I.E. I will have to pay a portion of the mortgage for some one who is living in a house I cannot afford to buy!

The Spider

techdiver wrote: »

This is irrelevant. People need to take responsibility for their actions. Blaming the government etc is typical immature Irish reaction when something goes wrong for some one in this country. People borrowed the money, now I have to help pay it back for them!

What's the excuse going to be for the people who are paying way over the odds at the moment in Dublin? They have broadband and access to information. I'm sure they will find some one else to blame next time. I wonder who it will be then? The message they are receiving now is that it is ok not to honour your commitments. How can we have a functioning system when that's the message?



I hope this is not the case, but with the way things are going I wouldn't be surprised.

I just think it is wrong that you can have debt written off whilst maintaining ownership of the asset, added to that, the tax payer is on the hook for the debt that is written off. I.E. I will have to pay a portion of the mortgage for some one who is living in a house I cannot afford to buy!

Sorry disagree, they should never have been given that level of debt in the first place, the general population are not financial experts, they used to trust that if the bank gave them that amount then it must be ok, it's incumbant on the banks who lent too much, to sort it out that's the banks business model not the guy in the street.

Now with this AIB have realised that they'll never get back what's owed and if their customers go bankrupt, they'll get nothing, the other banks'll follow suit.

As for the people paying over the odds in Dublin, it's been said on this site over and over that they're cash buyers, so what's the problem?

If they're cash buyers then they don't have mortgages?

The_Conductor

The Spider wrote: »

Yeah at the moment, this is called flying a kite, eventually it'll be brought out to all other customers, it's either write down the debt or people can declare themselves bankrupt, and then the bank gets very little.

Guy from new beginning was on George Hook last night saying going bankrupt was the right thing for the vast majority as they'd get to keep the family home, unless it was a massive trophy house, if that happens the banks'll get even less.

The bankrupt route would allow the economy to reboot.

Its hardly kite-flying, its a small subset of customers, who qualify for split mortgages- in return for signing up to somewhat onerous conditions, there is a financial incentive for the customers to follow the agreement to the letter of the law.

In addition- there is a scheme to write-off a portion of the parked amount- should the borrower come into an inheritance or win the lottery (aka come into a lumpsum they could use to retire a portion of the parked loan).

The lender continues to hold the parked loan amount, they have far greater control over the first loan tranche than they would otherwise have, and they don't have to write-down anything other than the initial inducement to get the borrower to sign on the dotted line.

Assuming all 1,500 eligibly borrowers signed up to it (which they won't- the terms are quite severe)- it would be an initial cost to the lender of 50-60m in exchange for vastly enhanced control over the secured property- and the finances of the borrowers.

I don't see how you imagine this is a first step to a roll-out of blanket debt forgiveness- especially when the approval panel in the bank themselves, don't see a many eligible customers as being happy to sign on the dotted line.

Its an exercise in kicking the bucket down the road- with an inducement to the borrower, in exchange for tight monitoring of their expenditure, other than their mortgage expenditure.

Most sane borrowers- might imagine a PIP to be preferable- at least they'd get their unsecured debt cleared too, using that mechanism.

The Spider

The_Conductor wrote: »

Its hardly kite-flying, its a small subset of customers, who qualify for split mortgages- in return for signing up to somewhat onerous conditions, there is a financial incentive for the customers to follow the agreement to the letter of the law.

In addition- there is a scheme to write-off a portion of the parked amount- should the borrower come into an inheritance or win the lottery (aka come into a lumpsum they could use to retire a portion of the parked loan).

The lender continues to hold the parked loan amount, they have far greater control over the first loan tranche than they would otherwise have, and they don't have to write-down anything other than the initial inducement to get the borrower to sign on the dotted line.

Assuming all 1,500 eligibly borrowers signed up to it (which they won't- the terms are quite severe)- it would be an initial cost to the lender of 50-60m in exchange for vastly enhanced control over the secured property- and the finances of the borrowers.

I don't see how you imagine this is a first step to a roll-out of blanket debt forgiveness- especially when the approval panel in the bank themselves, don't see a many eligible customers as being happy to sign on the dotted line.

Its an exercise in kicking the bucket down the road- with an inducement to the borrower, in exchange for tight monitoring of their expenditure, other than their mortgage expenditure.

Most sane borrowers- might imagine a PIP to be preferable- at least they'd get their unsecured debt cleared too, using that mechanism.

It'll gradually be loosened up, it may be severe now, but it recognises the inevitability of writing down debt. It will be made more attractive to people over time.

It's better for the banks than bankruptcy, because under that they'll get nothing, and cases are going through the courts now.

Three years and your out of it and you'll get to keep the house (more than likely) and all your debt is written off from mortgage to credit card, writing down debts is a no brainer for the bank if they or the taxpayer want to get some money back, because if the banks get nothing from someone declaring themselves bankrupt either does the taxpayer, even money owed to revenue is written off.

The_Conductor

The Spider wrote: »

Sorry disagree, they should never have been given that level of debt in the first place, the general population are not financial experts, they used to trust that if the bank gave them that amount then it must be ok, it's incumbant on the banks who lent too much, to sort it out that's the banks business model not the guy in the street.

No-one is going to argue that they shouldn't have taken on that level of debt in the first place- what people are arguing is that you can't simply point your finger at the bankers and go 'Nah, nah, nah- it was all your fault, catch me if you can'.........

Most borrowers were greedy- and those who weren't- allowed themselves become enmeshed in the herd mentality and bought into the propaganda sold by various vested interests.

If you imagine that the whole population are stupid and didn't know what they were doing- you are doing a disservice to a large portion of the highly intelligent people who bought into the hype- many of whom saw it as a lottery- they just had to know when to step out of the dance. Unfortunately- after several false calls- the dance was allowed continue- and it became expedient to imagine it would never stop.

The Spider wrote: »

Now with this AIB have realised that they'll never get back what's owed and if their customers go bankrupt, they'll get nothing, the other banks'll follow suit.

They're never going to get back what they're owed in full, from a significant cadre of borrowers. They are maximising their possible return- by tightening a straightjacket on borrowers- and controlling their expenditure to remarkable levels, akin to those that would be prescribed under bankruptcy proceedings.

AIB always has call on the asset, come what may- it is a secured debt after all (unlike a credit card debt, over-drafts etc).

If the customer declares bankruptcy- AIB get the asset back. Using this mechanism- they discount its current market value by 10-20%, park up to 50% of the original loan amount- and end up with possibly between 85-90% of the original principal, only with strict terms on the borrower- in exchange for the limited debt forgiveness. Depending on how badly someone wants to keep their family home- bankruptcy sounds quite appealing, in lieu of using this carrot and stick approach.

The Spider wrote: »

As for the people paying over the odds in Dublin, it's been said on this site over and over that they're cash buyers, so what's the problem?

They're not all cash buyers. And in any event- how do recent purchasers of PPRs in Dublin- factor in this equation? Different lending rules have governed any mortgages approved since 2008- so presumably any of the borrowers eligible for this scheme are pre-bust clients? So we're comparing apples with oranges.

The Spider wrote: »

If they're cash buyers then they don't have mortgages?

Plenty of cash buyers have mortgages. Just because you have cash, doesn't mean you don't also have debts. We've seen improbable amounts of cash materialise from under people's mattresses etc- doesn't mean the self same people don't have mortgages.........?

The_Conductor

The Spider wrote: »

It'll gradually be loosened up, it may be severe now, but it recognises the inevitability of writing down debt. It will be made more attractive to people over time.

It's better for the banks than bankruptcy, because under that they'll get nothing, and cases are going through the courts now.

Three years and your out of it and you'll get to keep the house (more than likely) and all your debt is written off from mortgage to credit card, writing down debts is a no brainer for the bank if they or the taxpayer want to get some money back, because if the banks get nothing from someone declaring themselves bankrupt either does the taxpayer, even money owed to revenue is written off.

Under bankruptcy the bank gets nothing?
Really?
Unsecured debtors get nothing.
Banks are secured debtors.
Under bankruptcy- they get the house.

Your mortgage is not written off- your assets and liabilities are wiped, you do not get to keep the house, but your overdraft and your credit card are cleared (not that you'll ever qualify for credit ever again).

Why do you have this notion that in bankruptcy the bank gets nothing- they get all the secured assets- which in this instance, is the house.

The benefit of this scheme for the bank- is the parked portion of the mortgage remains intact- and not due for reconsideration for 10 years. Its the parked portion of the mortgage that the bank are looking at- and its this that they are going to give the biggest incentives to people to clear- you'll find 30-40% write-offs on the parked portion of mortgages- where people use lumpsums they come into to write down the parked portion (providing they keep with all terms of the initial part of the loan.

Its really quite easy to follow- and you can see why it makes sense for the bank- however they are reliant on borrowers wanting to hold onto their PPR at all costs- which is something that is ingrained in the Irish psyche.

bbam

I heard a BOI add on the radio this morning. Today FM.
They were banging on about the fact that it's cheaper to purchase than rent and encouraging people to get out of renting to buy houses.

Sounded like an ad from 2006/2007.

It seems the madness is never far off in this country.

The_Conductor

bbam wrote: »

I heard a BOI add on the radio this morning. Today FM.
They were banging on about the fact that it's cheaper to purchase than rent and encouraging people to get out of renting to buy houses.

Sounded like an ad from 2006/2007.

It seems the madness is never far off in this country.

Hopefully people have learnt something this time round- though I have to say, its quite unusual just how fickle people are- this isn't our first burst, nor will it be our last.

Maybe BOI are just trying to drum up some business- their lending rules are a lot more stringent than many other lenders- and indeed, of all the major financial institutions, they uniquely remained out of majority state ownership, as the quality of their loans wasn't nearly as bad as the other incumbents.

The Spider

The_Conductor wrote: »

Under bankruptcy the bank gets nothing?
Really?
Unsecured debtors get nothing.
Banks are secured debtors.
Under bankruptcy- they get the house.

Your mortgage is not written off- your assets and liabilities are wiped, you do not get to keep the house, but your overdraft and your credit card are cleared (not that you'll ever qualify for credit ever again).

Why do you have this notion that in bankruptcy the bank gets nothing- they get all the secured assets- which in this instance, is the house.

From here, and Charlie Weston said the same thing.

http://www.newbeginning.ie/faqs/bankruptcy#6-what-happens-to-my-family-home-under-bankruptcy

6. What happens to my Family Home under Bankruptcy?
When a person becomes bankrupt the OA will consider what the reasonable living expenses are for the person and his or her family based on the guidelines issued by the Insolvency Service.

As part of this, the Official Assignee will allow sufficient money for accommodation and will consider how much will be allowed for reasonable mortgage repayments.

The Official Assignee has said that the family home is the last asset that he will choose to deal with.

Additionally, the Official Assignee may not sell the family home without obtaining permission from the High Court. Where the Official Assignee seeks this permission, the High Court may postpone the sale of the family home having regard to the interests of creditors and the interests of the bankrupt’s spouse and dependents.

Finally, if the family home is in negative equity (the mortgage is greater than the value of the property) there is no benefit to the assignee is selling the property.

And I'd reckon all houses going the bankrupt route are in negative equity.

Thargor

Its not mentioned enough that in any debt write off situation the house should be returned to the bank/taxpayer on the death of the borrower.

The_Conductor

Thats a complete misrepresentation of facts- and where you're quoting from only adds credence to people looking very sceptically at what you're saying- its a selective representation of facts, and not even current facts, as many have been superceded by recent legislative changes, which firmly puts the ball bank in the lender's court. Quoting Charlie Weston- and New Beginnings as fact.......... sigh.........

The official assignee decides the house as the final asset to be disposed of- fine.

How you make out that the lender gets nothing- is beyond me- they are a secured debtor- the unsecured debtors get nothing. In the event of a property being in negative equity- the lender gets the current market value for the property- should it sell- not the mortgaged amount- and the mortgaged amount, then, as an unsecured debt, gets wiped at the elapse of the insolvency.

Its quite a reasonable concept.

The only sticking point is the permission of the High Court to dispose of the family home- but even this was watered down in the recent legislation- its not really a sticking point any longer.

AIB's scheme relies on people wanting to stay in their family home and retain ownership of it. Parking that portion of the mortgage that they cannot afford- while tying them up in financial constraints, akin to those of a PIP- is a good deal for the write-off they are willing to offer on the *current market value* of the property. The parked portion of the mortgage remains parked- and may be discounted at some future point- if/when the mortgator comes into a lumpsum.

Its a good deal for the bank- and its reliant on the borrower not throwing in the towel and wanting to stay in their PPR- which wouldn't work in any other country, other than Ireland.

gaius c

The_Conductor wrote: »

Its only for split mortgage customers- who have a hope of repaying a lower amount, have made full disclosures to the bank- and the debt write down is a portion of the parked (delayed) portion of the mortgage, providing all terms and conditions of the first loan are adhered to.

Aka- its a tiny subset of customers- and not likely to be extended beyond this small group.

Its also predicted that of those who qualify for this limited offer, many will decide the terms associated with it are too onerous to make it a viable option.

Essentially- you'd be subject to pretty much the same rules as you would under a Personal Insolvency Plan- only the bank would be the sole lender involved. Many people may just say- 'bugger this for a lark- lets go the whole hog, and avail of a PIP instead'.

There's one important bit that didn't get reported and that's that they lose their tracker as well thus negating the value of the write-down.

The_Conductor

gaius c wrote: »

There's one important bit that didn't get reported and that's that they lose their tracker as well thus negating the value of the write-down.

Of course they loose their tracker. Would anyone imagine they'd keep it? Its a millstone and an ongoing cost around the bank's neck. The write down- is a recognition of this- and the borrower signing up to their 'PIP-Lite' scheme (actually, it would be nice if AIB called it this- as this is essentially what it is).

HerrKuehn

The Spider wrote: »

Sorry disagree, they should never have been given that level of debt in the first place, the general population are not financial experts,

If they are not financial experts then perhaps they shouldn't have been investing. Anyway, at least they learned a valuable lesson: "Sheep are for fleecing".