Writing off mortgage debt

Tigerandahalf · 20-04-2012 11:12PM #1

It seems like some mortgage debt will be written off as people simply can't afford to pay their mortgages. Many genuine people are unemployed. So what will happen? Will those who were prudent lose out? Or could some other scheme be done to make it more fair to everyone?
For example, if a person had a 400,000 mortgage. The gov/banks agree to write off 100,000. The gov/banks however take a 1/4 stake in the house. Thus the person is not getting off completely. If the person sold the house 10 years down the road the gov would get 1/4 of the price.
Would this be fair and possible?

Let's keep this reasonable as I'm sure there could be strong feelings on both sides.

Hayte · 21-04-2012 12:47AM

There is already a whole set of procedures for this sort of thing. One of the ways a lender can enforce a debt is to register it as a burden on title (a Judgement Mortgage), usually when more direct methods of debt recovery have failed. This way, it is possible for the lender to force a sale of the property and recover the debt from the proceeds of the sale.

You should check out courts.ie for information on mortgage suits and the like. They probably have some "cheat sheets" in the Examiner's office with a flow chart of the court procedure i.e. obtaining an execution order, registering a judgement in the land registry as a burden on title, applying for a well charging order and an order for sale etc.

So those are the rules. The exceptions (which are unique and specific to each case) have to be worked out by all the parties involved in a courtroom with a Judge having the final say.

Tigerandahalf · 21-04-2012 12:37PM

So could this be a possibility in dealing with mortgage debt?

21-04-2012 12:48PM

I think there will have to be a passing of the Fiscal Compact Treaty, and a little bit of continuous growth at home before people at large will open up to the idea of any sort of meaningful mortgage forgiveness. I would imagine it would have to be done percentage-wise, rather than throwing massive figures around, and I would imagine it would be nowhere near the full amount.

Brussels Sprout · 22-04-2012 12:21AM

A lot of last week's Frontline was devoted to this. They had a few people on the panel who basically said that write-downs that didn't involve the people handing the property back to the bank would be unworkable. The logic went like this:

If banks start writing off mortgage debt at a certain level then people who are just below that level will stop paying their mortgages so as to fall into enough debt to get some written off.

Tigerandahalf · 22-04-2012 12:35AM

Yes but if they do get debt written off they would lose a percentage of their house. This would have negative affects as the gov/banks would be written into the deeds of the house. Even getting repairs/extension done on house would require permission. Not many people would want to lose full ownership of their house.

Head The Wall · 22-04-2012 01:58AM

Tigerandahalf wrote: »

Yes but if they do get debt written off they would lose a percentage of their house. This would have negative affects as the gov/banks would be written into the deeds of the house. Even getting repairs/extension done on house would require permission. Not many people would want to lose full ownership of their house.

You don't really have ownership of a house until you have the mortgage fully paid off. It seems to me like nobody reads the terms and conditions of their mortgages before signing them, is it any wonder we have so many people in such dire straits

22-04-2012 03:07AM

here is a fair question:

What about renters who are also as you state "genuine people" who can no longer afford to pay their current level of rent?

jased10s · 22-04-2012 04:37AM

im getting screwed by PTSB for approx €300 a month extra compared to AIB, so approx €100000 over the life of the loan unless some fairness comes in to 2 state owned banks. €300 less i can spend on the local ecomony.
Theres who can pay and who pay more .

NakedNNettles · 22-04-2012 02:24PM

There should be no write down of debt for anyone. Full Stop!

I spent long enough saving and investing my pennies to try to get ahead of the 'beemer' & multitude flash holidays a year with their massive houses in prime locations crowd.

F them, leave them up to their necks.

My time has come now, I want a shot at the cherry.

Wizzbit · 22-04-2012 03:45PM

NakedNNettles wrote: »

There should be no write down of debt for anyone. Full Stop!

I spent long enough saving and investing my pennies to try to get ahead of the 'beemer' & multitude flash holidays a year with their massive houses in prime locations crowd.

F them, leave them up to their necks.

My time has come now, I want a shot at the cherry.

Ok whilst I get your general view and am off a similar position...maybe just a tad bit harsh... don't get me wrong, we were the same, saving anything we could, never borrowed to go on hols or trips or to buy flash appliances. If we couldn't afford to go on holiday, we just didn't go or else we went somewhere cheaper etc... if we needed to get a new appliance or stuff for the house, we saved up for it. I think society is split on this one, you have half the population (not all) that went 'mad' in the boom and are now in neg equity, struggling to make payments etc and then the other half who are also struggling but 'played' safe during the boom and are still keeping the heads above water but will not get a write off but will have to cover the cost for those who over-borrowed.

bbsrs · 22-04-2012 04:18PM

How could this work , it's impossible I think . Say in 2006 I bought a house for 400k in an estate and put 200k of my money into it and got a mortgage for the remaining 200k . My house is now worth 200k.
My next door neighbour got a 92% mortgage of 368k and his house is now worth 200k .
My neighbour is in neg eq for 168k and I'm not .
How in fairness could they write off some of his debt without compensating me for the same bad investment except I lost my own money and not the banks?
I know they wouldn't compensate me for losing my own money so I don't see how they write off debt just because it's mortgage debt.

Tigerandahalf · 22-04-2012 04:46PM

That is one of the problems and I'm sure many other examples will spring up. There are many who believe that the banks should take care of it and just foreclose on people. That would mean evictions and putting people up on council houses. Whatever will happen v few people will be put out of their house as above all it would not make financial sense, as the cost would fall back on the gov. Perhaps we will have to see some board/court set up that will decide on whether people are making an effort to repay and achieve a settlement based on that. However, people can be very adept at hiding assets and only PAYE workers would fit this model. This has the potential to divide the country more than anything else. As you said above people would be left v bitter if their neighbour got preferential treatment.
If a board/court was set up with real teeth to punish people who don't comply or reveal all then maybe it could be sorted. But what do you do about people who just won't pay? If they are evicted does the gov have to provide accommodation for them? In fairness I would say most people in difficulty want to achieve some sort of a fair solution. At the end of the day we will all have to pick up the tab in some way whether people like or not, unless Europe agrees to write off debt.

Sponge Bob · 22-04-2012 04:51PM

There will be writedowns after the people seeking a writedown go into bankruptcy and work through all their debts and liabilities.

The only modification required is to shorten the period of bankruptcy, it is too long at 12 years. In a case where only one debt...eg a mortgage....is a problem there should be a low administration bankrupcy procedure not the long winded and intensive proceure that is there now.

Leaving people in homes they cannot afford....eg a palazzo in Killiney.....is not a solution. These places should be sold and the debtor should move somewhere in keeping with their circumstances.

amen · 22-04-2012 05:03PM

That would mean evictions and putting people up on council houses

It doesn't have to. Simpy forclose, evict and then and let them back as a private tenant.

Mr.Micro · 22-04-2012 05:06PM

Sponge Bob wrote: »

There will be writedowns after the people seeking a writedown go into bankruptcy and work through all their debts and liabilities.

The only modification required is to shorten the period of bankruptcy, it is too long at 12 years. In a case where only one debt...eg a mortgage....is a problem there should be a low administration bankrupcy procedure not the long winded and intensive proceure that is there now.

Leaving people in homes they cannot afford....eg a palazzo in Killiney.....is not a solution. These places should be sold and the debtor should move somewhere in keeping with their circumstances.

Indeed. I am sick and tired of some people thinking that they should be let off their debts and still keep the house and whatever. What about all the other people who paid their way, or do up an old house, and are left with a house that is worth a lot less. Should they expect re-numeration for all they expenses they incurred as well, because of the imprudence of others?

Tigerandahalf · 22-04-2012 05:09PM

The case in Killiney is a very rare case. The vast majority will be young families where one or other parent has lost their job or people who have taken paycuts and can't keep up with increased taxes etc. They won't be moved from their house and that's fair enough. Kids are in school and one of the parents may have a job close by.
The gov has to get their act together and put pressure on the ECB to write off debt. People can't spend in the economy if all their wages are going on paying back debt. It makes sense that people can move on and have money to spend to get the country going again.
The Fiscal Treaty could well be our last real chance as ordinary people to have a say on matters and to dictate policy. After that we will be relying on the gov to put it upto Europe. If we vote YES without getting serious write off we are wasting an opportunity.

Pete_Cavan · 22-04-2012 06:33PM

Tigerandahalf wrote: »

The case in Killiney is a very case. The vast majority will be young families where one or other parent has lost their job or people who have taken paycuts and can't keep up with increased taxes etc. They won't be moved from their house and that's fair enough. Kids are in school and one of the parents may have a job close by.

Where are you getting that from? You cant just make up some tear-jerking story and say it applies to the "vast majority" of those concerned without backing upbn the claim.

The gov has to get their act together and put pressure on the ECB to write off debt. People can't spend in the economy if all their wages are going on paying back debt. It makes sense that people can move on and have money to spend to get the country going again.

While we are at it, why not get the government to put pressure on the ECB to give everyone else €50,000 to allow them to "have money to spend to get the country going again"?

The Fiscal Treaty could well be our last real chance as ordinary people to have a say on matters and to dictate policy. After that we will be relying on the gov to put it upto Europe. If we vote YES without getting serious write off we are wasting an opportunity.

Great idea, we sign up to the Treaty, without considering the long term consequences, as long as there is a short term gain in it for ourselves - sure if we didnt re-elect Bertie when he was offering give-away budgets and tax incentives for buying second homes, we would have been wasting an opportunity.

I dont mean to sound antagonistic, but just trying to make the point that, whatever way you try to justify it, mortgage forgiveness is giving preferential treatment to a select few (which is not clearly defined and it may be possible for some to engineer a situation where, people who wouldnt otherwise, become part of this select few) at the expense of everyone else, which a lot of people will not be happy about.

Tigerandahalf · 22-04-2012 07:33PM

Well if you dont do anything people will just walk away and leave the keys in the letterbox. People took the advice of the gov to buy. Should they be made to suck it up now because the gov messed up. By the way I am not talking about people who bought second houses. They gambled and lost.

hmmm · 22-04-2012 07:54PM

jased10s wrote: »

unless some fairness comes in to 2 state owned banks. €300 less i can spend on the local ecomony.

Do you think that 300 quid can be magiced out of thin air? If you want to pay 300 less in your mortgage, someone else has to pick up the bill. Any argument that this "will help the economy as people will have more to spend" is horse manure.

That couple in Killiney have done wonders for the debate on mortgage forgiveness - they've finished off any chance of a blanket deal.

hmmm · 22-04-2012 08:00PM

Tigerandahalf wrote: »

Well if you dont do anything people will just walk away and leave the keys in the letterbox. People took the advice of the gov to buy..

What about those several million Irish people who took personal responsibility and didn't buy a property they couldn't afford? Since when do you take orders from the Irish government?

Besides, a read through threads on boards.ie in the accommodation forum from 2006 should tell you that greed and the Irish addiction to owning property was the predominant thread, not what the government was saying.

southsiderosie · 22-04-2012 08:04PM

Tigerandahalf wrote: »

The gov has to get their act together and put pressure on the ECB to write off debt. People can't spend in the economy if all their wages are going on paying back debt. It makes sense that people can move on and have money to spend to get the country going again.
The Fiscal Treaty could well be our last real chance as ordinary people to have a say on matters and to dictate policy. After that we will be relying on the gov to put it upto Europe. If we vote YES without getting serious write off we are wasting an opportunity.

Why doesn't the government get its act together and re-write Irish bankruptcy law to make it easier for people to restructure their debt and become whole again financially? This is one regulatory area where the Irish government does have control; I don't understand why it should be looking beyond its borders to deal with the issue.

AltAccount · 22-04-2012 08:09PM

Tigerandahalf wrote: »

It seems like some mortgage debt will be written off as people simply can't afford to pay their mortgages.

I'm really enjoying this thread, but I can't get past this first sentence. Where are you getting the idea this is likely/imminent?

Brussels Sprout · 22-04-2012 08:10PM

Tigerandahalf wrote: »

People took the advice of the gov to buy. Should they be made to suck it up now because the gov messed up.

Jesus, would you listen to yourself. That's a childishly pathetic argument. "It wasn't my fault, an older boy told me to do it!"

Tigerandahalf wrote: »

Well if you dont do anything people will just walk away and leave the keys in the letterbox.

This isn't America. There's no "jingle mail" get-out-clause here. You can walk away from the house but you can't walk away from the mortgage.

Mr.Micro · 22-04-2012 08:12PM

Tigerandahalf wrote: »

Well if you dont do anything people will just walk away and leave the keys in the letterbox. People took the advice of the gov to buy. Should they be made to suck it up now because the gov messed up. By the way I am not talking about people who bought second houses. They gambled and lost.

An extremely naive and simplistic analysis IMO. The people who purchased houses did so as grown adults and were not forced. Why should they be rewarded because they messed up or because the economy dipped? Where in the world does the State bail out private individuals involving a private mortgage?

Putting the keys in the letterbox still leaves individuals owing the loans. The ECB would be better off giving money to the prudent individuals not good after bad.

Brussels Sprout · 22-04-2012 08:24PM

Pete_Cavan wrote: »

While we are at it, why not get the government to put pressure on the ECB to give everyone else €50,000 to allow them to "have money to spend to get the country going again"?

Mr.Micro wrote: »

Putting the keys in the letterbox still leaves individuals owing the loans. The ECB would be better off giving money to the prudent individuals not good after bad.

As mad as that sounds there was actually an Australian economist on the Vincent Brown show the other night putting this forward as a solution. He proposed that a bailout fund be used to tackle household debt where a lump sum is given to everyone in the country with the proviso that if you were in debt then you had to use it to pay off your debt. If you weren't in debt you could keep in in cash.
A journalist from one of the Irish papers scoffed at this saying that it would lead to massive inflation. Constantine Gurdiev, who was also on the panel, then replied saying that this was true but that the only way to eliminate massive debt is either through debt restructuring or through inflation.

Clearly loads of holes in that but an interesting proposal all the same.

Tigerandahalf · 22-04-2012 08:37PM

Yes I saw the programme. His idea was that Irish punts would be printed within the Irish economy but wouldnt be tender outside the Republic of Ireland. The punt would have a 1 to 1 value with the euro. However, what would a business do with all the punts when they wanted to pay for some imported good? The business would be left with a load of punts. This though would force the business to buy Irish and thus perhaps drive inflation and perhaps make a previously competitive company uncompetitive.

Re the posts above: if we allow people to go bankrupt the courts will be clogged up for the next century. The solicitors would be laughing. All this would do is flood the market with property.

hmmm · 22-04-2012 08:44PM

Brussels Sprout wrote: »

He proposed that a bailout fund be used to tackle household debt where a lump sum is given to everyone in the country

Sounds like Bill Bernanke and his old comment about throwing money out of helicopters.

The only problem is who is going to give us this money? It's all very well coming up with creative solutions where you start with a large, free pot of gold, but try explaining to the German taxpayer who is paid less, and pays more taxes than Irish people, why he should be subsidising our gigantic binge.

Tigerandahalf · 22-04-2012 08:50PM

The German people are being fooled by their leaders. This will continue until the next election in Germany. Then and only then will we see movement from Germany/ECB. There is a great report on the rte website quoting Romano Prodi. It is sense he talks.

southsiderosie · 22-04-2012 08:54PM

Tigerandahalf wrote: »

Re the posts above: if we allow people to go bankrupt the courts will be clogged up for the next century. The solicitors would be laughing. All this would do is flood the market with property.

Not if the process was relatively straightforward. Modern credit-based economies need to have a modern, efficient way to deal with debt, and Ireland clearly fails in this regard (as does Spain, whose debt repayment laws are even more onerous than Ireland's).

As for the market being flooded with property - well, such is life. The market needs to be flooded anyway to wash out prices once and for all. Not all of that inventory is going to be viable in the long-term anyway, especially one-off construction and isolated cul-de-sac developments in the boondocks.

hmmm · 22-04-2012 08:58PM

Tigerandahalf wrote: »

if we allow people to go bankrupt the courts will be clogged up for the next century. The solicitors would be laughing. All this would do is flood the market with property.

The horror of the thought. All those people who bought houses they couldn't afford would lose the house and have to rent, all those people who didn't buy houses they couldn't afford might now be able to buy a nice place.

Instead you seem to be proposing that those who bought houses they couldn't afford get to stay in that house, while being subsidised by those who lived within their means.

Writing off mortgage debt

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