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Negative Equity - Solutions ?

24

Comments

  • #32
    20Cent
    Registered Users, Registered Users 2 Posts: 8,940 ✭✭✭20Cent


    ei.sdraob wrote: »
    Yes I can, since for average person its the next biggest asset they buy

    And a home is an asset (once credit is paid off if bought if credit) not a magical piggy bank or home ATM

    Maybe if more people stood back and thought rationaly before signing on the dotted line they wont be in situation they are today.

    Usually you make good arguments but don't think so in this case. Comparing depreciation on a car to negative equity on a home is laughable.


  • #33
    DonkyDonk
    Registered Users, Registered Users 2 Posts: 48 ✭DonkyDonk


    SC wrote: »
    An interesting discussion so far. But seems to be getting fixed on the issue of bankruptcy. While this is part of the arrears question. I intended my question on negative equity solutions , as one that was looking at the 'trapped' generation. And the costs of having an immobile labour force.
    What would increase the mobility of this labour, without costing the taxpayer so no moral hazard.
    If at this point houses could be shorted, there is still a gain of 40 to 50 % to be made i.e. protection/hedge, going on the basis of NAMA and CBI projections.

    I tried putting three possible negative equity solutions to negative equity: make them pay anyway (which the banks are currently doing), let the loans fail (which will further cripple the economy) or give them an "out" (which is unfair to those of us who didn't buy in the boom)

    Unfortunately, I would consider bankruptcy to be closely linked to the negative equity issue: boom-time mortgages are now approaching (or on) variable interest rates, which will rise for the foreseeable future. If the homeowners can continue making the payments, fine. As long as they don't mind never seeing most of that money ever again.

    But if they overstretched themselves with their loans then they will have no choice but to sell their house. However, they must sell the house at a price that will pay back the mortgage in full for the bank to clear their debt. Since their home is not worth what it was when they bought it, they aill be unable to do so. as a result, their only choice may be to give the house back to the bank and rent it from them instead.

    As a result, thousands and thousands of people are faced with a stark choice: keep paying back a loan for a house that's no longer worth what you paid or just give up and go bankrupt?

    I would have to answer your questions with a question: Is it really fair to "let people off" their negative equity? Would that sit well with the rest of the population?

    As regards mobility of workforce, i wouldn't see it as having any impact at all: People wouldn't be able to move to find work unless they're willing to rent for several years: they can no longer get mortgages as the banks have gotten too strict! (well, as strict as they should've been all along!)

    That's my understanding of the predicament. Sorry to go the long way about explaining it :)


  • #34
    Amhran Nua
    Closed Accounts Posts: 4,124 ✭✭✭Amhran Nua


    danbohan wrote: »
    it will also create a generation of savers who having been very badly burned on the biggest investment most people ever make will be reluctant to spend as they might have previously . while saving is a v good thing in itself is not what a flagging economy like ours needs right now
    Trying to stimulate or operate a small economy that imports as much as ours on domestic demand alone is an exercise in futility anyway. The primary focus should be on creating or bringing in well paying jobs which export goods or services, getting money into the country from abroad, which also solves the mortgage repayment issue quite nicely.
    seamus wrote: »
    However, if you make the potential risks for the lender much larger and the ability to declare bankruptcy easier, then that requires the lender to be more strict and frugal in their policies.
    While a good point, the damage has been done. Retroactively adjusting bankruptcy laws will only place the burden for repayment on the taxpayer, which is not acceptable. Also it's important to differentiate between consumer and enterprise bankruptcy, actually I think that was one of the IMF conditions for their assistance.


  • #35
    dan_d
    Closed Accounts Posts: 2,819 ✭✭✭dan_d


    Tipp Man wrote: »
    I want to know how that is going to make people smarter borrowers?

    Currently if i take out a mortage i know the huge responsibility that goes with it for many years so i am more likely to borrow what i can afford. If we relax the laws then i will think to myself I'll borrow more and if it goes pear shaped i can always declare bankruptcy. Sur i can get going again in 10 years. For me this kind of law promotes bad borrowing and god knows we have enough of that already in the country.

    Here's a solution for you. You pay the mortage till its paid - if its not paid by death then your estate pays it until its paid

    You make a fair point, but you've only learned about that responsibility through the mistakes of others being forced down your throat due to our current position. 5 years ago, you (possibly) wouldn't have thought like that.

    I agree it promotes bad borrowing. But what people need to understand is it's not a case of "if people get into NE and/or can't afford their payments, we could do this...". They ARE in NE and CAN'T afford their payments. So your solution is not valid. People at this exact point in time, cannot "pay the mortgage til it's paid". They just can't afford it. I'm not excusing or criticising, I'm simply stating a fact.

    With that in mind, the OP's post is a valid question. As said before, NE becomes an issue if you want to sell. The way I see it, home owners can be divided into a number of groups

    (1) Those who own their homes outright
    (2) Those who almost own their homes outright, are not in NE and can afford repayments (mainly our parent's generation)
    (3) Those who are in family homes,in NE and can afford repayments
    (4) Those who are in small houses/apartments, in NE and can afford their repayments
    (5) Those who are family homes, in NE and are struggling to meet repayments
    (6) Those who are in small houses/apartments, in NE and are struggling to meet repayments
    (7) Those who are in family homes, in NE and cannot/are not meeting their repayments
    (8) Those who are in small houses/apartments, in NE and cannot/are not meeting their repayments.

    I am not including those with multiple mortgages or investment properties, as that's another problem for another thread.

    I do not have an outright solution and I'm not an economist. But the way I see it, certain groups need to be prioritised. The groups could be more detailed - those on trackers/variables, etc - or less detailed if needed.

    Groups 1 & 2 are not a concern.
    Group 3 should mainly not be a concern, although there will be a small number who need/want to move to other parts of the country. But these tend to rent their own property out, while renting another property for themselves. However, leave them as not a concern, for the purposes of this excercise.
    Group 4 is a concern in the sense that some of these people will be young couples wanting to start a family and with no space to do so. However they are not an urgent concern from the point of view of the banks.Socially however, that's another story.
    Groups 5 & 6 are a concern.These are the people that the banks need to be negotiating with, extending terms, allowing interest only payments for a few years, allowing brief holidays, restructuring debts, whatever. This needs to be done on the assumption that they will get themselves back on their feet in say the next couple of years. These are the people the Gov need to engage with, partiuclarly those looking to start families in small dwellings, etc.Again, I don't have an exact solution, but kicking them out of their homes is not one.
    Groups 7 & 8 are similar to groups 5 & 6, but these are the ones I suppose, that the bankruptcy laws need to be looked at for. What exactly the solution is here, I'm not sure. But for these groups, and the previous groups, I think it needs to be a combination of making them pay somehow, amending (if only slightly), the bankruptcy laws, to be used as an absolute last resort. I don't believe the Gov should be bailing people out, but nor do I believe the hard-line mantra of "tough sh*t" is the solution.


  • #36
    Tipp Man
    Closed Accounts Posts: 4,025 ✭✭✭Tipp Man


    Euroland wrote: »
    UK:

    Personal Bankruptcy

    What are the advantages of going bankrupt?

    • Often the fastest and cheapest way of becoming debt free.
    • If you have no assets, then losing them is not exactly a hardship. i.e losing ownership of your home is not exactly a worry if you live in rented accommodation!
    • Removes some of the pressure on you because you’ll not have to negotiate individually with a number of creditors.
    • The problems and harassment caused by creditors or bailiffs end once the order is created.
    • Bankruptcy helps you make a fresh start. The moment the bankruptcy order is made, you’ll achieve relief from pressing creditors. Depending on your circumstances, you can be automatically discharged from bankruptcy after 12 months, which may be a shorter time than it would take to come to other agreements with creditors.
    • The majority of assets that people believe they will lose in bankruptcy, they can actually keep in most cases. I.e low value cars, cars on HP, their television etc.
    Misconceptions

    It is a generally held misconception that personal bankruptcy is punitive and that bailiffs will seize your goods and chattels leaving you nothing but a change of clothes. This is false. You enter the protection of a Bankruptcy Order to do exactly that; to protect yourself from creditors and to allow you to wipe the slate clean and get a fresh start. Under Section 283(2) of the Insolvency Act you are allowed to keep the tools of your trade, all clothing, bedding, furniture and even your car (provided it’s not too expensive and subject to certain conditions) the general principle is that your goods and chattels are safe.
    The law changed in 2004 and the mandatory period required to serve under the Bankruptcy Order was reduced from 3 years to 1 year even if you have been adjudged bankrupt before. Bankruptcy is no longer a punitive action and is there to allow discharged Bankrupts the opportunity of rebuilding their lives. In some cases, bankrupts can be discharged from bankruptcy in as little as 3 months at the Official Receiver’s discretion. An early discharge is possible provided no creditors object. For those granted an early discharge, the average discharge period is around 7 months.
    Your name no longer appears in the local paper when you enter yourself into the protection of bankruptcy. This stopped in April of 2009. There are some restrictions to this however for example your name will still appear if you owned a business that had complaints made against it in the local community.


    To find out more about common misconceptions in bankruptcy and to get further information on making the right choice we heavily recommend reading our frequently asked questions page, or contacting an advisor.
    Assets you can keep!

    You can keep the following items of property unless the individual value of each is more than the cost of a reasonable replacement:
    Tools, books, vehicles, and other items of equipment necessary to your personal use in your employment, business or vocation; and clothing, bedding, furniture, household equipment (for example, a cooker) and possessions necessary for satisfying your basic domestic needs of you and your family.
    Most household items will not be sold. You will usually be allowed to keep furniture, a television and similar items. However, items which go beyond satisfying basic domestic needs, for example, antiques, expensive jewellery, a good quality new hi-fi system or a new DVD player, may be sold.
    A car will usually not be sold unless it is valued over £1,500. However, the value of the car can influence the decision made about its sale.
    Inland Revenue approved pensions are excluded from being taken into account as an asset in bankruptcy.
    You can apply to court if you believe that the trustee is acting unreasonably when taking or selling goods. Also, if an exempt item is sold, then you may be provided with a reasonable cheaper replacement, if your circumstances require it, by the trustee. For example, if you need a car for your job, a cheaper replacement vehicle may be supplied.
    If you have items of value, the trustee may take possession and sell them. They may instruct an agent or auctioneer to value such items. You may dispute the value of the property by obtaining an independent valuation. Bankruptcy has the benefit of writing off all unsecured debt with the exception of court fines and maintenance payments directed by Court Order and student loans.

    http://www.bankruptcy.co.uk/personal-bankruptcy.php


    As i said previously what exactly in what you have just pasted there is going to make any Irish person act more responsibily when they borrow???


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  • #37
    Tipp Man
    Closed Accounts Posts: 4,025 ✭✭✭Tipp Man


    dan_d wrote: »
    You make a fair point, but you've only learned about that responsibility through the mistakes of others being forced down your throat due to our current position. 5 years ago, you (possibly) wouldn't have thought like that.

    not quite Dan, 5 years ago I was 28 - prime age for buying an overpriced shoe box - I didn't cause the prices were nuts - that was obvious. I had a great salary so could have gotten a huge mortage, but i didn't. Now i'm going to have to pay for the mistakes and foolishness of others?? Where's the justice in that?

    You know the less you do in this country the more you get - don't work? don't worry we'll pay generous dole. No house - don't worry we'll give you a free house. Out of free houses?? don't worry we'll pay your rent for you. Had a child and the fella has "left you" and now can't "afford" it?? don't worry the government will take care of you.

    I know exactly where this negative equity business is going to end up. There will be a lot of people who will get either free houses or huge proportions of their mortages written off and they'll be off living the high life in a couple of years again. There is going to be a daylight robbery of certain people in this country and it won't be the people in negative equity let me tell you


  • #38
    dan_d
    Closed Accounts Posts: 2,819 ✭✭✭dan_d


    No, I agree with most of what you're saying. I'm on the dole. As someone who worked her ass off for the last 5 years, and is entitled to the dole now - and I'm not asking for more than that - I have frequently stated that the system is better off for those who do nothing at all, and don't even try to look like they're doing anything. To be stereotypical, I'd be better off if I turned up at the SW with X number of kids in tow, by X no. of men, having never bothered to go to college or get any kind of qualification or work experience, and not even pretend to be looking for work. They'd throw money, among other things, at me. The way I am now, I get the dole - and that's with an endless initial wait - and it'll cut off after a year. Now I will admit that I won't hang around to see that year out - I want to work, and if I have to do it elsewhere, I will.

    And I agree that revamping the bankruptcy laws would result in reckless borrowing. The point I'm trying to make is that there's no point in saying "pay until you die". For some people, it's just not going to happen, and some sort of solution HAS to be put in place. I believe it has to be a multi-pronged approach on behalf of the banks (it's the least they can do) and the Gov.

    Furthermore as someone with a mortgage, in NE, unemployed and still paying my mortgage, I would certainly be against bailing out foolish borrowers. But as I said, something needs to be done. What I also should have said in my last post is that, out of that list of groups of homeowners, priority groups need to be identified. Those whose need is greater than others, with solutions developed to focus on them initially. The bottom line here is if mortgages are not repaid, we all suffer.Every last one of us. Because the banks will heap the interest rates and any other charge they can think of higher and higher and higher to cover these losses. So it's in all of our interests to find a solution to this problem that enables people to pay off as much as they can, even if it's not under the exact T & C's of the original loan.


  • #39
    Euroland
    Closed Accounts Posts: 634 ✭✭✭Euroland


    Tipp Man wrote: »
    As i said previously what exactly in what you have just pasted there is going to make any Irish person act more responsibily when they borrow???

    Our task is not to make them more responsible, but rather help them find solution for negative equity situation. Or maybe you believe that now all these people have to struggle for another 15-30 years repaying the debt on devalued property and benefiting the bankers? I believe that those who want should have the open door which would allow them to escape from the negative equity situation, leaving the problem for the banks.


  • #40
    DonkyDonk
    Registered Users, Registered Users 2 Posts: 48 ✭DonkyDonk


    Euroland wrote: »
    Our task is not to make them more responsible, but rather help them find solution for negative equity situation. Or maybe you believe that now all these people have to struggle for another 15-30 years repaying the debt on devalued property and benefiting the bankers? I believe that those who want should have the open door which would allow them to escape from the negative equity situation, leaving the problem for the banks.

    If people are allowed escape their negative equity then surely the banks have to make the money back somewhere else?

    That would result in the more responsible borrowers facing interest rate hikes, higher bank charges etc. If too many people escape their negative equity then the banks will need another bailout to clear the debts. That means higher taxes and more cutbacks.

    It's a nasty dilemma. :(


  • #41
    danbohan
    Closed Accounts Posts: 1,914 ✭✭✭danbohan


    Euroland wrote: »
    Our task is not to make them more responsible, but rather help them find solution for negative equity situation. Or maybe you believe that now all these people have to struggle for another 15-30 years repaying the debt on devalued property and benefiting the bankers? I believe that those who want should have the open door which would allow them to escape from the negative equity situation, leaving the problem for the banks.

    leaving the problem for the banks.

    which in reality means leaving the problem for the taxpayers many of whom did not buy at crazy prices which created this negative equity yet they should see people bailed out who did , wont and cant happen

    what needs to happen is a immediate reforming of bankruptcy laws which will allow people to rebuild their lives in time and both they and the banks pay for their mistakes not the people who had nothing to do with the mess


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  • #42
    ei.sdraob
    Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    20Cent wrote: »
    Usually you make good arguments but don't think so in this case. Comparing depreciation on a car to negative equity on a home is laughable.

    Why? people readilly accept that they will lose alot of money and never be able to sell a car for what they paid for it.

    Not viewing a home as an investment but as a "a home" puts things into perspective.


  • #43
    20Cent
    Registered Users, Registered Users 2 Posts: 8,940 ✭✭✭20Cent


    ei.sdraob wrote: »
    Why? people readilly accept that they will lose alot of money and never be able to sell a car for what they paid for it.

    Not viewing a home as an investment but as a "a home" puts things into perspective.

    Being homeless is a lot worse than not having a car.


  • #44
    sarumite
    Registered Users, Registered Users 2 Posts: 2,909 ✭✭✭sarumite


    20Cent wrote: »
    Being homeless is a lot worse than not having a car.

    Having a home should not be conflated with owning the property.


  • #45
    hmmm
    Registered Users, Registered Users 2 Posts: 11,203 ✭✭✭✭hmmm


    danbohan wrote: »
    which will allow people to rebuild their lives in time and both they and the banks pay for their mistakes not the people who had nothing to do with the mess
    Unfortunately the taxpayer owns most of the banks, anything you take off the banks comes out of the taxpayer's pocket.

    There is no solution that involves free money. All "solutions" involve taking money off one group of people and giving it to mortgagees. Any argument that this will benefit the economy forgets that someone else is going to have less to spend as a consequence.

    The solution as far as I am concerned is a reform of bankruptcy laws. However, if it becomes easier for people to go bankrupt with fewer consequences, the flipside is that many people will be unable to get loans or mortgages in the future as the banks will not be as willing to lend. That should be borne in mind when in 10 years time we hear complaints about people being unable to borrow to buy their "dream house".


  • #46
    erictheviking1
    Closed Accounts Posts: 160 ✭✭erictheviking1


    If people can't afford to pay they should be allowed to walk. I think a cut in peoples mortgage debt with a deal struck with banks so that the banks take the profit from a future sale.
    Whats with all the comments of "why should I bail out homeowners when I rented?"
    All I can say to that is that there are plenty of people with no savings. Why should they guarantee deposits of people who have savings.
    Its a society first and an economy second. The "I'm all right Jack" attitude on these boards is very disappointing. It would not have happened 20 or 30 years ago. It was in peoples nature to help each other out.
    I think until the attitude changes the country will stay in the ****!


  • #47
    Amhran Nua
    Closed Accounts Posts: 4,124 ✭✭✭Amhran Nua


    erictheviking1 wrote: »
    All I can say to that is that there are plenty of people with no savings. Why should they guarantee deposits of people who have savings.
    Because the alternative is complete social collapse?
    erictheviking1 wrote: »
    It would not have happened 20 or 30 years ago.
    Yeah it would. At no stage in history has anyone been willing to pony up dough so other people could accumulate valuable assets. And rightly so.


  • #48
    Mr. Loverman
    Closed Accounts Posts: 4,001 ✭✭✭Mr. Loverman


    erictheviking1 wrote: »
    If people can't afford to pay they should be allowed to walk. I think a cut in peoples mortgage debt with a deal struck with banks so that the banks take the profit from a future sale.
    Whats with all the comments of "why should I bail out homeowners when I rented?"
    All I can say to that is that there are plenty of people with no savings. Why should they guarantee deposits of people who have savings.

    Two wrongs don't make a right.


  • #49
    Sarn
    Registered Users, Registered Users 2 Posts: 3,137 ✭✭✭Sarn


    erictheviking1 wrote: »
    If people can't afford to pay they should be allowed to walk. I think a cut in peoples mortgage debt with a deal struck with banks so that the banks take the profit from a future sale.

    I don't agree with writing off a portion of someone's mortgage debt. A restructuring of the debt or reform of the existing bankruptcy laws, yes. As it is, all taxpayers are supporting existing mortgage holders through lower interest rates for both variable and tracker holders. Mortgage interest relief and the moratorium are also being provided as a temporary measure.
    erictheviking1 wrote: »
    All I can say to that is that there are plenty of people with no savings. Why should they guarantee deposits of people who have savings.

    So, hurt those who were prudent/fortunate with their money? Deposits benefit the banking system and have always been guaranteed up to a point. Pretty much every EU country offers a guarantee. The guarantees are in place to slow capital flight. Even with the guarantee, a lot of cash has already left the country. At this stage you would only be hurting those who can ill afford it.

    A basic deposit guarantee benefits everyone. It ensures that when your wage is paid in it'll be there to pay your mortgage, utilities, car loan etc. If the government were to revoke the guarantee, the deposits would rapidly disappear elsewhere, truly shutting our banks down. I know I would be looking to be paid in cash.


  • #50
    20Cent
    Registered Users, Registered Users 2 Posts: 8,940 ✭✭✭20Cent


    10's of thousands of defaults will be everyones problem.


  • #51
    Mr. Loverman
    Closed Accounts Posts: 4,001 ✭✭✭Mr. Loverman


    20Cent wrote: »
    10's of thousands of defaults will be everyones problem.

    Not mine, I'm emigrating.

    Not because I don't have a good job (I have a good job) but in principle I don't want to live in a country where a prudent person like me has to pay so much tax to support the mistakes of others.

    Ich gehe nach Deutschland.


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  • #52
    Amhran Nua
    Closed Accounts Posts: 4,124 ✭✭✭Amhran Nua


    Mr. Loverman wrote: »
    Ich gehe nach Deutschland.
    Ahem... :p

    Maybe try Luxembourg, with national debt at only 16% of GDP?


  • #53
    20Cent
    Registered Users, Registered Users 2 Posts: 8,940 ✭✭✭20Cent


    Mr. Loverman wrote: »
    Not mine, I'm emigrating.

    Not because I don't have a good job (I have a good job) but in principle I don't want to live in a country where a prudent person like me has to pay so much tax to support the mistakes of others.

    Ich gehe nach Deutschland.

    You'll need to go further than Germany for that.
    All this mess is heading their direction.


  • #54
    Mr. Loverman
    Closed Accounts Posts: 4,001 ✭✭✭Mr. Loverman


    20Cent wrote: »
    You'll need to go further than Germany for that.
    All this mess is heading their direction.

    Germany is a ridiculously stable and wealthy country compared to Ireland.

    You don't need to go to the moon to improve your standard of living. Picking one of the most successful countries in the world is sufficient.


  • #55
    20Cent
    Registered Users, Registered Users 2 Posts: 8,940 ✭✭✭20Cent


    Mr. Loverman wrote: »
    Germany is a ridiculously stable and wealthy country compared to Ireland.

    You don't need to go to the moon to improve your standard of living. Picking one of the most successful countries in the world is sufficient.

    Wouldn't be so sure of that. If Ireland, Portugal and Spain default on all the money they recklessly lent then you might find yourself moving again. I hear Somalia is nice, no taxes there.


  • #56
    whiteonion
    Closed Accounts Posts: 837 ✭✭✭whiteonion


    Amhran Nua wrote: »
    Because the alternative is complete social collapse?


    Yeah it would. At no stage in history has anyone been willing to pony up dough so other people could accumulate valuable assets. And rightly so.
    I think there should be no deposit guarantee whatsoever, that would make people more careful about who they used as a bank.


  • #57
    Mr. Loverman
    Closed Accounts Posts: 4,001 ✭✭✭Mr. Loverman


    whiteonion wrote: »
    I think there should be no deposit guarantee whatsoever, that would make people more careful about who they used as a bank.

    Is there really a deposit guarantee?

    I know they say there is, but in reality if it came down to it, is the money for the guarantee really there?


  • #58
    whiteonion
    Closed Accounts Posts: 837 ✭✭✭whiteonion


    Probably not.


  • #59
    Unrealistic
    Registered Users, Registered Users 2 Posts: 1,397 ✭✭✭Unrealistic


    DonkyDonk wrote: »
    As a result, thousands and thousands of people are faced with a stark choice: keep paying back a loan for a house that's no longer worth what you paid or just give up and go bankrupt?
    I don't really see how this is a choice. If you can afford to keep paying back a loan on a house the fact that it has dropped in value should make no difference. It's still the same house you bought with the same number of rooms in the same neighbourhood so you just keep paying. (With the proviso that we do need some sort of portable negative equity solution to deal with people who need to move house.)

    If you can't keep paying you go bankrupt. But hopefully soon under a more user friendly system than currently.

    Two separate scenarios with two separate outcomes. No choice that I can see, stark or otherwise.


  • #60
    Unrealistic
    Registered Users, Registered Users 2 Posts: 1,397 ✭✭✭Unrealistic


    dan_d wrote: »
    But what people need to understand is it's not a case of "if people get into NE and/or can't afford their payments, we could do this...". They ARE in NE and CAN'T afford their payments. So your solution is not valid. People at this exact point in time, cannot "pay the mortgage til it's paid". They just can't afford it. I'm not excusing or criticising, I'm simply stating a fact.
    There is an awful lot of noise made about this situation, and it must be terrible for people who actually find themselves unable to pay and unable to walk away, but I think you'll find there are actually relatively few people in this situation. At a rough estimate only 2-3% of all mortgages.

    dan_d wrote: »
    (5) Those who are family homes, in NE and are struggling to meet repayments
    (6) Those who are in small houses/apartments, in NE and are struggling to meet repayments
    (7) Those who are in family homes, in NE and cannot/are not meeting their repayments
    (8) Those who are in small houses/apartments, in NE and cannot/are not meeting their repayments.

    I don't find it so easy to have sympathy for those in groups (5) and (6). If someone is struggling to make their mortgage it implies that they are still in employment but had over-borrowed to the extent that they were already close to the edge and it just took a pay cut and/or a couple of points increase in interest rates to tip them over the edge. Being more prudent about the amount they borrowed would have been enough to keep them out of this mess. In that case I think any assistance from the state has to involve giving up ownership of the home; either partially by handing over equity to the state to be realised on sale or bought back at future market rates, or outright by trading down to something they can afford to meet payments on.

    Groups (7) and (8) are easier to have sympathy for. If you have been genuinely unemployed for an extended period then you are screwed no matter how prudent you were when you originally borrowed.


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  • #61
    Unrealistic
    Registered Users, Registered Users 2 Posts: 1,397 ✭✭✭Unrealistic


    Euroland wrote: »
    Our task is not to make them more responsible, but rather help them find solution for negative equity situation. Or maybe you believe that now all these people have to struggle for another 15-30 years repaying the debt on devalued property and benefiting the bankers? I believe that those who want should have the open door which would allow them to escape from the negative equity situation, leaving the problem for the banks.
    One of the important tasks most certainly is to make people more responsible because irresponsible decisions about personal borrowings is one of the main problems that brought us to the sorry state we are in today. Yes, it was also irresponsible banking practices, irresponsible governance and regulation, and irresponsible behaviour by the property industry. But without people choosing to borrow more than the could sensibly afford, to pay for property and luxuries that they couldn't afford, the bubble could not have been inflated.

    Why shouldn't people continue to pay the banks for property just because it is currently worth less? Why do you think the bank should take the loss just because someone changes their mind. If it was worth more would you be suggesting that the banks be allowed to change their mind and just kick the owners out so the bank get sell the house at a profit?

    In any case, there are no banks left to leave the problem with. It's been said on here dozens of times already but some people still don't get it; we are the banks now. Every single €1 that a mortgage holder does not pay back is an additional €1 that the tax payer has to put in in the form of recapitalisation. Hopefully that will become more clear to people when they listen to the news tomorrow.


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