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Negative Equity Mortgages approved by CBI

  • 15-02-2012 5:13pm
    #1
    Posts: 0


    With today's announcement that Negative equity mortgages will be available in certain circumstances to customers of BOI and PTSB who wish to carry over a portion of their debt and trade up to a larger property, irish homeowners will effectively be crystallizing 100% of their property losses at or near the lowest point of the housing market and carrying forward a debt of up to 125% of the value of their new home, while banks still refuse to consider write-downs on their reckless lending during the boom.

    At this point in the property market, is this move a lifeline for families who want to move home in order to have a family or secure employment, or is is simply a repeat of the disastrous 100% mortgage schemes of a few years ago which drove people into yet more debt than they could handle?

    Are we banking on the future being too rosy yet again?

    Irish Independent Article


«1

Comments

  • Registered Users, Registered Users 2 Posts: 3,872 ✭✭✭RichardAnd


    Isn't this just a re-hash of the idea that debt can be escaped through the medium of more debt? Forgive me if I misunderstand this . . .


  • Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    I cannot imagine it being allowed in a situation where someone is in arrears.
    If someone is in negative equity, but not in arrears, then it's probably a progressive step imo.
    I'd imagine the criteria will be very strict.


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    RichardAnd wrote: »
    Isn't this just a re-hash of the idea that debt can be escaped through the medium of more debt? Forgive me if I misunderstand this . . .

    This is not about escaping debt, and would be unlikely to be offered to those who were unable to service their current mortgages..

    At present they can't sell their current house, as they are unable to pay the negative equity sum in a single payment, so are locked into that house. This allows people who can afford their current mortgages, to sell the property and purchase another property moving the negative equity across..
    Very useful for those who want to trade up (or possibly down) or those who want to move to secure new/different employment.


  • Registered Users, Registered Users 2 Posts: 5,146 ✭✭✭Morrisseeee


    Not very usefull if you are on a Tracker !!

    Why can't the NAMA principle be applied here, ie. write off the negative equity & pay me €20k per year to.....ahem.........'manage' my mortgage :rolleyes:
    I jest of course, but you can see my point !


  • Posts: 0 [Deleted User]


    Welease wrote: »
    This is not about escaping debt, and would be unlikely to be offered to those who were unable to service their current mortgages...

    What I can't figure out is who this move is supposed to help. Most people I know who would avail of it are stuck in apartments they bought at or near the peak of the boom, which have dropped in value by 40-60%. The kind of negative equity that those properties have built up will be well in excess of the 25% carry-over limit of the value of any mortgage that they could realistically afford on a new home.

    It seems to me that the people hit hardest in the boom, who most need this kind of help, will be least likely to be able to avail of it unless banks are forced to write down some of their loans.


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  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    What I can't figure out is who this move is supposed to help. Most people I know who would avail of it are stuck in apartments they bought at or near the peak of the boom, which have dropped in value by 40-60%. The kind of negative equity that those properties have built up will be well in excess of the 25% carry-over limit of the value of any mortgage that they could realistically afford on a new home.

    It seems to me that the people hit hardest in the boom, who most need this kind of help, will be least likely to be able to avail of it unless banks are forced to write down some of their loans.

    I don't see this as being implemented to help those who need help the most.. There will have to be other instruments put in place for that if that what the banks/government choose to do..

    This (to my mind) is to help kick start a sector of the housing market where people can afford and want to move house, but are limited by the current process which means that have to pay off the negative equity before being able to sell their current house (which they can't afford to do)..

    There are people (i know at least 2) who had purchased a house in a location suitable to their previous jobs. They are now in new jobs, but cannot sell those houses because they would need to fund about €100K of negative equity before being allowed to sell the house. With the new process, they can move to a more convenient locations, and carry the negative equity with them.. A much more flexible solution.. There are those who are looking for work who would be in a similar positions and are currently tied to a location where no jobs are to be found.

    I have no idea of the size of this sector, but each sale or move could be classed as useful to the economy, as services are required to sell, move and DIY the new house, so the benefit is wider than just the house sell..

    I personally think it's a good change, and at least provides an option to those who would find it useful..

    For your example, there are many smaller 3 bed houses which have also drastically dropped in price, and depending on the maths might become affordable (especially if they can save up a deposit of the difference).. Again, it isn't designed to help those who are in financial difficult, but one of your friends with a 1 bed appartment who now has kids might have an option to get a house further out with a garden etc.. Previously they would have had no option...


  • Registered Users, Registered Users 2 Posts: 1,787 ✭✭✭GSF


    So
    1) you'd lose your tracker rate
    2) the banks would now have a better security in case they want to reposess- swapping say an apartment for a semi d house for example

    i wonder who is getting the better bargain here?


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    GSF wrote: »
    So
    1) you'd lose your tracker rate
    2) the banks would now have a better security in case they want to reposess- swapping say an apartment for a semi d house for example

    i wonder who is getting the better bargain here?

    I'm not here to defend banks.. but in fairness i think your complaints are somwhat irrelevant..

    If the customer was in positive equity and wanted to move 1) & 2) would apply anyway irrespective of this change.. This change merely allows those who would not have had the option to consider if it meets their requirements..

    Would people prefer everyone to be locked into their negative equity properties for the remainder of their 25-30 year terms?


  • Moderators, Entertainment Moderators, Politics Moderators Posts: 14,539 Mod ✭✭✭✭johnnyskeleton


    If you can carry over your NE, presumably you will not have to stump up a deposit either. Logically therefore it is a 100-125% loan.

    So why would a bank give 125% to someone with a proven record of making bad purchases, but are unwilling to give 90% loan to someone with no baggage.


  • Registered Users, Registered Users 2 Posts: 1,787 ✭✭✭GSF


    Welease wrote: »
    Would people prefer everyone to be locked into their negative equity properties for the remainder of their 25-30 year terms?

    well i take your point in so far as you can move to another property and tranfer the negative equity to that property, assuming you can find a buyer for your current property of course. But the debt stays with you. It just has a new home. And a higher interest rate to repay at. So the interest on the negative equity goes up, possibly by quite a lot over those 25-30 years.


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    GSF wrote: »
    i wonder who is getting the better bargain here?

    it's the banks. As far as I can see in this country, it will always be the banks. They have consistently shown that they are always a step ahead of the policy makers and politicians, and are cleverer, and more agile in how they do business than those who regulate them.

    I haven't seen any sign of that changing so far, just a lot of talk and political posturing, so why assume they'll suddenly start treating their customers with respect?


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    GSF wrote: »
    well i take your point in so far as you can move to another property and tranfer the negative equity to that property, assuming you can find a buyer for your current property of course. But the debt stays with you. It just has a new home. And a higher interest rate to repay at. So the interest on the negative equity goes up, possibly by quite a lot over those 25-30 years.

    Agreed.. I'd imagine it only makes sense to those who have no issue paying their mortgages and can absorb the increased rate.. It likely won't suit the majority of mortgage related issues in this country, but it's not designed to.. It does however, put a viable option on the table for those who currently have no option available..

    For example, as friend who is now seperated from his wife is living in their house almost 2 hours from work.. He can easily afford increases in costs, but it currently locked into the house and a rediculous commute because he cannot pay off the current negative equity to liquidate the house.. This allows them to sell and move on with their lives.. and more importantly doesn't burden the state and taxpayer any further..


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    If you can carry over your NE, presumably you will not have to stump up a deposit either. Logically therefore it is a 100-125% loan.

    So why would a bank give 125% to someone with a proven record of making bad purchases, but are unwilling to give 90% loan to someone with no baggage.

    This is not carte blanche to everyone who has a neg equity mortgage that suddenly they can extend to 125%.. If you meet their criteria then they are allowed to extend that facility to you (the facility did not previously exist).. They may of course decide you do not meet their criteria and decline..

    Same as they do have a facility to offer 90% loans.. But they may decide you don't meet their criteria and decline..


  • Registered Users, Registered Users 2 Posts: 3,553 ✭✭✭lmimmfn


    trade up to a larger mortgage? WTF!!!!

    Ignoring idiots who comment "far right" because they don't even know what it means



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


    lmimmfn wrote: »
    trade up to a larger mortgage? WTF!!!!
    My sister bought a house in '08 in dublin. The house is now 40% in NE. Back then she was young, free and single. Fastforward 4 years and she is in a committed relationship and I would imgine that soon she may even think of starting a family. However her current house while suitable for a person in their mid 20's is too small for someone approaching 30 and thinking of having a child. She can afford a mortgage, she can even afford more than her mortgage, but she cannot afford to sell the house at the moment because of the NE. Allowing her to move the NE to a bigger house suitable for a family makes perfect sense in my opinion...as long as she can make her mortgage repayments I really don't see what the problem is.


  • Posts: 0 [Deleted User]


    sarumite wrote: »
    ...as long as she can make her mortgage repayments I really don't see what the problem is.

    That's exactly what everybody was saying 5 or 6 years ago. "As long as everything keeps going the way it is, everything will be grand", but things can change for the worse very easily. There are external forces beyond our control still at work here, affecting things like interest rates, unemployment rates, bailouts, etc, and despite a lot of hot air, we STILL haven't reached rock bottom and our property prices are still falling.

    Again I ask, is it sensible in THIS market to be enticing heavily indebted people to crystalise their "on paper" losses and borrow even more risky money at higher interest rates? Aren't we supposed to be reducing our borrowings to earnings ratio, not increasing it by repeating the same mistakes that got us here in the first place?


  • Registered Users, Registered Users 2 Posts: 3,553 ✭✭✭lmimmfn


    sarumite wrote: »
    My sister bought a house in '08 in dublin. The house is now 40% in NE. Back then she was young, free and single. Fastforward 4 years and she is in a committed relationship and I would imgine that soon she may even think of starting a family. However her current house while suitable for a person in their mid 20's is too small for someone approaching 30 and thinking of having a child. She can afford a mortgage, she can even afford more than her mortgage, but she cannot afford to sell the house at the moment because of the NE. Allowing her to move the NE to a bigger house suitable for a family makes perfect sense in my opinion...as long as she can make her mortgage repayments I really don't see what the problem is.
    Ok no, i realise there are such cases, no offense but it would have been better if she bought a gaff that would house a family/have flexibility for the future. Im just saying in general they should be allowing people to downsize not the other way around.

    Ignoring idiots who comment "far right" because they don't even know what it means



  • Registered Users, Registered Users 2 Posts: 1,049 ✭✭✭Dob74


    sarumite wrote: »
    My sister bought a house in '08 in dublin. The house is now 40% in NE. Back then she was young, free and single. Fastforward 4 years and she is in a committed relationship and I would imgine that soon she may even think of starting a family. However her current house while suitable for a person in their mid 20's is too small for someone approaching 30 and thinking of having a child. She can afford a mortgage, she can even afford more than her mortgage, but she cannot afford to sell the house at the moment because of the NE. Allowing her to move the NE to a bigger house suitable for a family makes perfect sense in my opinion...as long as she can make her mortgage repayments I really don't see what the problem is.



    So rent out the small pad to someone else and rent a suitable house for herself.
    Why get tied to another property when there are plenty of decent places to rent?
    NE mortgages are just another way to push up property prices.
    There are plenty of empty properties in good locations lying idol. If the cute whores at the banks want to hold on to them and gov must push them to rent them our sell them. The taxpayer cant let this wait and see attitude continue. How mch more money are we going have to dump into the banks while the let prime property lie vacant?


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


    Dob74 wrote: »
    So rent out the small pad to someone else and rent a suitable house for herself.
    Why get tied to another property when there are plenty of decent places to rent?
    NE mortgages are just another way to push up property prices.
    There are plenty of empty properties in good locations lying idol. If the cute whores at the banks want to hold on to them and gov must push them to rent them our sell them. The taxpayer cant let this wait and see attitude continue. How mch more money are we going have to dump into the banks while the let prime property lie vacant?

    I can see that as an valid argument. However I can see a few reasons one may not want to rent out their place. The obvious one is that it is your property and you are responsible for the upkeep and payment on said property. When you haven't bought a house with investment as the primary goal, it can be quite daunting to hand over the keys to a stranger. I don't even like loaning my car to a friend, never mind a stranger so I can imagine how someone would feel about property. Since one is relaint on the rent to pay the mortgage, they may be worried about not having a constant income stream from the rental property. Then there is the question of upkeep. If the cooker breaks I can live without it for a few weeks (months perhaps), however as someone who is currently a tenant I know that I would be onto my landlord within 5 minutes of it breaking. I am not saying that this is a good idea for everyone, however I don't see why it is such a big problem myself. Considering the prices of houses at the moment, it might even be financially better off.


  • Registered Users, Registered Users 2 Posts: 24,289 ✭✭✭✭Sleepy


    For those that are able to afford larger repayments than they're currently making, this could be useful. I can think of a number of scenarios where this could be used sensibly:

    Apartment bought during the boom by a single person for 250k. Now worth 125k. Person has since gotten married and the couple have a combined income capable of supporting a mortgage for 350k. The difference between the negative equity and what that couple could afford to service mortgage wise (225k) would buy a 3 bed semi or similar relatively easily in Dublin. Sure, they now have an 155% mortgage but even allowing for a further drop in the value of the house of another 25k, the negative equity of the property is now at 42% rather than the previous 50%. Now, this scenario is only workable if the couple are both in stable jobs with a combined salary of over 100k but there are still plenty of people in that category.


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    Sleepy wrote: »
    The difference between the negative equity and what that couple could afford to service mortgage wise (225k) would buy a 3 bed semi or similar relatively easily in Dublin. Sure, they now have an 155% mortgage...

    Except that the maximum allowable under the scheme is a 125% mortgage, which can be affordably repaid without breaching mortgage guidelines. This means that the couple in your example carrying over €125k Negative equity would need to be able to afford repayments on a mortgage of €625k (€500k for their new house, plus their carried over €125k). This is well outside the cost of a reasonably average family home in any county in Ireland at the moment.

    Add to that the higher risk that these 125% loans would carry for banks because the security for the loan-ie:the house-won't cover the full cost of the funds advanced if it ever needs to be repossessed) and your couple will be likely to be repaying a very high loan value at an interest rate that's probably a half to one point or so over the market rate.

    Now take that high monthly repayment and apply the financial regulator's lending rules that say you are not supposed to have a mortgage where your repayments exceed 35% of your total income (a crucial rule tht was broken routinely in the boom, resulting in people getting on the property ladder when the shouldn't have, but that is being followed much more closely now) and you'll see that the amount of people out there who will actually be able to avail of this type of scheme will be in the vast minority. High earners, typically well into the six figure combined salary territory, who really don't need a solution like this as they realistically can probably afford to fund all or most of their NE out of their own pocket, NOT the thousands of average earning first time buyer young families stuck in apartments the length and breadth of the country.

    Once again, I return to my main point. Who is this scheme designed to help, and is it really what the market needs right now?
    Dob74 wrote: »
    So rent out the small pad to someone else and rent a suitable house for herself. Why get tied to another property when there are plenty of decent places to rent?

    It's not as simple as that, if it was there wouldn't be any crisis at the moment. The current rental yield on a property like a 1 or 2 bedroom apartment bought at the peak of the boom is only about 70% of the cost of servicing the morgage based on the figures that were signed up to by a buyer back then. In simple terms, if you have a mortgage repayment of €1000 per month on a 5 or 6 year old apartment you'll be lucky to see €700 a month come in from renting it, so before you make a move you're down €300 a month.

    Add to that the cost of upkeep and maintenance, annual management fees, and lost rental income while replacing your tenants etc, and you could be looking at another €2000 or more per year, or as much as a couple of hundred euros per month out of your own pocket. So your apartment is costing you €500 euros a month from your own pocket to rent out. You've now also got to think about all of the various mortgage rate hikes the bank will charge you (your apartment is now an "investment property" rather than your principal residence, and so is liable for business interest rates), government levvies and taxes like the Non principal private residence levy, the Private resedential tenancies board fees, and various other sneaky extra costs like water rates and household charges that will be creeping in over the next few years.

    Add to all of this the extra expense of renting and running a bigger, more suitable house for yourself, and the increased cost of starting a family (kids are expensive), and you can see how much extra cost is involved in the simply "renting it out and moving" option. You could effectively be doubling your spend on accommodation before any other living costs are even factored in.

    That just isn't financially do-able for a lot of people at the moment, and that's completely apart from the hit your morale would take after scrimping and saving for years to own your own place, and ending up stuck in a rental paying someone else's mortgage in order to have something as basic a human right as raising a family.


  • Registered Users, Registered Users 2 Posts: 3,872 ✭✭✭RichardAnd


    lmimmfn wrote: »
    trade up to a larger mortgage? WTF!!!!


    That sums up my qualms about this scheme, though you express it in a far more succinct manner. To me, someone availing of this scheme would be leaving a negative equity house to purchase a larger house which is just as likely to drop in value thus, the said individual would just be incurring more debt. Is that correct?


  • Registered Users Posts: 2 Tsad


    can't agree more. as far as i can work out it appeals either to those in the highest house price brackets moving from large house to an even larger one or those who bought a starter home very early in the boom (when the prices were lower) and have a whack load of their mortgage paid off. The third option (and proabably what the banks are very interested in) are those who are willing to put additional savings in to bring down the negative equity at this stage so that they can qualify.

    How come they can't also offer a product based on the second mortgage (plus the negative equity carried over) not exceeding the cost of the first mortgage as it stands? Family homes in the counties around Dublin are now well below what 1 and 2 beds cost in the height of the boom.
    Except that the maximum allowable under the scheme is a 125% mortgage, which can be affordably repaid without breaching mortgage guidelines. This means that the couple in your example carrying over €125k Negative equity would need to be able to afford repayments on a mortgage of €625k (€500k for their new house, plus their carried over €125k). This is well outside the cost of a reasonably average family home in any county in Ireland at the moment.

    Add to that the higher risk that these 125% loans would carry for banks because the security for the loan-ie:the house-won't cover the full cost of the funds advanced if it ever needs to be repossessed) and your couple will be likely to be repaying a very high loan value at an interest rate that's probably a half to one point or so over the market rate.

    Now take that high monthly repayment and apply the financial regulator's lending rules that say you are not supposed to have a mortgage where your repayments exceed 35% of your total income (a crucial rule tht was broken routinely in the boom, resulting in people getting on the property ladder when the shouldn't have, but that is being followed much more closely now) and you'll see that the amount of people out there who will actually be able to avail of this type of scheme will be in the vast minority. High earners, typically well into the six figure combined salary territory, who really don't need a solution like this as they realistically can probably afford to fund all or most of their NE out of their own pocket, NOT the thousands of average earning first time buyer young families stuck in apartments the length and breadth of the country.

    Once again, I return to my main point. Who is this scheme designed to help, and is it really what the market needs right now?


  • Registered Users, Registered Users 2 Posts: 24,289 ✭✭✭✭Sleepy


    Except that the maximum allowable under the scheme is a 125% mortgage, which can be affordably repaid without breaching mortgage guidelines. This means that the couple in your example carrying over €125k Negative equity would need to be able to afford repayments on a mortgage of €625k (€500k for their new house, plus their carried over €125k). This is well outside the cost of a reasonably average family home in any county in Ireland at the moment.
    As you might have guessed, I plucked figures from the air to demonstrate where it could be of value.
    Add to that the higher risk that these 125% loans would carry for banks because the security for the loan-ie:the house-won't cover the full cost of the funds advanced if it ever needs to be repossessed) and your couple will be likely to be repaying a very high loan value at an interest rate that's probably a half to one point or so over the market rate.
    The loans are pro-rata less risky for the bank since the new house's value would cover a higher percentage of the new mortgage than the apartment did on the old mortgage. Also, as 3 bed houses tend to be suffering less than apartments in price drops, the new asset upon which the mortgage is based is also safer collateral: it's likely to depreciate less than the original asset.
    Now take that high monthly repayment and apply the financial regulator's lending rules that say you are not supposed to have a mortgage where your repayments exceed 35% of your total income (a crucial rule tht was broken routinely in the boom, resulting in people getting on the property ladder when the shouldn't have, but that is being followed much more closely now) and you'll see that the amount of people out there who will actually be able to avail of this type of scheme will be in the vast minority. High earners, typically well into the six figure combined salary territory, who really don't need a solution like this as they realistically can probably afford to fund all or most of their NE out of their own pocket, NOT the thousands of average earning first time buyer young families stuck in apartments the length and breadth of the country.

    Once again, I return to my main point. Who is this scheme designed to help, and is it really what the market needs right now?
    How many people, even high-earners with a joint income of 100k or so, can pay off more than a year's salary at a stroke: very, very few. A joint income of 100k or so is hardly unusual for a professional couple either btw.

    The scheme allows those who can afford it to move house whilst in negative equity. In doing so it provides the banks (which we the taxpayer own a large chunk of) with better security than they previously held.

    It's not the debt forgiveness scheme that many are hoping for (and many more of us are appalled at being asked to fund) but I'd contend that it's not supposed to be: it's addressing a very specific concern for those in fairly specific scenarios that have the capacity to repay a slightly larger mortgage than they currently have (or even one of lesser or equal size if they're moving to similar or cheaper accommodation). The other benefit for many here is mobility: at present if you're stuck in negative equity on your home in Dublin you're not able to transfer it to a home in Galway or Cork should a career option open up there for you.


  • Registered Users, Registered Users 2 Posts: 24,289 ✭✭✭✭Sleepy


    RichardAnd wrote: »
    That sums up my qualms about this scheme, though you express it in a far more succinct manner. To me, someone availing of this scheme would be leaving a negative equity house to purchase a larger house which is just as likely to drop in value thus, the said individual would just be incurring more debt. Is that correct?
    That assumes that price drops are equal across all categories of property when they're not. Apartments, "starter" homes and Celtic Tiger mansionettes in the middle of nowhere have all fallen far more in value than 3/4 bedroom houses in mature residential suburbs for example.


  • Posts: 0 [Deleted User]


    Sleepy wrote: »
    As you might have guessed, I plucked figures from the air to demonstrate where it could be of value.

    Yes, but the values you plucked are pretty accurate and are indicative of the situations a lot of people are in at the moment, so i based my calculations on them. €125k is a fair representation of the negative equity that an average small house or particularly an apartment buyer from the last few years of the boom might currently find themselves in. Average, not a high earner, or someone who is particularly comfortable. For a lot of very ordinary homeowners at the moment being in €125k negative equity is all too likely, while being wealthy enough to be able to afford making the repayments on a €625k mortgage is definitely not.

    Sleepy wrote: »
    The loans are pro-rata less risky for the bank since the new house's value would cover a higher percentage of the new mortgage than the apartment did on the old mortgage.

    Yes, exactly, so the bank's outlook improves, while the already heavily indebted homeowner crystalises their assumed "on paper" losses by effectively "cashing out" at the bottom of the market, and refinancing their losses into an even higher debt in just as unstable a market, effectively foregoing any chance of regaining any of the lost value in their original property through any recovery which might happen over the next few years. This is a far better option for a bank, and a worse situation for the customer who avails of it.

    Once again i ask, who is this scheme really designed to help?
    Sleepy wrote: »
    How many people, even high-earners with a joint income of 100k or so, can pay off more than a year's salary at a stroke: very, very few. A joint income of 100k or so is hardly unusual for a professional couple either btw.

    I don't mean to be pedantic, but if you read back over my post, it's clear that i was referring to higher earners well into the six figure earning bracket, not an average middle income professional couple touching 100k PA. I was referring to combined incomes of 200, 300, and 400k or upwards, which I'm sure you would agree do not represent average middle income earnings in Ireland at the moment.

    My main point was that this scheme would seem to only be of use to the higher end of the earning spectrum, to a cohort of people where the problems associated with negative equity, socially speaking, tend not to be as serious, or tend not to impact on their major life choices so gravely.

    The vast majority of people trapped in a negative equity nightmare and who need help urgently are ireland's low and middle income young families, the first time buyers from 5-10 years ago who were sold a pup by the banks, developers, and Fianna Fail, and are now locked into expensive mortgages on unsuitable properties and struggling to make ends meet. These people are facing the reality of being logistically tied to a small town where all available employment has dried up, or are having to decide to have one child versus two, or no child versus one, etc because they don't have the space to raise the family they always dreamed of having.

    Those who really need help will not be helped by this scheme, as it is financially unattainable for them in it's current form. Meanwhile their lives are being hugely affected by the current administration's inaction on this issue.


  • Registered Users, Registered Users 2 Posts: 24,289 ✭✭✭✭Sleepy


    Yes, exactly, so the bank's outlook improves, while the already heavily indebted homeowner crystalises their assumed "on paper" losses by effectively "cashing out" at the bottom of the market, and refinancing their losses into an even higher debt in just as unstable a market, effectively foregoing any chance of regaining any of the lost value in their original property through any recovery which might happen over the next few years. This is a far better option for a bank, and a worse situation for the customer who avails of it.
    The two bolded items above are important: we are not at the bottom of the market and any recovery in house prices is both (a) undesirable and (b)decades away.

    Once again i ask, who is this scheme really designed to help?
    The banks and those in negative equity who require the mobility to re-locate, downsize or up-size dependent on their financial ability to do so.

    I don't see it being touted as a solution to the negative equity that many people are suffering from. Though, that said, I don't believe we need a solution to that negative equity that involves debt-forgiveness. If the mortgage holder can service their mortgage, that's the contract they willingly signed and have to live with. if they can't service their mortgage there's a new,more lenient, personal bankruptcy process they can go through to get a new start.

    I don't mean to be pedantic, but if you read back over my post, it's clear that i was referring to higher earners well into the six figure earning bracket, not an average middle income professional couple touching 100k PA. I was referring to combined incomes of 200, 300, and 400k or upwards, which I'm sure you would agree do not represent average middle income earnings in Ireland at the moment.

    My main point was that this scheme would seem to only be of use to the higher end of the earning spectrum, to a cohort of people where the problems associated with negative equity, socially speaking, tend not to be as serious, or tend not to impact on their major life choices so gravely.

    The vast majority of people trapped in a negative equity nightmare and who need help urgently are ireland's low and middle income young families, the first time buyers from 5-10 years ago who were sold a pup by the banks, developers, and Fianna Fail, and are now locked into expensive mortgages on unsuitable properties and struggling to make ends meet. These people are facing the reality of being logistically tied to a small town where all available employment has dried up, or are having to decide to have one child versus two, or no child versus one, etc because they don't have the space to raise the family they always dreamed of having.

    Those who really need help will not be helped by this scheme, as it is financially unattainable for them in it's current form. Meanwhile their lives are being hugely affected by the current administration's inaction on this issue.
    Those people signed on for the circumstances they find themselves and would have been a large part of Fianna Fail's vote during the boom. Speaking personally, as someone who never voted FF in my life, I took on more personal debt than I should have during the boom on the incorrect assumption that my ever-rising salary wouldn't be affected by the housing bubble bursting. So, while I'm fortunate enough not to be saddled with huge negative (because I was smart enough to see the insanity of the situation) I'm paying for my mistakes and expect others to pay for theirs. (before you make the argument "but the bankers...", yes, I agree that it's a disgrace that we socialized private losses but one miscarriage of justice does not call for another).


  • Registered Users, Registered Users 2 Posts: 223 ✭✭checkcheek


    Sleepy wrote: »
    The two bolded items above are important: we are not at the bottom of the market and any recovery in house prices is both (a) undesirable and (b)decades away.

    How do you know were not at the bottom of the market, i keep saying this but this could be the bottom, nowadays everybody has the same mind set as a few years ago, people always seem to think that house prices can go only one way, years ago it was believed that they would only go up, not its believed they can only go down!


  • Registered Users, Registered Users 2 Posts: 1,787 ✭✭✭GSF


    checkcheek wrote: »
    How do you know were not at the bottom of the market, i keep saying this but this could be the bottom, nowadays everybody has the same mind set as a few years ago, people always seem to think that house prices can go only one way, years ago it was believed that they would only go up, not its believed they can only go down!

    The link to incomes would suggest that they will continue to fall since the next 3-4 budgets will continue to reduce the amount of disposable income buyers have available to either afford a mortgage or build a deposit on a house.


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  • Posts: 0 [Deleted User]


    Sleepy wrote: »
    ...lots of harsh truths...

    While i don't share your rather cold, dispassionate view of the situation, i can't argue with much of what you say. A lot of people dug their own hole during the boom, it's true, and fundamentally i do agree that it is ultimately people's responsibility to deal with the consequences of their decisions. As far as socialization of losses go biffo and lenihan were stupid enough to socialise the bank losses, and unfortunately, two wrongs don't make a right.

    It does seem to me though that while people do have to bear responsibility for their decisions, the state institutions who encouraged those decisions, and failed to legislate against all the reckless behaviour and who failed to properly regulate borrowing, as well as the banks who facilitated it all at great profit and in dubious circumstances (albeit both under different leaderships) are now standing back and washing their hands of it all, and singing the same song you are:

    "You made your own bed, now lie in it"


  • Registered Users, Registered Users 2 Posts: 223 ✭✭checkcheek


    Oh I agree that prices are going to fall but i just feel that everybody is in the frame of mind that house prices are goin down!


  • Registered Users, Registered Users 2 Posts: 24,289 ✭✭✭✭Sleepy


    checkcheek wrote: »
    How do you know were not at the bottom of the market, i keep saying this but this could be the bottom, nowadays everybody has the same mind set as a few years ago, people always seem to think that house prices can go only one way, years ago it was believed that they would only go up, not its believed they can only go down!
    For me, I just can't see a price decline going from circa 15% in a year to a raise. I'm expecting at least a 5-10% decline this year a slowing in the decline and then a plateau until the economy begins to see substantial growth again and much as I hope I'm wrong, I can't see significant, employment-creating, growth in the short to medium term.
    It does seem to me though that while people do have to bear responsibility for their decisions, the state institutions who encouraged those decisions, and failed to legislate against all the reckless behaviour and who failed to properly regulate borrowing, as well as the banks who facilitated it all at great profit and in dubious circumstances (albeit both under different leaderships) are now standing back and washing their hands of it all, and singing the same song you are:

    "You made your own bed, now lie in it"
    It could be argued that many of the TD's that legislated at the time are lying in their bed: they lost their jobs. Unfortunately, they were in the position to ensure their beds were lined with comfortable pensions.


  • Registered Users, Registered Users 2 Posts: 20,299 ✭✭✭✭MadsL


    While i don't share your rather cold, dispassionate view of the situation, i can't argue with much of what you say. A lot of people dug their own hole during the boom, it's true, and fundamentally i do agree that it is ultimately people's responsibility to deal with the consequences of their decisions. As far as socialization of losses go biffo and lenihan were stupid enough to socialise the bank losses, and unfortunately, two wrongs don't make a right.

    It does seem to me though that while people do have to bear responsibility for their decisions, the state institutions who encouraged those decisions, and failed to legislate against all the reckless behaviour and who failed to properly regulate borrowing, as well as the banks who facilitated it all at great profit and in dubious circumstances (albeit both under different leaderships) are now standing back and washing their hands of it all, and singing the same song you are:

    "You made your own bed, now lie in it"


    In the US you can negotiate your way out of a bad mortgage by taking some pain, but then the bank takes pain as well. the Short Sale - bank agrees an amount based on the current market value + a fair chunk of the overage depending on what you owe. they write of some of the debt in exchange for getting their money now rather than in foreclosure.

    In Ireland the banks suggest you take a 125% mortgage? If taking a 100% mortgage was a bad idea, what the f is this??


  • Registered Users, Registered Users 2 Posts: 24,289 ✭✭✭✭Sleepy


    People living with the consequences of their bad decisions and the banks attempting to accommodate those who are suitable candidates to be accommodated in this fashion. Labour force mobility is important both for people's quality of life and for the recovery of our economy.

    Yes, I'd be happier if the banks had been left to do the same (We should have temporarily nationalised BOI and AIB whilst letting Anglo and the other non-systemic hit the wall at full tilt imho) but an idiotic decision by a former government doesn't justify an idiotic one by the current one.


  • Registered Users, Registered Users 2 Posts: 829 ✭✭✭hognef


    MadsL wrote: »


    In the US you can negotiate your way out of a bad mortgage by taking some pain, but then the bank takes pain as well. the Short Sale - bank agrees an amount based on the current market value + a fair chunk of the overage depending on what you owe. they write of some of the debt in exchange for getting their money now rather than in foreclosure.

    In Ireland the banks suggest you take a 125% mortgage? If taking a 100% mortgage was a bad idea, what the f is this??

    These people already have 125% (or higher) mortgages. What difference does it make if they move that to another house? Their net debt doesn't change as a result. This is simply allowing people to move to more suitable homes. Also, to some extent, it might save the taxpayer from covering even more bank losses.


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  • Registered Users, Registered Users 2 Posts: 1,246 ✭✭✭daltonmd


    Welease wrote: »
    This is not about escaping debt, and would be unlikely to be offered to those who were unable to service their current mortgages..

    At present they can't sell their current house, as they are unable to pay the negative equity sum in a single payment, so are locked into that house. This allows people who can afford their current mortgages, to sell the property and purchase another property moving the negative equity across..
    Very useful for those who want to trade up (or possibly down) or those who want to move to secure new/different employment.

    So they pay double the NE over the lifetime of the new mortgage - that's money that will never be spent in the economy, in the shops, pubs, small businesses. This notion that "Negative Equity is not a problem" is a myth. It is a huge problem and kicking that can down the road will cause more damage.

    Loading more debt onto people is doing exactly to them what the government is doing to the country, more loans on top of loans that will never be repaid. Introducing this measure when we are looking at years of paycuts, higher taxes, stealth taxes is crazy, can they guarantee those who take up this crazy scheme that they will have their jobs in 5 years time or the same/higher disposable income .

    If they want to solve the problem then they should order the banks to write down the debts, just as their debt was written down and the taxpayer put on the hook for it.

    We need people to have money to spend in the economy - not redirected to the banks yet again, we need people spending to create demand and stimulate growth. This is yet another way to stifle growth. The difference with this measure is that is it channels money into the banks over a longer term.


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    daltonmd wrote: »
    So they pay double the NE over the lifetime of the new mortgage - that's money that will never be spent in the economy, in the shops, pubs, small businesses. This notion that "Negative Equity is not a problem" is a myth. It is a huge problem and kicking that can down the road will cause more damage.

    Loading more debt onto people is doing exactly to them what the government is doing to the country, more loans on top of loans that will never be repaid. Introducing this measure when we are looking at years of paycuts, higher taxes, stealth taxes is crazy, can they guarantee those who take up this crazy scheme that they will have their jobs in 5 years time or the same/higher disposable income .

    If they want to solve the problem then they should order the banks to write down the debts, just as their debt was written down and the taxpayer put on the hook for it.

    We need people to have money to spend in the economy - not redirected to the banks yet again, we need people spending to create demand and stimulate growth. This is yet another way to stifle growth. The difference with this measure is that is it channels money into the banks over a longer term.

    You seem to think that everyone is struggling to pay their mortgages and that any debt is bad.. That is simply not true..Why should the debts of people who can afford their mortgages and want to trade up to bigger houses need to be written down? That simply doesn't make sense..

    To take your proposal to it's fullest conclusion.. why not limit all people to purchasing 1 bed shacks.. so that we maximise money flowing out in the economy and minimise debt?


  • Registered Users, Registered Users 2 Posts: 1,246 ✭✭✭daltonmd


    Welease wrote: »
    You seem to think that everyone is struggling to pay their mortgages and that any debt is bad.. That is simply not true..Why should the debts of people who can afford their mortgages and want to trade up to bigger houses need to be written down? That simply doesn't make sense..

    To take your proposal to it's fullest conclusion.. why not limit all people to purchasing 1 bed shacks.. so that we maximise money flowing out in the economy and minimise debt?

    Where do I think, say or even hint that everyone is struggling?

    Where do I say that any debt is bad?

    You simply aren't looking at the bigger picture, but you're not alone in that.

    Why would we limit all people to purchase one bed shacks? You've lost me.

    As to maximise money to "flow out of the economy"??? Maybe you can clarify?


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    daltonmd wrote: »
    Where do I think, say or even hint that everyone is struggling?

    Where do I say that any debt is bad?
    daltonmd wrote: »
    Loading more debt onto people is doing exactly to them what the government is doing to the country, more loans on top of loans that will never be repaid. Introducing this measure when we are looking at years of paycuts, higher taxes, stealth taxes is crazy, can they guarantee those who take up this crazy scheme that they will have their jobs in 5 years time or the same/higher disposable income .

    If they want to solve the problem then they should order the banks to write down the debts, just as their debt was written down and the taxpayer put on the hook for it.

    You seem to believe that these loans wont be repaid and that debt write down is the solution.. For people who fall into this category and could avail of the changes.. they will be able to service their debt, and they don't need debt write down..
    daltonmd wrote: »
    You simply aren't looking at the bigger picture, but you're not alone in that.

    I am looking at the bigger picture.. I understand that there are many many people who can and will continue to service their loans, but they need flexibility to be allowed to move properties, and not be locked into the current until the mortage is paid off.
    daltonmd wrote: »
    Why would we limit all people to purchase one bed shacks? You've lost me.

    As to maximise money to "flow out of the economy"??? Maybe you can clarify?

    You seem to believe that increasing debt is bad.. it's not.. it can be useful and necessary to move both personal and state economies along.. It's unsustainable debt that is the problem.. People with unsustainable debt would likely not be eligible to avail of these changes.


  • Registered Users, Registered Users 2 Posts: 1,246 ✭✭✭daltonmd


    Welease wrote: »
    You seem to believe that these loans wont be repaid and that debt write down is the solution.. For people who fall into this category and could avail of the changes.. they will be able to service their debt, and they don't need debt write down..



    I am looking at the bigger picture.. I understand that there are many many people who can and will continue to service their loans, but they need flexibility to be allowed to move properties, and not be locked into the current until the mortage is paid off.



    You seem to believe that increasing debt is bad.. it's not.. it can be useful and necessary to move both personal and state economies along.. It's unsustainable debt that is the problem.. People with unsustainable debt would likely not be eligible to avail of these changes.


    You misunderstand - you were the one who said "as they are unable to pay the negative equity sum in a single payment", so even though they aren't struggling they cannot repay that debt. So the answer? Load up with more debt (the new mortgage on top of the NE) so they repay double in the long term.
    You are not looking at the bigger picture - they need less debt to be flexible not more. They aren't locked into a property they are locked in debt.

    Increasing the debt means that less money can come into the economy - it's all going one way and that's to the banks.


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  • Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    daltonmd wrote: »
    Increasing the debt means that less money can come into the economy - it's all going one way and that's to the banks.

    I'm curious, how is this increasing the debt? The person that's taking this on is already in debt (not as much as when they bought the property though, because they will have paid off some of the principle).

    The way I see this proposal is that a property owner will sell their existing property (e.g. 1/2 bed apartment) to buy another (e.g. house).

    So we're talking about the price of the house, offset by the sale price of the apartment. Will there be significant extra debt from this, not likely if the buyer is looking to get something affordable.

    The new mortgages will still have to be within the reals of the ability of the applicant to pay back - so we're talking 4/5 times income.

    I think the bigger question around this is how many people will even be eligible for this?


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    daltonmd wrote: »
    You misunderstand - you were the one who said "as they are unable to pay the negative equity sum in a single payment", so even though they aren't struggling they cannot repay that debt. So the answer? Load up with more debt (the new mortgage on top of the NE) so they repay double in the long term.
    You are not looking at the bigger picture - they need less debt to be flexible not more. They aren't locked into a property they are locked in debt.

    Increasing the debt means that less money can come into the economy - it's all going one way and that's to the banks.

    Actually i think you misunderstand and dont see the bigger picture... :)

    In order to move house they need to be able to pay off the complete mortgage which includes the negative equity in a single instance, otherwise the bank will not allow the property to be sold.. Unless (for example) they have €100K lying around then they are stuck with that property for the term of loan.
    The can pay the debt, and can easily service the debt over the 20+ years agreed, but they cannot pay €100K in a single go now (how many people can?).. The debt level is not an issue for them.. the payment of neg equity in a single go is.. It's a different issue completely.

    Forcing them to pay the neg equity actually removes 100K from the economy in a single go.. Whereas allowing that 100K to roll over to monthly payments keeps the vast majority of money in the economy along with all the associated economic benefits of having people trade properties.

    It's also worth noting that once the money gets to the bank it doesn't sit there hidden as you seem to imply.. It gets lent out to business & people etc.. So it's important to keep money circulating through the system, part of the reason why we needed to recapitalise the banks.


  • Registered Users, Registered Users 2 Posts: 1,246 ✭✭✭daltonmd


    Welease wrote: »
    Actually i think you misunderstand and dont see the bigger picture... :)


    No, it's you, really.:rolleyes:
    Welease wrote: »
    In order to move house they need to be able to pay off the complete mortgage which includes the negative equity in a single instance, otherwise the bank will not allow the property to be sold.. Unless (for example) they have €100K lying around then they are stuck with that property for the term of loan.

    100k today and after it's rolled over 20 years? 150k, 200k?? It is still money going to the banks and not into the economy.

    Welease wrote: »
    The can pay the debt, and can easily service the debt over the 20+ years agreed, but they cannot pay €100K in a single go now (how many people can?).. The debt level is not an issue for them.. the payment of neg equity in a single go is.. It's a different issue completely.

    They cannot pay the debt if they cannot pay it in one go and move, if they roll it over they are adding more debt onto debt. Debt is debt whether you can pay it in one go or over time.
    Welease wrote: »
    Forcing them to pay the neg equity actually removes 100K from the economy in a single go.. Whereas allowing that 100K to roll over to monthly payments keeps the vast majority of money in the economy along with all the associated economic benefits of having people trade properties.
    I never said they should be forced. But I am glad you agree that to repay the debt to the bank takes it out of the economy - which is what I said. It doesn't matter if it's on one go or over time - it is gone.
    Welease wrote: »
    It's also worth noting that once the money gets to the bank it doesn't sit there hidden as you seem to imply.. It gets lent out to business & people etc.. So it's important to keep money circulating through the system, part of the reason why we needed to recapitalise the banks.

    Ah, but with people in so much debt it means they cannot borrow more and the banks will not lend it to them as has been highlighted everywhere - the banks aren't lending.


    This issue isn't this proposed solution, it is simply that Negative Equity has far reaching implications on the economy.


  • Registered Users, Registered Users 2 Posts: 1,246 ✭✭✭daltonmd


    antoobrien wrote: »
    I'm curious, how is this increasing the debt? The person that's taking this on is already in debt (not as much as when they bought the property though, because they will have paid off some of the principle).

    They are in Negative Equity yes.
    antoobrien wrote: »
    The way I see this proposal is that a property owner will sell their existing property (e.g. 1/2 bed apartment) to buy another (e.g. house). So we're talking about the price of the house, offset by the sale price of the apartment. Will there be significant extra debt from this, not likely if the buyer is looking to get something affordable.

    No, we are talking about the negative equity on the mortgage for the 1/2 bed apt on top of a new mortgage for a new house. Apartments have tanked so if you paid 300k for one you'd be lucky to get 100k for it now - 200k less your repayments, not forgetting that if you put down a deposit then it is gone. It all depends then on where people want to move - if it's for jobs then it's closer to a city which will be a bit more expensive then commuterland.
    antoobrien wrote: »
    The new mortgages will still have to be within the reals of the ability of the applicant to pay back - so we're talking 4/5 times income.

    But they are still in Negative equity, repaying a new mortgage for probably twice the price of a mortgage on the value of the property - crazy in my opinion...
    antoobrien wrote: »
    I think the bigger question around this is how many people will even be eligible for this?

    Great point - and I doubt there are many to be honest, at least I hope not anyway.


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    daltonmd wrote: »
    100k today and after it's rolled over 20 years? 150k, 200k?? It is still money going to the banks and not into the economy.

    Err the banks ARE part of the economy.. Money goes in .. then it goes out again in the form of loans, funding etc. If banks don't have funding.. then they can't loan.. if they can't loan.. companies close.. if they close the economy slows down..

    Debt is part of the economy.. and it's acceptable.. Unsustainable debt is the problem.. They are not the same..

    And the people who will be able to avail of this service are not in unsustainable debt.. They have sustainable manageable debt, and want the freedom to trade properties (for various reasons), which itself helps stimulate the economy..
    daltonmd wrote: »
    They cannot pay the debt if they cannot pay it in one go and move, if they roll it over they are adding more debt onto debt. Debt is debt whether you can pay it in one go or over time.

    And sustainable debt is not nor has it ever been the issue.. It's necessary.. How many people can pay off their mortgage in a single go? If they could.. they wouldnt need a mortgage...

    You seem to have an issue with any type of debt.. Tell me how you plan to go through life without accumulating any type of debt?
    Because most plans (esp. those which include buying property) will require debt.. The issue is making sure the debt is sustainable.. The people who will be able to use these new facilities have sustainable debt..

    They are not, nor have they been the source of the banks or Ireland economic issues. The problems lies with people who have unsustainable debt.. This facility does not, and will not effect them nor does it intend to alleviate their issues..


  • Registered Users Posts: 2 Tsad


    What about a scenario where the overall debt is not increased by taking out the 2nd mortgage? Set aside the 25% neg equity BOI rule for a moment. What if the rule was you can take out the 2nd mortgage regardless of how large the neg equity is, as long as the cost of the 2nd mortgage plus the neg equity, is equal to or less than the remaining cost of the 1st mortgage?

    Now some might say this is unrealistic as the 2nd house would then need to be a "move down" rather than a "move up". Not necessarily so if you add in "location". Possible e.g. - a starter 1-bed bought in Dublin suburb in the boom for 300k now sells for 100k less. The couple decide to move down the country to Mullingar or Tullamore or whereever. You can get a large family home there for 200k. Add the 100k neg equity to the 2nd mortgage and they are back at the level they were with the first house. Leaving aside other possible issues (such as losing tracker) it would appear that no additional debt is being created. Plus 2 houses sold! Obviously doesn't suit everyone but could attract a greater number than the current proposal?


  • Registered Users, Registered Users 2 Posts: 1,246 ✭✭✭daltonmd


    Welease wrote: »
    Err the banks ARE part of the economy.. Money goes in .. then it goes out again in the form of loans, funding etc. If banks don't have funding.. then they can't loan.. if they can't loan.. companies close.. if they close the economy slows down..

    Debt is part of the economy.. and it's acceptable.. Unsustainable debt is the problem.. They are not the same..

    And the people who will be able to avail of this service are not in unsustainable debt.. They have sustainable manageable debt, and want the freedom to trade properties (for various reasons), which itself helps stimulate the economy..

    And sustainable debt is not nor has it ever been the issue.. It's necessary.. How many people can pay off their mortgage in a single go? If they could.. they wouldnt need a mortgage...

    You seem to have an issue with any type of debt.. Tell me how you plan to go through life without accumulating any type of debt?
    Because most plans (esp. those which include buying property) will require debt.. The issue is making sure the debt is sustainable.. The people who will be able to use these new facilities have sustainable debt..

    They are not, nor have they been the source of the banks or Ireland economic issues. The problems lies with people who have unsustainable debt.. This facility does not, and will not effect them nor does it intend to alleviate their issues..

    Firstly can you not personalise the argument. This is about Negative Equity and the effect it has on the economy - not on what you wrongly perceive are my issues.

    The banks are the problem. They are why we are where we are. Banks borrow from other banks, that's how they give out long term mortgages.

    The economy is not based on the property market - this proposal may help people move but it won't put anymore money directly into the economy. It just means the banks are getting their money back, after we bailed them out already.

    During the boom people were in positive equity, they tapped into this and spent the money in the economy, fuelling it. Now they are in Negative Equity and the reverse is happening. If they are spending large chunks servicing negative equity then they are not spending it in the economy, if they are not spending there is no demand, if there is no demand there are no jobs, if there are no jobs then there is no growth.

    Here are a couple of articles on Negative Equity for your information.

    http://www.examiner.ie/opinion/columnists/matt-cooper/why-the-government-isnt-interested-in-solving-our-mortgage-debt-crisis-170606.html

    http://trueeconomics.blogspot.com/2011/10/16102011-negative-equity-and-debt.html


  • Registered Users, Registered Users 2 Posts: 20,299 ✭✭✭✭MadsL


    I'm waiting to hear the first Short Sale being openly discussed in the media. The banks surely cannot wait much longer to foreclose on those in arrears, and there must be a fair few flights to Oz gone with keys being dropped through letterboxes.


  • Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    daltonmd wrote: »
    Firstly can you not personalise the argument. This is about Negative Equity and the effect it has on the economy - not on what you wrongly perceive are my issues.

    I'm not personalising any arguement beyond referring to what you seem to be saying.. It is going to somewhat difficult to respond, if i cannot refer to where I believe you are saying the issues exist.. In previous posts you are complaining about debt, you are now stating the issue is about negative equity.. They are not the same issue.. So I am trying to ascertain where you believe the problem lies..
    If you take offense I apologise, but it also should be noted that you seem comfortable with telling me I am incapable of seeing the bigger picture which in the same vein would be considered a personal insult..

    So with that out of the way :)
    daltonmd wrote: »

    The banks are the problem. They are why we are where we are. Banks borrow from other banks, that's how they give out long term mortgages.

    I am well aware of how the funding work.. Not sure why you feel it necessary to add that.. Re: the banks issue.. been done to death 1000's of times here.. It's the banks.. its everyone.. its developers.. it's noone .. again not relevant to any points being made..
    daltonmd wrote: »
    The economy is not based on the property market - this proposal may help people move but it won't put anymore money directly into the economy.

    No the economy is not based on the propety market.. Noone said it was.. but the property market is an important part of the economy!One could argue that a healthier trade is housing does indeed help the economy as there are many associated services from estate agents, diy companies, trademen etc etc that are dependant on a healty housing industry.
    daltonmd wrote: »
    It just means the banks are getting their money back, after we bailed them out already.

    These are performing loans.. You won't get funding if your loan is not performing and can service the new increased level of debt.. So this point is once again completely irrelevant.
    daltonmd wrote: »
    During the boom people were in positive equity, they tapped into this and spent the money in the economy, fuelling it. Now they are in Negative Equity and the reverse is happening. If they are spending large chunks servicing negative equity then they are not spending it in the economy, if they are not spending there is no demand, if there is no demand there are no jobs, if there are no jobs then there is no growth.

    Here are a couple of articles on Negative Equity for your information.

    http://www.examiner.ie/opinion/columnists/matt-cooper/why-the-government-isnt-interested-in-solving-our-mortgage-debt-crisis-170606.html

    http://trueeconomics.blogspot.com/2011/10/16102011-negative-equity-and-debt.html

    Negative equity will continue to exist irrespective of whether this new facility exists or not.. So the point again is completely irrelevant. The facility is not designed to fix negative equity is to to remove the inability to trade when negative equity exists..

    If this facility never existed.. exactly the same level of negative equity would exist tomorrow.. It wont increase it.. and it won't diminish it..So whats your point?


  • Registered Users, Registered Users 2 Posts: 1,246 ✭✭✭daltonmd


    MadsL wrote: »
    I'm waiting to hear the first Short Sale being openly discussed in the media. The banks surely cannot wait much longer to foreclose on those in arrears, and there must be a fair few flights to Oz gone with keys being dropped through letterboxes.

    I'd say so, if I was in my late 20's/30's with a young family I'd be gone. As it stands 1 in 14 mortgages are in arrears of 6 months or more, wonder how many are 30 days, 60 days, 90 days and so on - god knows how many are hanging on by the skin of their teeth and even those doing their best to manage will re-think and wonder what the hell they're doing...


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