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Negative Equity Mortgages approved by CBI

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Comments

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


    Daltonmd,

    A thought occurred to me while i was pottering around the house, it will help expain my position.. Apologise for directing this directly at you, it obviously applies to all who have issues with this new facility, but i wanted to seperate it from our embedded responses to each other..

    This facility is designed to allow people with neg. equity who are capable of servicing their loans to move properties..

    What would the removal of this facility achieve?...

    If you can't give a reasonable answer to this.. then I would suggest your issue is not with this facility. it lies with other issues not being addressed.
    But those issues are not something this facility is designed or intends to address..


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


    Welease wrote: »
    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 :)


    You are personalising it when you say:

    "You seem to think that everyone is struggling to pay their mortgages and that any debt is bad.
    To take your proposal
    You seem to believe
    You seem to believe that increasing debt is bad.
    It's also worth noting that once the money gets to the bank it doesn't sit there hidden as you seem to imply.
    You seem to have an issue with any type of debt.

    I have never said or implied any of these statements - this is your interpretation of what I wrote - not what I wrote. When I said to you that you don't seem to see the bigger picture I referred to this statement where you say:

    "Why should the debts of people who can afford their mortgages and want to trade up to bigger houses need to be written down?"

    And note here that it is you calling the Negative Equity debt. Mind you to me they are one and the same because negative equity as it stands must be repaid to the bank. But again the point is that if people are paying large chunks off mortgages which they got during the boom and are paying higher taxes, taken paycuts. looking at new taxes then surely you can see that it is only a matter of time before the sustainable deb becomes unsustainable?

    I'm not offended but you are not reading my posts as they are written you are telling me that I am saying things when I am not.

    Now, with that out of the way :)


    Welease wrote: »
    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..

    Well you said that banks are an important part of the economy, well I agree with you but not bad banks, good healthy ones - not the ones we have. (maybe one or two but heavily restructured and stripped of waste)


    Welease wrote: »
    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.

    A healthy functioning property market is a result of a healthy economy - not the other way around as it became during the boom.

    Welease wrote: »
    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.

    Which the banks received a bailout from the taxpayer to cover those losses.


    Welease wrote: »
    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..

    Of course it is not designed to fix Negative Equity - that's the problem. The solution is to write down the debt of homeowners burdened with these monster mortgages.
    Welease wrote: »
    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?

    Write down mortgage debt. It is the only solution and will be a huge step in rebuilding this economy.


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


    Welease wrote: »
    Daltonmd,

    A thought occurred to me while i was pottering around the house, it will help expain my position.. Apologise for directing this directly at you, it obviously applies to all who have issues with this new facility, but i wanted to seperate it from our embedded responses to each other..

    This facility is designed to allow people with neg. equity who are capable of servicing their loans to move properties..

    What would the removal of this facility achieve?...

    If you can't give a reasonable answer to this.. then I would suggest your issue is not with this facility. it lies with other issues not being addressed.
    But those issues are not something this facility is designed or intends to address..

    The removal of this facility will achieve very little, much like the introduction of it will achieve very little. It's existence merely spreads out debt over a longer term and insures the banks get their money back.

    Maybe a few people might be able to move, at a price of course and maybe someone can then buy their property at a knockdown price - ironic really because not only does the bank then get the full boom mortgage repaid by homeowner number one, but it then has another bankroll of cash from the buyer who will be paying again for the same property!!

    This Government will throw all the wrong solutions at the problem, Negative Equity mortgages, Nama loans - they are all the same, they are geared towards the banks and are of no long term financial gain to the mortgage holder and the taxpayer (who are one and the same in a lot of cases).

    Every year more and more people are dipping into NE, it is a disaster waiting to happen.


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


    Welease wrote: »

    I've been pondering this while walking around and am directing this to you Welease.

    Look at the proposal and ask yourself this. If there are people who are comfortably managing their mortgages while in significant Negative Equity then it would be safe to assume that they are working wouldn't it? Well if they are in a good position then I would absolutely agree when you say "why should we write down these mortgages" - because if they can afford to take the NE as a personal loan and move up then that's fine - but - these are not the people who need help.

    Nor is it those who are in comfortable homes who "want" to trade up, that need the help.

    It is those who are deep in NE who have maybe lost their jobs, cannot sell to relocate to find work, who are being subsidised already by the government who badly need help to move.

    It's the wrong solution for the wrong problem.

    But I still believe that even those who are "managing" are doing so by cutting down on essentials to some degree in order to repay these mortgages.


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


    daltonmd wrote: »
    The removal of this facility will achieve very little, much like the introduction of it will achieve very little. It's existence merely spreads out debt over a longer term and insures the banks get their money back.

    I don't think either of us have figures to substantiate a claim to the audience size.. but it is guaranteed to help some.. So it's better than nothing.
    And it appears you agree there is no actual benefit to not having this facility.. So I fail to see your issue with it.
    daltonmd wrote: »
    Maybe a few people might be able to move, at a price of course and maybe someone can then buy their property at a knockdown price - ironic really because not only does the bank then get the full boom mortgage repaid by homeowner number one, but it then has another bankroll of cash from the buyer who will be paying again for the same property!!

    Ok.. so it does what it sets out to do.. and allows people to do what they want to do.. Great..
    daltonmd wrote: »
    This Government will throw all the wrong solutions at the problem, Negative Equity mortgages, Nama loans - they are all the same, they are geared towards the banks and are of no long term financial gain to the mortgage holder and the taxpayer (who are one and the same in a lot of cases).

    Actually you seem to agree that the solution achieves exactly what it sets out to do. Allow people in Neg Eq to move.
    It may not achieve all that you want to do, but it wasn't designed nor does it claim to attempt to. Your issue appears to be with the lack of solutions to other issues. Fair enough.
    daltonmd wrote: »
    Every year more and more people are dipping into NE, it is a disaster waiting to happen.

    Can you be more specific about what "disaster".. granted it's obviously not a situation we would prefer to be in.. but if the loans are serviceable then people got the property they wanted at a price they could afford.. They will continue to pay the exact same amount of money out as they did when there property was worth "more"..
    Should we have debt forgiveness for every car owners who's car is also worth less than when they bought it? It seems to be a very celtic tiger issue that property must go up in price and other items can go down.. and if property goes down (in isolation) then an economic disaster befalls us...


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


    daltonmd wrote: »
    I've been pondering this while walking around and am directing this to you Welease.

    Look at the proposal and ask yourself this. If there are people who are comfortably managing their mortgages while in significant Negative Equity then it would be safe to assume that they are working wouldn't it? Well if they are in a good position then I would absolutely agree when you say "why should we write down these mortgages" - because if they can afford to take the NE as a personal loan and move up then that's fine - but - these are not the people who need help.

    Nor is it those who are in comfortable homes who "want" to trade up, that need the help.

    It is those who are deep in NE who have maybe lost their jobs, cannot sell to relocate to find work, who are being subsidised already by the government who badly need help to move.

    It's the wrong solution for the wrong problem.

    ????

    No.. it's a solution to one problem.. and it solves it simply and adequately..

    Other solutions will be required for the other problems..


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


    Welease wrote: »
    I don't think either of us have figures to substantiate a claim to the audience size.. but it is guaranteed to help some.. So it's better than nothing.
    And it appears you agree there is no actual benefit to not having this facility.. So I fail to see your issue with it.





    Ok.. so it does what it sets out to do.. and allows people to do what they want to do.. Great..


    Actually you seem to agree that the solution achieves exactly what it sets out to do. Allow people in Neg Eq to move.
    It may not achieve all that you want to do, but it wasn't designed nor does it claim to attempt to. Your issue appears to be with the lack of solutions to other issues. Fair enough.



    Can you be more specific about what "disaster".. granted it's obviously not a situation we would prefer to be in.. but if the loans are serviceable then people got the property they wanted at a price they could afford.. They will continue to pay the exact same amount of money out as they did when there property was worth "more"..
    Should we have debt forgiveness for every car owners who's car is also worth less than when they bought it? It seems to be a very celtic tiger issue that property must go up in price and other items can go down.. and if property goes down (in isolation) then an economic disaster befalls us...

    Again you are taking what I am writing it and twisting it to suit your argument. Buying a car for 10k is a little different than buying a house. The loan on a car is normally 5 years not 30.

    If you cannot see the damage that forcing people to repay debt on a property that is worth 50% of what it was what bought for is doing, as well as taking job losses and watching their disposable incomes shrink, then what can I tell you.

    This "facility" is designed and aimed at the very people who do not need it. Working people comfortable repaying their mortgage who do not need to move. They may "want" to - but it is those who "need" to move, to find work that need a solution. It is those who cannot repay the mortgages who need the help - those with "unsustainable debt" that need help.

    You want me to be more specific when I say it is a disaster waiting to happen?

    http://m.irishtimes.com/newspaper/breaking/2012/0217/breaking25.htm?via=latest

    "The data reveals more than 9 per cent of home loans had fallen behind by 90 days or more at the end of December - which accounts for 70,911 mortgages."

    "A total of 100,700 of the State's 770,000 residential mortgages are in arrears or have been restructured.
    The numbers of homes in arrears is up by almost 8,000 compared to the end of September last year."

    "The figures show that 74,379 residential mortgage accounts had been restructured compared to 69,735 at the end of September. More than 36,797 householders are keeping up with the restructured arrangements, but 37,582 are experiencing some form of arrears."

    No mention here of how many are 30+, 60+, 90+.....

    What do you see for the next 5 years Welease? Cos personally what I see is no growth, no jobs,higher taxes, lower disposable income and continued house price falls - so what do you think the numbers will look like next year? Or the year after? How many of the sustainable serviceable mortgages will be left?

    The solution to the problem is to write down the debt - it has to be done and will be - eventually. It will be done on a case by case by the banks, there will be conditions but at the end of the day people need to be freed from the debt first and only then will everything else start moving.


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


    daltonmd wrote: »
    If you cannot see the damage that forcing people to repay debt on a property that is worth 50% of what it was what bought for is doing, as well as taking job losses and watching their disposable incomes shrink, then what can I tell you.

    Because you continue to interchange problems and present them as one.. They are different problems, and need different solutions..

    A property being worth 50% of the initial purchase price, does not effect a person's ability to repay that loan.. A person's ability to sustain that loan is completely removed from the value of the asset.. Neg Eq does not have
    an effect unless they wished to move. This solution address the movement problem.

    Losing their job is a different issue.. That can make the debt unsustainble, this facility does not apply nor is it intended to apply to people with unsustainable debt..
    Other facilities (incl. changing bankruptcy laws) are being implemented to address those problems (irrespective of where people agree with how they should be handled)
    daltonmd wrote: »
    This "facility" is designed and aimed at the very people who do not need it. Working people comfortable repaying their mortgage who do not need to move. They may "want" to - but it is those who "need" to move, to find work that need a solution. It is those who cannot repay the mortgages who need the help - those with "unsustainable debt" that need help.

    Really, I know several people who are desperate for a solution like this.. And it sounds like there are those in the banks who also understand this is needed, which is exactly why the facility has been put in place..
    If as you say, more and more people are going into NE, then it is very much needed otherwise everyone will be locked into their current properties until the conclusion of the loan.. Can you name a single person who thinks this is a good idea?
    Just because it's not the biggest problem, does not mean that the problem doesnt exist..
    daltonmd wrote: »
    You want me to be more specific when I say it is a disaster waiting to happen?

    http://m.irishtimes.com/newspaper/breaking/2012/0217/breaking25.htm?via=latest

    "The data reveals more than 9 per cent of home loans had fallen behind by 90 days or more at the end of December - which accounts for 70,911 mortgages."

    "A total of 100,700 of the State's 770,000 residential mortgages are in arrears or have been restructured.
    The numbers of homes in arrears is up by almost 8,000 compared to the end of September last year."

    "The figures show that 74,379 residential mortgage accounts had been restructured compared to 69,735 at the end of September. More than 36,797 householders are keeping up with the restructured arrangements, but 37,582 are experiencing some form of arrears."

    No mention here of how many are 30+, 60+, 90+.....
    daltonmd wrote: »
    This is about Negative Equity and the effect it has on the economy - not on what you wrongly perceive are my issues.
    daltonmd wrote: »
    Every year more and more people are dipping into NE, it is a disaster waiting to happen.

    ???? You are complaining about Negative Equity and you present an article about unsustainble loans?
    Once again.. Negative Equity and Unsustainable loans are not one and the same.. This facility it to work on a segment of NE issues.. It has absolutely nothing to do with unsustainable loans..
    daltonmd wrote: »
    What do you see for the next 5 years Welease? Cos personally what I see is no growth, no jobs,higher taxes, lower disposable income and continued house price falls - so what do you think the numbers will look like next year? Or the year after? How many of the sustainable serviceable mortgages will be left?

    I don't think my vision of the future is relevant to the implementation of a facility to allow the movement of mortgages with NE..
    daltonmd wrote: »
    The solution to the problem is to write down the debt - it has to be done and will be - eventually. It will be done on a case by case by the banks, there will be conditions but at the end of the day people need to be freed from the debt first and only then will everything else start moving.

    Once again.. this is about the movement of NE mortgages.. That is not a solution to this problem.. it's a solution to a different problem..

    But for the sake of discussion, how do you intend to fund the writedown of all these mortgages?


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


    Welease wrote: »
    Because you continue to interchange problems and present them as one.. They are different problems, and need different solutions..

    Nope - it's the one problem, Negative Equity.


    Welease wrote: »
    A property being worth 50% of the initial purchase price, does not effect a person's ability to repay that loan.. A person's ability to sustain that loan is completely removed from the value of the asset.. Neg Eq does not have
    an effect unless they wished to move. This solution address the movement problem.

    But pay cuts/job losses/higher taxes/lower disposable income does.
    Welease wrote: »
    Losing their job is a different issue.. That can make the debt unsustainble, this facility does not apply nor is it intended to apply to people with unsustainable debt..
    Other facilities (incl. changing bankruptcy laws) are being implemented to address those problems (irrespective of where people agree with how they should be handled)

    But the existing problem is negative equity. Look at it this way, without NE if people lost their jobs and couldn't repay their mortgages they could sell and get rid of the mortgage - they can't do that now, they can't afford to repay the existing mortgage and have to depend on the state to live.

    Welease wrote: »
    Really, I know several people who are desperate for a solution like this.. And it sounds like there are those in the banks who also understand this is needed, which is exactly why the facility has been put in place..
    If as you say, more and more people are going into NE, then it is very much needed otherwise everyone will be locked into their current properties until the conclusion of the loan.. Can you name a single person who thinks this is a good idea?
    Just because it's not the biggest problem, does not mean that the problem doesnt exist..

    Desperate people? With jobs who can easily afford to service their mortgages? What are they desperate for?

    People are locked in debt until the conclusion of the loan.


    Welease wrote: »
    ???? You are complaining about Negative Equity and you present an article about unsustainble loans?
    Once again.. Negative Equity and Unsustainable loans are not one and the same.. This facility it to work on a segment of NE issues.. It has absolutely nothing to do with unsustainable loans..

    You don't see where job losses, paycuts, falling house prices = unsustainable loans?
    Welease wrote: »
    I don't think my vision of the future is relevant to the implementation of a facility to allow the movement of mortgages with NE..

    But that's the point - again, if people are in a good position, working bringing in a good income then they do not need this - they can go to the bank and turn their NE into a personal loan if they wish and move on.


    Welease wrote: »
    Once again.. this is about the movement of NE mortgages.. That is not a solution to this problem.. it's a solution to a different problem..
    If you are in employment with a good income and can happily and comfortably service your existing mortgage then you don't have a problem so don't need a solution.
    Welease wrote: »
    But for the sake of discussion, how do you intend to fund the writedown of all these mortgages?

    It was already funded with the 70 billion that was put into the banks.


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


    daltonmd wrote: »
    Nope - it's the one problem, Negative Equity.

    If it was a single problem.. Then a single solution would suffice.. This solution works for the problem it attempts to solve, but does not solve all problems.. So sorry.. its more than a single problem.
    daltonmd wrote: »
    But pay cuts/job losses/higher taxes/lower disposable income does.

    So the problem is unsustainable loans via those issues.. not NE.. If there was none of the above.. the loan would be serviceable, irrespective of the NE.
    daltonmd wrote: »
    But the existing problem is negative equity. Look at it this way, without NE if people lost their jobs and couldn't repay their mortgages they could sell and get rid of the mortgage - they can't do that now, they can't afford to repay the existing mortgage and have to depend on the state to live.

    The NE is one of the problems agreed.. and this is one solution to the problem for certain people.. It's not the sole problem as you suggest.. The problem also lies with all the other issues you mentioned above pay cuts, jobs losses, higher taxes etc.. Removing NE still wont allow an unemployed person to repay a 300K loan..
    daltonmd wrote: »
    Desperate people? With jobs who can easily afford to service their mortgages? What are they desperate for?

    Desperate to move.. For a variety of reason incl. access to extremely limited special needs services for children, loss of previous jobs now with 3 hour daily minute commutes, inability to liquidate an assets in a failed relationship, requirement to move to a bigger house as now have family.. and some just becuase they can afford to service a mortgage on a bigger place. Just because it's not a problem you deal with, doesnt make it ok to dismiss it and believe they don't need help.
    daltonmd wrote: »
    People are locked in debt until the conclusion of the loan.

    Again sustainable debt is different from unsustainable debt.
    daltonmd wrote: »
    You don't see where job losses, paycuts, falling house prices = unsustainable loans?

    I do. I have been explaining they are unsustainble loans to you for the last few hours... I also have the ability to see that NE is not the sole problem there as you claim..

    daltonmd wrote: »
    But that's the point - again, if people are in a good position, working bringing in a good income then they do not need this - they can go to the bank and turn their NE into a personal loan if they wish and move on.

    Not all moves are based on financial issues.. as per my response above..
    You think a bank will give a 100K personal loan to someone so they can liquidate their sole asset capable of covering that loan? Get real..
    daltonmd wrote: »
    If you are in employment with a good income and can happily and comfortably service your existing mortgage then you don't have a problem so don't need a solution.

    Wrong again.. For all the reasons given above..
    daltonmd wrote: »
    It was already funded with the 70 billion that was put into the banks.

    No it wasn't.. I suggest you read up on how banks work and the issues trackers are currently causing with ongoing funding.. no one has funded a further reduction of billions of Euro's in banks loan books.


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


    Welease wrote: »
    If it was a single problem.. Then a single solution would suffice.. This solution works for the problem it attempts to solve, but does not solve all problems.. So sorry.. its more than a single problem.

    The reason people cannot move is because they are in Negative Equity. They cannot repay that debt in order to move - it is one and the same.


    Welease wrote: »
    (This is from your last post) A property being worth 50% of the initial purchase price, does not effect a person's ability to repay that loan.. A person's ability to sustain that loan is completely removed from the value of the asset..
    Neg Eq does not have an effect unless they wished to move. This solution address the movement problem.

    So the problem is unsustainable loans via those issues.. not NE.. If there was none of the above.. the loan would be serviceable, irrespective of the NE.

    Following on from this logic, if there was none of the above then there also wouldn't be Negative Equity would there? You can't simply pluck out what suits your argument.

    Welease wrote: »
    The NE is one of the problems agreed.. and this is one solution to the problem for certain people.. It's not the sole problem as you suggest.. The problem also lies with all the other issues you mentioned above pay cuts, jobs losses, higher taxes etc.. Removing NE still wont allow an unemployed person to repay a 300K loan.

    There are people (unless this issue is properly tackled) who will be in Negative Equity for the next 15 - 20 years at least, now think about that for a minute. Let's say you bought a house for 300k in the boom, it is now worth 150k and by the time you repay the 300k principal you will more than likely have repaid over 250k (taking 5% overall, I'm being modest with that I'd say). By the end of the mortgage the property might be worth 300k - they may as well have rented. That is 250k gone - up in smoke. Now multiply the problem and multiply the money repaid to banks for


    Welease wrote: »
    Desperate to move.. For a variety of reason incl. access to extremely limited special needs services for children, loss of previous jobs now with 3 hour daily minute commutes, inability to liquidate an assets in a failed relationship, requirement to move to a bigger house as now have family.. and some just becuase they can afford to service a mortgage on a bigger place. Just because it's not a problem you deal with, doesnt make it ok to dismiss it and believe they don't need help.

    In other words they are badly affected by Negative Equity and not, as you stated in your earlier posts those who will find it "Very useful for those who want to trade up (or possibly down) or those who want to move to secure new/different employment"?

    Edit to add - what you initially said in your earlier post was more like a "lifestyle" choice, that they "wanted to move" they were not "desperate - big difference.


    Welease wrote: »
    Again sustainable debt is different from unsustainable debt.

    Ah yea, but sustainable only if the above hasn't affected you.


    Welease wrote: »
    I do. I have been explaining they are unsustainble loans to you for the last few hours... I also have the ability to see that NE is not the sole problem there as you claim..

    I think I said that given paycuts/job losses etc it was the same as unsustainable debt - I stand ot be corrected of course :)


    Welease wrote: »
    Not all moves are based on financial issues.. as per my response above..
    You think a bank will give a 100K personal loan to someone so they can liquidate their sole asset capable of covering that loan? Get real..

    Of course not all moves are based on financial issues - but they're based on whether or not you can liquidise them and move and as you have outlined above, if you are in NE you can't.


    I think it's time you got real yourself - because if you are suggesting that a bank will happily give someone a "Negative Equity" mortgage over 30 years at a price but deem them unsuitable for a personal loan for the same amount - then you are simply making it clear as to who the ONLY winners in this scam sorry "facility" are...

    Welease wrote: »
    No it wasn't.. I suggest you read up on how banks work and the issues trackers are currently causing with ongoing funding.. no one has funded a further reduction of billions of Euro's in banks loan books.

    And I suggest you read this http://www.irisheconomy.ie/index.php/2011/08/22/lack-of-debt-forgiveness-not-realistic/

    "The report estimates total lifetime losses on the €74.4 billion owner-occupied mortgage portfolio for AIB\BoI\EBS\ILP at €5.7 billion in their base case and €10.2 billion in the stress scenario. These loss estimates were then used to come up with the capital requirements for each bank, most of which has been met by putting public money into the banks.

    For those who say that they don’t think that their money should be used to help write down other people’s mortgage debt, there’s bad news and good news. The bad news is that it’s already happened. The taxpayer injections from the NPRF are covering mortgage debts that won’t be paid back. The good news is also that it’s already happened, i.e. implementing a debt relief programme won’t involve any additional costs to taxpayers over and above those already announced.

    What this means is that the banks are sitting on mortgage losses that will be around €6 billion even if the economy recovers in line with the government’s projections. This €6 billion represents debt that simply will not be paid back and taxpayer funds have already been injected to cover these losses. At present, however, the banks are preferring to write these losses off as slowly as possible. But whether the day of writing down is put off some more or whether the banks actively engage in a write-down programme, these losses are being incurred."

    I suggest also that you read the report.


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


    daltonmd wrote: »
    The reason people cannot move is because they are in Negative Equity. They cannot repay that debt in order to move - it is one and the same.

    This is getting rediculous..
    I am not going to continue to respond to each and every point, becuase the same point still stands over and over again..

    There is more than 1 issue in play here..
    This change is to solve 1 issue (inability to move due to NE).
    It is not intended to solve other issues (such as unsustainable debt, job loss, increased tax, bank funding or bad haircuts)..

    It's not any more complicated that.. If you still have an issue with that then /shrug.. running through the same point again and again isn't going to change your mind..


    daltonmd wrote: »
    And I suggest you read this http://www.irisheconomy.ie/index.php/2011/08/22/lack-of-debt-forgiveness-not-realistic/

    "The report estimates total lifetime losses on the €74.4 billion owner-occupied mortgage portfolio for AIB\BoI\EBS\ILP at €5.7 billion in their base case and €10.2 billion in the stress scenario. These loss estimates were then used to come up with the capital requirements for each bank, most of which has been met by putting public money into the banks.

    For those who say that they don’t think that their money should be used to help write down other people’s mortgage debt, there’s bad news and good news. The bad news is that it’s already happened. The taxpayer injections from the NPRF are covering mortgage debts that won’t be paid back. The good news is also that it’s already happened, i.e. implementing a debt relief programme won’t involve any additional costs to taxpayers over and above those already announced.

    What this means is that the banks are sitting on mortgage losses that will be around €6 billion even if the economy recovers in line with the government’s projections. This €6 billion represents debt that simply will not be paid back and taxpayer funds have already been injected to cover these losses. At present, however, the banks are preferring to write these losses off as slowly as possible. But whether the day of writing down is put off some more or whether the banks actively engage in a write-down programme, these losses are being incurred."

    I suggest also that you read the report.

    I think you need to read the report more closely.. the 6m million cover debts that won't be re-paid.. it doesnt cover a writedown of all debts..
    If memory serves correct, in 2008 there was over €110B of mortgage debt in this country.. 6B comes nowhere near covering the NE portion of €110b debt (given people are throwing around figures of 40% NE)


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


    At the risk of repeating myself. Short Sales. Why are the banks not taking some of the pain on mortgages they extended 2006-2007 onwards for blatantly overpriced property.


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


    MadsL wrote: »
    At the risk of repeating myself. Short Sales. Why are the banks not taking some of the pain on mortgages they extended 2006-2007 onwards for blatantly overpriced property.

    Short Sale with a) unpaid balance or b) refinanced balance?

    if a)
    I'm guessing the reason is a) because noone is forcing them to do so.. and b) people won't want them to do so if we have to pick up the tab..


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


    "There is more than 1 issue in play here..
    This change is to solve 1 issue (inability to move due to NE).
    It is not intended to solve other issues (such as unsustainable debt, job loss, increased tax, bank funding or bad haircuts)..

    It's not any more complicated that.. If you still have an issue with that then /shrug.. running through the same point again and again isn't going to change your mind.. "



    There isn't more than one issue here. It's one underlying problem and that is Negative Equity.

    In some cases it affects those who want to trade up, who can afford to repay a bigger mortgage but who really are not in difficulty.

    In some cases it is affecting those who have to move/marriage breakup and the other reasons you listed.

    In other cases because of paycuts/job losses it has rendered the entire mortgage unsustainable because they cannot sell for what they owe on their mortgage.

    It is one underlying problem with various outcomes - it is that simple and running through these same points won't change your mind *shrugs*...

    @Madsl - that's called a writedown and it will happen.


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


    daltonmd wrote: »
    @Madsl - that's called a writedown and it will happen.

    The thing is - it is happening, just not in any public or regulated way. Time for the banks and the regulator to come clean about what is being writtendown.


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


    MadsL wrote: »
    The thing is - it is happening, just not in any public or regulated way. Time for the banks and the regulator to come clean about what is being writtendown.

    Absolutely agree with you. The questions that need to be asked - are people still living in the properties and paying rent to the banks? Are the properties lying idle and if they are why? The banks/Gov are terrified that doing this will cause further drops in property - which it will of course.

    Banks eh - still as transparent as ever!!


  • Posts: 0 [Deleted User]


    MadsL wrote: »
    At the risk of repeating myself. Short Sales. Why are the banks not taking some of the pain on mortgages they extended 2006-2007 onwards for blatantly overpriced property.

    Ok, deep breath, here goes...

    This to me is the crux of the issue, and it's unfortunate, but understandable if you break it down. It all comes back to the bank guarantee by cowen and lenihan. Those two clowns unilaterally made one of the most monumentally short sighted disastrous decisions, perhaps THE most disastrous decision in Ireland's history, AND they made it contrary to expert advice paid for by taxpayers money at the time. Prior to that guarantee, and the subsequent bank recapitalisations, bank debt was a private matter, for banks, their customers and their shareholders. The government would have been free to legislate for debt write downs without the massive political fallout that goes with the losses being socialised. It wouldn't have been pretty, sure, but it wouldn't have been as fundamentally game-changing an issue as its now become.

    However, As we stand currently, the irish property market is collectively billions and billions of euros in negative equity, and a large proportion of it is now underwritten by the state, in nationalised and recapitalized banks. The only thing preventing that huge loss from being realised in its entirety is that there has been no definite, formally recognised program of debt write down written into law. There has only been this "case by case" fudge that we hear so much about but that really just equals a long, drawn out exercise in keeping cost to the state down and kicking the can down the road at a time when the exchequer is strapped for cash. We simply can't afford to have widespread debt forgiveness, regardless of any moral considerations that might occur as to whether it was the right thing to do or not.

    If we allowed for negative equity write downs, restructuring, debt forgiveness, or whatever you want to call it, formally through legislation, as is the norm in many countries throughout the world, the floodgates would open, literally overnight and the banks, and hence the state would be ruined. Privately held foreign banks (many of whom are currently facilitating the irish state financially) would go to the wall through their risky exposure to our mortgage market being realised, and nationalised irish ones would pass billions worth of losses on to the exchequer, immediately. All at once. In addition to the social austerity being undergone in ireland as part of the troika's bailout program, the withdrawl of many of our funding sources from foreign markets combined with the huge losses to the exchequer would be the final blow that would push the country undeniably and firmly into bankruptcy, ruining our credibility internationally and removing any prospect of us raising credit from the markets that we might use to get our country back on track. We would have massively higher outgoings as a state, re-enter recession, and be unable to source short term funding to run the state, at any price. It would create a perfect storm from which there would be no surviving, and would put Ireland on a par with Greece as it stands at the moment, or worse.

    Not only that, But if that was to happen, our country's best and brightest talent, and our most educated and employable people, the best prospects for driving any eventual economic growth and recovery and the ones who currently have a choice whether to stay or go, would flee to other countries, many of them permanently, and Ireland would languish without money, skills, confidence, or growth for generations. The party that presided over such a disaster would be decimated in elections and would be consigned to the history books in one fell swoop (rather than just the disappointing dressing down that fianna fail got in the last election).

    Unfortunately (and this is the key point) to enact the only solution that will REALLY solve our current negative equity problem, ie: large-scale debt forgiveness on a structured basis, would be political and economic suicide by any party silly enough to allow it, and that's why we won't see it happen.

    If I was to guess what the most likely outcome to this whole situation was going to be, it would be that our political masters simply cut a large chunk of the celtic tiger generation loose and let them drift in their negative equity until such a point as any losses on their property have been recovered, maybe in 15-20 years. Let them deal with the unfortunate social consequences of their actions, and instead concentrate on coming out of the far end of the EU/IMF rescue plan and rebuilding the economy.

    Call me pessamistic, but I have no faith in our government to do the morally right thing in this situation, it's too dangerous and far too costly. Given the situation we're in since the bank guarantee, I think a political decision has already been made to treat the thousands in the worst negative equity in ireland as "acceptable losses" as part of the process of rebuilding the country, and to try to learn the necessary lessons from a dark period in Irish history and move on as best we can.

    So much for the most promising generation our country has ever produced...


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


    Completely disagree with you Mack. This is the same line we were fed with the Guarantee, with the Lisbon treaty, with the repaying of the bondholders.

    The banks were recapitilised taking mortgage losses into account. No one is suggesting a blanket mortgage debt relief programme.

    Banks fail in the states all the time it's not the end of the world and according to Karl Whelan there will be no extra cost on the state.

    http://www.businessandfinance.ie/bf/2011/8/commanalyaugust2011/karlwhelanthecaseformortgagewr

    Leaving a chunk of people to drift in their NE does not only affect them - it affects the wider economy and as sure as night follows day many will default/avail of the new bankruptcy laws.

    The problems you outlined by having a debt relief programme have already happened, that horse has bolted. The only way for the economy to recover is by realising the bad debts, freeing up people from unsustainable debt, identifying those who are on the cusp and sorting the problem. Not knee jerking to every crisis as we have done previously.


  • Posts: 0 [Deleted User]


    daltonmd wrote: »
    The problems you outlined by having a debt relief programme have already happened, that horse has bolted. The only way for the economy to recover is by realising the bad debts, freeing up people from unsustainable debt, identifying those who are on the cusp and sorting the problem. Not knee jerking to every crisis as we have done previously.

    I agree with the vast majority of your post, but unfortunately I don't make government policy. What i personally think SHOULD happen is pretty much the same as you've outlined. I do think the only way this can be sorted out is with decisive action, but I can also see the other side of the argument (the politician's side) that decisive action of the kind that's needed to sort it out PROPERLY might, in effect sour the deal with the EU(who like it or not, we need at the moment) spook the money markets, and basically throw the baby out with the bath water. It's a political decision about not taking unnecessary risks now when you can lurch along for a while longer and hope things improve.

    Wouldn't you agree that a solution to negative equity now would be availed of by almost everybody eligible, all at once? Don't you think that would put a huge strain on an already strained irish exchequer? In an international trading environment where major decisions are taken by traders based on headlines and limited understanding of the key facts of a situation thousands of miles away, and confidence and "gut feel" count for a lot, I think there's an inherent risk involved in that situation for us.

    I do think there's an understanding of the need to fix the issue in government, but unfortunately I don't think there's an appetite for fixing it NOW, along with all the other problems we have. Don't forget, governments come and go every five years or so, theres always an underlying understanding in politics that this could all be someone else's problem by then, so why take a risk until you absolutely have to?.

    It may not be 15 or 20 years like I fear it will be before action is taken on this issue, and I hate that the real social problems its causing are largely irrelevant to politicians as long as they can keep things ticking over for a while to allow them some breathing space, but i can see how an FG Or Labour cabinet minister could make a case for kicking the can down the road on this one at the moment.

    EDIT: by the way I do agree with you and with previous posters on the issue of the cost of a solution which has in effect already been paid for by the state. Part of our last bailout of the banks was specifically earmarked to pay for the consequences of all of the distressed loans in the property market going bad. We paid out to "remove any remaining uncertainty in the markets regarding the state of our banks finances" or something along those lines, according to noonan. The cost of factoring in every dodgy mortgage in the country going to the wall have already been borne by us. The banks have received this money, and it's sitting on their balance sheets doing nothing, shoring them up and not currently being lent out to foster growth. If we've already paid for the cost of write downs, then at the very least, moral disagreements on rewarding reckless borrowing aside, I think we should be getting SOME return for that spend.


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


    I agree with the vast majority of your post, but unfortunately I don't make government policy. What i personally think SHOULD happen is pretty much the same as you've outlined. I do think the only way this can be sorted out is with decisive action, but I can also see the other side of the argument (the politician's side) that decisive action of the kind that's needed to sort it out PROPERLY might, in effect sour the deal with the EU(who like it or not, we need at the moment) spook the money markets, and basically throw the baby out with the bath water. It's a political decision about not taking unnecessary risks now when you can lurch along for a while longer and hope things improve.


    I don't think it will, but that's just my opinion. We have a major debt problem that is a drag on the economy - it is normal in any restructuring that part write down of debt is used. It's done every day in business.
    Wouldn't you agree that a solution to negative equity now would be availed of by almost everybody eligible, all at once? Don't you think that would put a huge strain on an already strained irish exchequer? In an international trading environment where major decisions are taken by traders based on headlines and limited understanding of the key facts of a situation thousands of miles away, and confidence and "gut feel" count for a lot, I think there's an inherent risk involved in that situation for us.

    If it's badly planned yes and add to that the fear that if money is freed up then people will use it to repay other debt - so this will have to be looked at.

    But look at what is happening as opposed to what might - people are scrimping to repay huge mortgages, they could be in employment and will eventually come to the conclusion that they won't be able to continue for the next 20 years. They may then default or go bankrupt which means the banks get no money back - if a debt solution was brought in now, reducing that burden before it's too late then they stay in their homes making manageable repayments.
    I do think there's an understanding of the need to fix the issue in government, but unfortunately I don't think there's an appetite for fixing it NOW, along with all the other problems we have. Don't forget, governments come and go every five years or so, theres always an underlying understanding in politics that this could all be someone else's problem by then, so why take a risk until you absolutely have to?.

    True.
    It may not be 15 or 20 years like I fear it will be before action is taken on this issue, and I hate that the real social problems its causing are largely irrelevant to politicians as long as they can keep things ticking over for a while to allow them some breathing space, but i can see how an FG Or Labour cabinet minister could make a case for kicking the can down the road on this one at the moment.

    That's the problem - they will only be able to kick it down the road for a limited time.
    EDIT: by the way I do agree with you and with previous posters on the issue of the cost of a solution which has in effect already been paid for by the state. Part of our last bailout of the banks was specifically earmarked to pay for the consequences of all of the distressed loans in the property market going bad. We paid out to "remove any remaining uncertainty in the markets regarding the state of our banks finances" or something along those lines, according to noonan. The cost of factoring in every dodgy mortgage in the country going to the wall have already been borne by us. The banks have received this money, and it's sitting on their balance sheets doing nothing, shoring them up and not currently being lent out to foster growth. If we've already paid for the cost of write downs, then at the very least, moral disagreements on rewarding reckless borrowing aside, I think we should be getting SOME return for that spend.

    As long as the markets fear the "mortgage time-bomb" there will be uncertainty and that's what they fear most.


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