Banks tread more carefully with defaulters

handlemaster

Ulster bank will not pursue low income defaulters if they sell their home. Seems like a good idea

http://m.rte.ie/news/2015/0427/696970-ulster-bank/

trobbin

I'm not sure if it's a good idea or not. Of course the low income people who're in arrears will welcome it, but what about others in arrears? Especially the people who sacrifice many things too meet their repayments?

Everybody keeps saying something needs to be done, and it's now becoming clear that major debt forgiveness measures will be implemented unfairly across the board, and while some will welcome it, it will destroy others.

People will just start defaulting on their loans because of a false feeling of entitlement. What about all the people who've just purchased homes? Moves like this could really damage the property market. Personally, I couldn't be bothered buying a house in Ireland any longer, very strange market.

The_Morrigan

I'd have an issue with how a 'low income' is defined. I don't have a low income, yet I'm just about covering my obligations every month (that includes relying on a lodger). There are people who have a large income but their mortgage repayments are also large, there are people on a low wage who have low(er) repayments to meet. If they are going to go down this route I think personally they might be better off doing it by means testing rather than on a concrete figure that is deemed low.
It just seems a bit wishy washy and pot of gold at the end of the rainbow type of deal going on.

johnp001

trobbin wrote: »

I'm not sure if it's a good idea or not. Of course the low income people who're in arrears will welcome it, but what about others in arrears? Especially the people who sacrifice many things too meet their repayments?

Everybody keeps saying something needs to be done, and it's now becoming clear that major debt forgiveness measures will be implemented unfairly across the board, and while some will welcome it, it will destroy others.

People will just start defaulting on their loans because of a false feeling of entitlement. What about all the people who've just purchased homes? Moves like this could really damage the property market. Personally, I couldn't be bothered buying a house in Ireland any longer, very strange market.

If this is effectively making mortgages non-recourse (in practice) then the main effects would be to:
1. Increase cost of borrowing across the board.
2. Make banks much more reluctant to issue high LTV loans in the future. 20% deposit is probably the minimum they should countenance for any class of borrower and the bank valuation process is going to have to be tightened up to reduce their exposure to losing money through housing loans going into negative equity and becoming unrecoverable.

Banks already have new restrictions on timing of valuations due to new CB rules:
loans-at-risk-under-new-rules-as-house-prices-fall
Additional costs for buyers and additional uncertainty for sellers selling to mortgage buyers will mean an even greater preference for cash buyers and those with very high deposits.

So the policy announced today by UB (and roughly the same thing was stated by AIB at Finance Committee last week) will have the effect of:
1. Increasing SVR
2. Making things a lot harder for FTB relative to investors/trader-uppers

fret_wimp2

Why dont we look at how other countries deal with Defaulter's. This is hardly a new problem, why completely reinvent the wheel?

Bob24

fret_wimp2 wrote: »

Why dont we look at how other countries deal with Defaulter's. This is hardly a new problem, why completely reinvent the wheel?

Because the issue has been kicked down the road so much and has became so rampant that any government dealing with it as other countries would could easily lose their next election over it.

:-/

gaius c

sadie06 wrote: »

Ulster Bank move to reach out to those not communicating withe them. Interesting to say the least.



http://www.rte.ie/news/2015/0427/696970-ulster-bank/

It's quite clever and is obviously part of a ploy to unmask strategic defaulters.

trobbin

fret_wimp2 wrote: »

Why dont we look at how other countries deal with Defaulter's. This is hardly a new problem, why completely reinvent the wheel?

There's too much vested interest by the decision makers to allow that to happen. If Ireland followed the American model the defaulters would be out of the houses (not their homes, as they never bought them) and house would be sold, with a foreclosed sign. Zero government involvement.

AIB is the bank to watch, they're 99% state owned, and have a large exposure to defaulters.

Take a look at these figures https://www.centralbank.ie/polstats/stats/mortgagearrears/Documents/2014q4_ie_mortgage_arrears_statistics.pdf
Not only are the defaulters getting away without any debt, they actually haven't paid a penny rent in the last few years. Personally I know somebody who is doing this.

I can understand they think they're never gonna get the money, and this will save on court fees, but what about the other people paying their loans. This is completely wrong. And do they then expect to sell the house to some new family at an inflated price and expect them to prioritise their mortgage? Why should any family prioritise their mortgage in such a reckless state?

trobbin

gaius c wrote: »

It's quite clever and is obviously part of a ploy to unmask strategic defaulters.

It's hardly unmasking them, as they gave them the loans in the first place, they know exactly who they're. IMO, UB is just trying to save on court fees, and think they will get a decent price from the properties they get returned. They also don't have large exposure to defaulters compared with other Irish banks.

Also maybe they're stealing a march on the government. Lot of whispers that the government are going to write of the debts of defaulters at the tax payers expense.

If you ask me, the property game is dead in this country. Sooner people realise that, the better for everybody.

jay0109

fret_wimp2 wrote: »

Why dont we look at how other countries deal with Defaulter's. This is hardly a new problem, why completely reinvent the wheel?

Because we had the famine, and the Brits, and evictions, and the Big house with the Landlords :rolleyes:

jay0109

The_Morrigan wrote: »

I'd have an issue with how a 'low income' is defined. I don't have a low income, yet I'm just about covering my obligations every month (that includes relying on a lodger). There are people who have a large income but their mortgage repayments are also large, there are people on a low wage who have low(er) repayments to meet. If they are going to go down this route I think personally they might be better off doing it by means testing rather than on a concrete figure that is deemed low.
It just seems a bit wishy washy and pot of gold at the end of the rainbow type of deal going on.

Low income in this case looks set to be initially defined as those that would qualify for Social housing.

At least with this UB proposal, the house will be handed over. Keeping a house and getting debt write off was the nightmare scenario from my view on this mess.

I'm afraid those that are struggling to get by, and just managing to keep the mortgage on the go, are going to come out of all this very bitter. Your just above the 'bread line' and so won't qualify for any sort of help. The vast majority are probably living modest lifestyles while paying celtic tiger mortgages.
They will be the big losers from the mortgage debacle and I think that was how it was always going to play out.

Perhaps some of those folk might now be enticed to go into arrears...could be an interesting side effect of this proposal.

johnp001

jay0109 wrote: »

Low income in this case looks set to be initially defined as those that would qualify for Social housing.

At least with this UB proposal, the house will be handed over. Keeping a house and getting debt write off was the nightmare scenario from my view on this mess.

I'm afraid those that are struggling to get by, and just managing to keep the mortgage on the go, are going to come out of all this very bitter. Your just above the 'bread line' and so won't qualify for any sort of help. The vast majority are probably living modest lifestyles while paying celtic tiger mortgages.
They will be the big losers from the mortgage debacle and I think that was how it was always going to play out.

Perhaps some of those folk might now be enticed to go into arrears...could be an interesting side effect of this proposal.

I'm not sure how this proposal would encourage people who are currently paying their mortgage into arrears as it is only debt write-off for the negative equity portion of debt after the house is sold. If you are currently paying you quite probably want to stay in the house.

jmayo

jay0109 wrote: »

Because we had the famine, and the Brits, and evictions, and the Big house with the Landlords :rolleyes:

Except the rub now is that it is still ok to evict TENANTS who can't meet the high rents, but it is not ok to evict the LANDLORDS who can't repay their mortgages.

Even worse you now have the bastardisation of the Land Leagues's legacy, where an organisation fights not behalf of tenants but on behalf of the landed gentry.

Only in Ireland:rolleyes:

It is obvious from this that Ulster Bank are trying to get in there before the rest.
Remember they have to answer to RBS and not the eejits in Dept of Finance or Dáil.

jay0109

johnp001 wrote: »

I'm not sure how this proposal would encourage people who are currently paying their mortgage into arrears as it is only debt write-off for the negative equity portion of debt after the house is sold. If you are currently paying you quite probably want to stay in the house.

It might be the straw that breaks the camels back. Some people might be enticed in the hope of getting some sort of minor write down etc but while keeping the house.
Some might even think the house price v's the mortgage amount is simply not worth it. Throw in the towel, get a finalised deal and go off and start again.

Not saying it's likely on any sort of scale but some will at least think about it

Listening to Sean O'Rourke earlier it is people who would qualify for social housing that they are interested in.

Presumably if you qualify for social housing you won't be in a position to repay the mortgage.

UB are recognising that there loans aren't going to be re-paid and want them off their books.

Bob24

Does anyone know if the bank is planning on setting the selling price or supervising the sale?
Since they are going to write-off the debt that is not covered by the sale, I assume they will want some control of this?

johnp001

Bob24 wrote: »

Does anyone know if the bank is planning on setting the selling price or supervising the sale?
Since they are going to write-off the debt that is not covered by the sale, I assume they will want some control of this?

I don't know but I expect that they have some sort of scheme worked out that will prevent Irish mortgage defaulters from costing NatWest shareholders more than is already unavoidable.
Certainly it is more likely that this is the case than if the UB proposal was a half-baked scheme put forward by the state or a state-owned bank where there are other agenda's in play.

Sleepy

Can only imagine the reaction to this in some of the councils housing offices. It's probably a safe bet that the majority of these are in the Dublin or commuter belt region. Qualifying for social housing means you can't afford to rent in this region yourself hence, were even half of these to come forward, it's another 1000 people onto the council's waiting lists and nearly all with rock-solid proof that they're now homeless...

gaius c

Sleepy wrote: »

Can only imagine the reaction to this in some of the councils housing offices. It's probably a safe bet that the majority of these are in the Dublin or commuter belt region. Qualifying for social housing means you can't afford to rent in this region yourself hence, were even half of these to come forward, it's another 1000 people onto the council's waiting lists and nearly all with rock-solid proof that they're now homeless...

Read the text.

Ulster Bank is to write to 2,000 people in arrears telling them if they sell their homes they will not be pursued for the outstanding debt if they are on low incomes and eligible for social housing.

The important word is IF. Not all those 2,000 will "qualify".

They are just trying to light a fire under people and get them engaging.

Zamboni

Smart move by UB.
Get in first and sell off what you can and reduce the hassle of repossessions.
They don't want to wait years for the courts to deal with the backlog.
Take the hit and let the Irish taxpayer worry about housing them. Not their problem.

Villa05

Deleted User wrote:

Presumably if you qualify for social housing you won't be in a position to repay the mortgage.

The max limits range from 30 to 35k net income per year to qualify for social housing. Assuming 1/3 of your income is spent on accommodation, some might find that re-engaging with your bank and paying your mortgage might be a cheaper option.
Very smart move by UB. Great PR move, helps flush put strategic defaulters, State will be under pressure to buy these houses,

Eric Cartman

company director :

declare 2014 income at less than 30k leaving money in the business
declare 2015 income at less than 30k leaving money in the business
claim can't pay on your 1.5 million euro mortgage
sell country abode to a trust or shelf company for 700k
half your mortgage written off
draw out plenty more income from the company next year and buy the house back off the trust / shelf for half price.

roll on bubble 2.0