Hypothetical - House repossessions etc

iMax · 08-11-2010 12:18PM #1

Just a hypothetical question.

As an example, a friend of mine who was recently laid off was getting more & more anxious about mortgage payments & falling to arrears. His wife luckily is still working & they're managing, but they are struggling.

The three of us were having a chat & he voiced this concern & I was stuck as to what to say & his wife just came out with "They can't evict everyone, who's going to buy another house after being evicted from their old one?" Now it's very simplified, but she does have a valid point.

If it was me for example, I can't afford to pay any more than my mortgage already is, if the rates go up, I'm going to start to fall into arrears, now I can keep paying what I currently pay to them, but the balance between the new rate & the old is going to be arrears. If it ever got to the point that I can't pay my mortgage (& that's entirely possible at some date in the future), the bank will take me to court, have me evicted & I'll have to rent somewhere. Chances are I'll be able to rent a bigger place for less than I'm paying for my mortgage but that's an aside.

Now, me newly evicted, will have absolutely no incentive to pay what I owe to the bank for arrears/balance, nor will I be able to since I have to now pay rent for my new supersized plush pad. They'll pursue me probably, but just now don't have it to give them, so is it off prison for me ? Probably, but wait, don't we have overloaded prisons already ? Aren't they chock full of murderers, rapists, thieves, tv licence evaders & corrupt politicians & bankers ? They were getting what I could give them before they turfed me out, now they'll get less, where's the business smarts in that ?

We know that homes are being repossessed on an increasing basis (don't know what the figure is, because it's being kept quiet).

So if more & more are being laid off & falling into arrears & more houses are going to be reposessed, what are they going to do with them ?

Nijmegen · 08-11-2010 12:36PM

Go read Morgan Kelly's article. Whole idea that when we all start foreclosing on mortgages, the country is really screwed.

As to whether or not you'd lose your house, well, that's the big "WTF do we do now lads?" question for banks, for government, for individuals.

feicim · 08-11-2010 12:43PM

Morgan Kelly hints that if mortgage defaulters are in large enough numbers they will be a power unto themselves. Its easy to lock up a handful but doing it to thousands is not realistic for numerous reasons. Imagine how annoyed you would be if your brother / sister / friend / parent got locked up for not paying a mortgage. This could lead to severe public disorder. The Irish have been very quiet considering all that is going on but aggressive actions like this taken by the banks/government could be the straw that breaks the camels back. Its seems hard to rile the Irish up but once they get going all hell can break loose.

Some middle ground of some form will inevitably have to be sought.

The government is well aware that it is not only the rich bankers (or poor bankers with rich wives;)) who can leave the country to declare themselves bankrupt to achieve more favourable terms.... its ignoring this issue completely. For now. No doubt is will surface soon enough.

iMax · 08-11-2010 12:52PM

Have read it & that's what put the question in my head.

I do honestly believe we're 100% screwed as a nation. We will NEVER recover. But, as a nation we have to go on.

I have a child who is my main priority, if it comes to a choice between her being fed/clothed etc over arrears on the mortgage, well then she's going to win out (& I'll be saving up to pay her airfare for when she hits 18 & wants to emigrate).

I know we're broke, I know things are going to get worse, I have a rough idea of how bad it'll get, but, what I don't know is what happens.

Is it just a shut down ?

We're kicked out of the EU (unlikely but a possibility), we pretty much end up back in the economic stone-age, we still have basic things like small exports, we have far less luxuries, we do what we can, when we can, it's crap, but it's not the end of the world, (just is as we know it). We'll possibly have to have a new currency (wonder if we can get the US to bail buy us out?)

Maybe we should rename the country Hawaii East.

Cyrus · 08-11-2010 02:23PM

ive been thinking about this too since reading kellys article,

and what struck me was, if a movement began, premised on the idea of not paying mortgages and handing the keys back, id say it could gather pace very quickly, and there would be real strength in the numbers.

why should the people who are paying to bail the banks out continue to pay to restore them into viable businesses?

im not saying i agree with any of this by the way im just hypothesising, but i do think this could actually happen and plenty of people would jump on the bandwagon

iMax · 08-11-2010 03:54PM

Cyrus wrote: »

<SNIP> i do think this could actually happen and plenty of people would jump on the bandwagon

I think it's not too far away, will start small & gather momentum. This country is a powderkeg & the fuse has been lit, we just don't know how long the fuse is.

Rabble Rabble · 08-11-2010 04:05PM

Morgan is right. If 200,000 people default - a number which includes plenty of Gardai, and we are paying for the mis-managment and fraudulent activity of the banks ( who apparanly lied to the Government and thus the guarantee is worthless), then these people will not pay and nobody is going to turf them out of their housing. A garda is not going to turf out a garda.

I would prefer we did this in an orderly fashion. The government owns the banks, wipes out the debtholders and shareholders, owns the mortgages and forgives with a new bankruptcy law which seizes no other assets, but does stop people getting a big loan for a few years.

Then people rent back from the government at a nominal fee. This frees up the labour market ( one bad effect might be an increase in emigration). it will also increase consumer demand. It will not prop up house prices. Wins all round. Except for Anglo, and AIB.

gmale · 08-11-2010 04:09PM

iMax wrote: »

I think it's not too far away, will start small & gather momentum. This country is a powderkeg & the fuse has been lit, we just don't know how long the fuse is.

3 months if we are lucky

gollem_1975 · 08-11-2010 04:12PM

Cyrus wrote: »

ive been thinking about this too since reading kellys article,

and what struck me was, if a movement began, premised on the idea of not paying mortgages and handing the keys back, id say it could gather pace very quickly, and there would be real strength in the numbers.

why should the people who are paying to bail the banks out continue to pay to restore them into viable businesses?

im not saying i agree with any of this by the way im just hypothesising, but i do think this could actually happen and plenty of people would jump on the bandwagon

this is the "social conflict" that Kelly alludes to. not everyone in the country is at risk of defaulting on their mortgage . I myself heeded the advice I got on websites during the bubble and was prudent financially. why should people like me bail out those who took on mortgages they shouldn't have ? its a tough question.
I personally would have a huge difficulty about families being turfed out of homes onto the street and tbh I don't think with the amount of surplus housing in the country there is going to be any problems with keeping a roof over peoples heads for a long time to come.

Rabble Rabble · 08-11-2010 04:14PM

gollem_1975 wrote: »

this is the "social conflict" that Kelly alludes to. not everyone in the country is at risk of defaulting on their mortgage . I myself heeded the advice I got on websites during the bubble and was prudent financially. why should people like me bail out those who took on mortgages they shouldn't have ? its a tough question.
I personally would have a huge difficulty about families being turfed out of homes onto the street and tbh I don't think with the amount of surplus housing in the country there is going to be any problems with keeping a roof over peoples heads for a long time to come.

The losers will be people still repaying their mortgages, and not in negative equity. If you didnt buy then when the banks start lending again you can buy for peanuts, on my plan.

gollem_1975 · 08-11-2010 04:23PM

Rabble Rabble wrote: »

The losers will be people still repaying their mortgages, and not in negative equity. If you didnt buy then when the banks start lending again you can buy for peanuts, on my plan.

but why would those people happily keep repaying if 200,000 other people (figure quoted from MK's article) were to default en masse.

also consider that the country now owns most of the banks and all of their debt..won't that hit the taxpayer when these people stop repaying ?

Rabble Rabble · 08-11-2010 04:35PM

gollem_1975 wrote: »

but why would those people happily keep repaying if 200,000 other people (figure quoted from MK's article) were to default en masse.

also consider that the country now owns most of the banks and all of their debt..won't that hit the taxpayer when these people stop repaying ?

There will be a moratorium period. People in negative equity can apply to default - people who aren't will have the option. That would mean losing their equity, which might happen anyway as this policy will reduce house prices.

As for the results - we are paying Anglo's Debtors and AIB debtors. Not paying that and taking over the banks is cheaper than the alternative, and Kelyy says no banks will loan next year anyway - a capitalised nationalised bank might ( or once loans are written off the rest are transferred to HSBC for a dollar).

There are two options here, do the default orderly, or dis-orderly.

Nijmegen · 08-11-2010 04:41PM

The big issue as they say is, what of people still paying their mortgages? Or those with no mortgage? They'll end up paying for those defaulting just as we're all paying for the banks.

The's the Catch-22.

A smarter system than default would be write downs.

Same Catch-22, less people turfed out of homes the banks can't sell.

gollem_1975 · 08-11-2010 04:46PM

Rabble Rabble wrote: »

As for the results - we are paying Anglo's Debtors and AIB debtors.

does debtors include the depositors ?

Rabble Rabble wrote: »

Not paying that and taking over the banks is cheaper than the alternative, and Kelyy says no banks will loan next year anyway - a capitalised nationalised bank might ( or once loans are written off the rest are transferred to HSBC for a dollar).

i think i'll quit while i'm behind

Rabble Rabble · 08-11-2010 04:49PM

Nijmegen wrote: »

They'll end up paying for those defaulting just as we're all paying f.

There is not cost to the taxpayer, as we - in my scenario - have removed the bank guarantee for debtors. Thats cheaper. Decreases in rent will offset any increases in taxes, were there any.

The losers are mortgage holders who have some equity. In general they would be - by the time this hits the fan ( i.e. the 8% interest rates) - the older population with lower mortgage repayments left and so on.

This would be a transfer of the wealth which was pushed to property owners of a certain generation back to the 20-30 year olds. It is going to happen in an orderly , or a dis-orderly fashion.

200,000 people will not be turfed out of their homes.

Gurgle · 08-11-2010 05:05PM

iMax wrote: »

We know that homes are being repossessed on an increasing basis (don't know what the figure is, because it's being kept quiet).

That seems a bit oxy-moronic.

Either we know that repossessions are on the increase because we have the figures, or we don't know because they're being kept quiet.

(facts shmacts and all that...)

Inquitus · 08-11-2010 05:09PM

Rabble Rabble wrote: »

There is not cost to the taxpayer, as we - in my scenario - have removed the bank guarantee for debtors. Thats cheaper. Decreases in rent will offset any increases in taxes, were there any.

The losers are mortgage holders who have some equity. In general they would be - by the time this hits the fan ( i.e. the 8% interest rates) - the older population with lower mortgage repayments left and so on.

This would be a transfer of the wealth which was pushed to property owners of a certain generation back to the 20-30 year olds. It is going to happen in an orderly , or a dis-orderly fashion.

200,000 people will not be turfed out of their homes.

I would imagine the only thing likely to happen is that the 200,000 people will be declared bankrupt and have their house rented back to them when it happens, but rented back at market rates. The downside is bankrupcy is harsh, the upside is instead of paying 2.5k a month to live in their house they now get it for 1.2k or w/e.

jimmycrackcorm · 08-11-2010 05:15PM

Rabble Rabble wrote: »

Morgan is right. If 200,000 people default - a number which includes plenty of Gardai, and we are paying for the mis-managment and fraudulent activity of the banks ( who apparanly lied to the Government and thus the guarantee is worthless), then these people will not pay and nobody is going to turf them out of their housing. A garda is not going to turf out a garda.

I think there is an overbearing sense of negativity in posts. First of all, by any means the figure of 200,000 is a very pessimistic figure. Secondly why would Gardai default? They aren't losing their jobs, they may have to take another paycut and tighten their belts but these are the last people who will be defaulting. If anything the only defaults they will suffer are their second house investment properties.

There are plenty of people in negative equity who are actually still well able to fund their mortgages. Their complaints are that they are unable to move house, but they may never have chosen to move anyway.

cyrus wrote:

what struck me was, if a movement began, premised on the idea of not paying mortgages and handing the keys back, id say it could gather pace very quickly, and there would be real strength in the numbers.

Seeing as Irish people won't go out in protest, it's unlikely such a movement would occur. Also repossessions would build up granuarly so without a mass-occurance of these there would be an insufficient spark to create such a movement.

Rabble Rabble · 08-11-2010 05:16PM

Inquitus wrote: »

I would imagine the only thing likely to happen is that the 200,000 people will be declared bankrupt and have their house rented back to them when it happens, but rented back at market rates. The downside is bankrupcy is harsh, the upside is instead of paying 2.5k a month to live in their house they now get it for 1.2k or w/e.

Basically that is what I am saying.

However, afaik - In general you cant have assets if you are bankrupt. I am creating a loan forgiveness program for people who are in negative equity, otherwise people would have to sell cars etc. I am pretty sure that is how bankruptcy normally works.

Rabble Rabble · 08-11-2010 05:19PM

jimmycrackcorm wrote: »

I think there is an overbearing sense of negativity in posts. First of all, by any means the figure of 200,000 is a very pessimistic figure. Secondly why would Gardai default? They aren't losing their jobs, they may have to take another paycut and tighten their belts but these are the last people who will be defaulting. If anything the only defaults they will suffer are their second house investment properties.

There are plenty of people in negative equity who are actually still well able to fund their mortgages. Their complaints are that they are unable to move house, but they may never have chosen to move anyway.

You didnt read Morgan's article entirely. Basically, default is a problem with cash flow, not negative equity. Although both together will tend to concentrate the mind. Garda salaries will take more cuts sometime next year, and interest rates will go to 8% ( see what Kelly wrote). Thats the problem. If a Guard over-invested he could be in trouble, regardless of employment.

Rabble Rabble · 08-11-2010 05:21PM

jimmycrackcorm wrote: »

Seeing as Irish people won't go out in protest, it's unlikely such a movement would occur. Also repossessions would build up granuarly so without a mass-occurance of these there would be an insufficient spark to create such a movement.

Defaulting is a matter of not paying. The bank has to instigate procedures. That takes a while. Give duffy a call and you're sorted.

Less effort than a protest.

jimmycrackcorm · 08-11-2010 05:28PM

Rabble Rabble wrote: »

You didnt read Morgan's article entirely. Basically, default is a problem with cash flow, not negative equity. Although both together will tend to concentrate the mind. Garda salaries will take more cuts sometime next year, and interest rates will go to 8% ( see what Kelly wrote). Thats the problem. If a Guard over-invested he could be in trouble, regardless of employment.

Yes I did read the article, I think that is obvious. But a Garda losing his investment house is not the same issue as his home. Losing his investment house is the existing scenario we have such as with ghost estates.

Also many of those "Gardai" acquired their mortgages at tracker rates - if so then they'll probably still be lucky. The big implosion yet to occur is with interest only investments - they will be the banks problems and subsequently the taxpayers. I only hope that the projected losses we are going to have to pay back factor in lots of these...

jmayo · 08-11-2010 05:50PM

Cyrus wrote: »

ive been thinking about this too since reading kellys article,

and what struck me was, if a movement began, premised on the idea of not paying mortgages and handing the keys back, id say it could gather pace very quickly, and there would be real strength in the numbers.

why should the people who are paying to bail the banks out continue to pay to restore them into viable businesses?

And why should people who have nearly paid off their mortgages or have no mortgages at all pay for those who went out and over borrowed ?

The options of jingle mail, debt forgiveness or new lax banruptcy laws does result in victims and the victims in this case is those who were either lucky enough to be of a certain age or smart enough not to buy into the property bubble.
If people do not pay the banks for their loans who does it affect, but the people who now own the banks and have to make up for the banks losses i.e. the citizens of the state and more particularly the taxpayers.

gollem_1975 wrote: »

but why would those people happily keep repaying if 200,000 other people (figure quoted from MK's article) were to default en masse.

also consider that the country now owns most of the banks and all of their debt..won't that hit the taxpayer when these people stop repaying ?

If I see johnny down the road defaulting on his 500,000 mortgage and getting to live in his hosue on some cheap rent it back scheme, why should I continue to pay off my 100,000 mortgage ?
Why should mary, who doesn't even have a house, bother hanging around when her taxes are now sustaining johnny and paying off his defaulted 500,000 mortgage ?
There is a hazard in this idea, and it is that does lucky to be certain age profile and particularly those sensible during the boom are being punished.

Nijmegen wrote: »

The big issue as they say is, what of people still paying their mortgages? Or those with no mortgage? They'll end up paying for those defaulting just as we're all paying for the banks.

Exactly

Rabble Rabble wrote: »

There is not cost to the taxpayer, as we - in my scenario - have removed the bank guarantee for debtors. Thats cheaper. Decreases in rent will offset any increases in taxes, were there any.

There is a cost to the taxpayer.
Who exactly are left with the banks' losses but the taxpayers.

Rabble Rabble wrote: »

The losers are mortgage holders who have some equity. In general they would be - by the time this hits the fan ( i.e. the 8% interest rates) - the older population with lower mortgage repayments left and so on.

So it alright for these people to be losers ?

What about people who paid off chunks off their mortgage early, becuase persish the thought they were sensible with their money and sensible about how much they borrowed in the first place ?

It seems the goal of some people is to now screw those of us who were not idiots during the boom.

These same people who are looking for personal NAMAs, debt forgiveness are probably the same ones complaining about banks being bailed out and how the government never take responsibility.

Rabble Rabble · 08-11-2010 06:52PM

jmayo wrote: »

Why should mary, who doesn't even have a house, bother hanging around when her taxes are now sustaining johnny and paying off his defaulted 500,000 mortgage ?
There is a hazard in this idea, and it is that does lucky to be certain age profile and particularly those sensible during the boom are being punished.

YOu are not following this. I am saying that we default on the non-sovereign bank debt and we do this. That saves us the interest on 50Bn. Or is it 60Bn? Or is it 70Bn? ( You can see what is spooking the sovereign bond market). Therefore people who never bought will not be subsidising anyone, their taxes would be less, and their rent will most probably fall.

Which leaves us with people who were - as you say yourself - lucky to be certain age profile.

I am not prepared to sacrifice the 20 and 30 year olds of the country to eternal debt for 40 year loans because people of 50+ years of age have made off like bandits.

To maintain people in equity in their houses above what they paid for in goods and services, so that 20 and 30 year olds stay in negative equity for their lifetime, while still paying off the debt on the banks to whom they owe money to via their taxes - thats the moral ugliness.

And - for people who bought pre 1995 the house prices would have to drop by 80% for any loses. I'll get my smallest ever violin.

amen · 08-11-2010 06:58PM

Garda salaries will take more cuts sometime next year

interesting. Of course if I was in power the only peoples salary I would not cut would the Garda and Army.

Need to keep the loyal. Would be a good way to break wage parity between different departments as well!

Rabble Rabble · 08-11-2010 06:58PM

jmayo wrote: »

These same people who are looking for personal NAMAs, debt forgiveness are probably the same ones complaining about banks being bailed out and how the government never take responsibility.

I have no personal horse in the race - I am living in England in a rental.

However NAMA helped both the developers and people with property. By putting a floor under your losses. by putting a floor under property falls.

This has possibly protected you from negative equity.

Clearly you want to be bailed out, just not the people already in negative equity. And you want to be bailed out by the people in negative equity. My idea is fairer, dont you think?

AckwelFoley · 08-11-2010 07:02PM

Rabble Rabble wrote: »

The losers will be people still repaying their mortgages, and not in negative equity. If you didnt buy then when the banks start lending again you can buy for peanuts, on my plan.

Ill keep repaying my mortgage.

When things pick up, and they will, when i dont know - i'll still have a good credit rating.

Inquitus · 08-11-2010 07:05PM

Rabble Rabble wrote: »

Clearly you want to be bailed out, just not the people already in negative equity. And you want to be bailed out by the people in negative equity. My idea is fairer, dont you think?

Personally I think rewarding the most stupid with debt forgiveness is not an option. Let them go bankrupt, but take all their assets, and ensure they can't borrow a penny for a decade. That way it's not too easy to walk away from your obligations, but those truly struggling can improve their life instantly by removing onerous mortgage obligations in place of much more affordable rent.

Sea Sharp · 08-11-2010 07:06PM

I remember hearing something about foreign banks potentially coming over to assist people struggling with their mortgages with the catch being that they'll get a big chunk of the money when the house is finally gets sold.

Dempo1 · 08-11-2010 07:18PM

The mortgage crisis is already a powder keg waiting to explode and i suspect the real figure for those in arrears is nearing 200,000. Just over the weekend it was reported BOI have already restructured up to €10 Billion of its mortgage loans whether is be moratoriums, interest only payment options etc.

On top of the already challenge for those struggling to meet mortgage payments, other personal loans are now catching up with a massive increase in judgments for personal debts, the next step will be installment orders which Judges are reluctant to issue against those on welfare so the natural next step is Judgment Mortgages against already struggling mortgage holders. Either way 2011 is looking decidedly grim and somethings going to give.

To top it off the Budget is going to crucify everyone, especially those still actually working, The interest rate for Bonds went to 8% today making it near impossible for Ireland Inc to borrow money in the new year and we now have the IMF breathing down our necks, we are essentially ****ed and i doubt its going to take a combined boycott of mortgage payments to force the issue. O and this is before mortgage interests start to rise.

Best and probably only option for the banks is a complete restructuring of mortgage debt, extended periods etc.

Rabidlamb · 08-11-2010 07:38PM

I see plenty of posters quoting 8% rates for the future.
Where has this figure been plucked from ?.
Is this expected increases in the ECB added to the upward spiral of variable rates ?.
Surely <1% trackers will never see rates this high.

Hypothetical - House repossessions etc

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