Writing off mortgage debt

Tigerandahalf · 22-04-2012 09:08PM

I think a lot of people here are seeing the issue as black or white and that those who bought a house that was overpriced and cant pay should be punished. It is in the interets of the country that people are unshackled from their debt. We need people to be spending their money and not worrying that they are going to be turfed out on the street. What will allowing ordinary people go bankrupt achieve?

southsiderosie · 22-04-2012 09:15PM

Tigerandahalf wrote: »

I think a lot of people here are seeing the issue as black or white and that those who bought a house that was overpriced and cant pay should be punished. It is in the interets of the country that people are unshackled from their debt. We need people to be spending their money and not worrying that they are going to be turfed out on the street. What will allowing ordinary people go bankrupt achieve?

It achieves EXACTLY what you just said: it unshackles people from debt. It isn't a punishment - it is a way for people to discharge their debt in a reasonable way and it lets then get access to credit again in 4-5 years time, rather than 12 years under current law (IIRC). People have to take some personal responsibility for their financial decisions, but they should not be punished for them for eternity - that is the point of bankruptcy.

Tigerandahalf · 22-04-2012 09:22PM

But does it make sense to put people out of their homes. Whole families being uprooted and forced to move to where? To rent? To go on a council list?
Many people in this position are unemployed through no fault of their own and thus the family may not be able to rent in their area. Surely it makes sense to allow people to stay in their homes until the economy has picked up and people have a fair chance of getting work and paying their mortgage.

southsiderosie · 22-04-2012 09:40PM

Tigerandahalf wrote: »

But does it make sense to put people out of their homes. Whole families being uprooted and forced to move to where? To rent? To go on a council list?
Many people in this position are unemployed through no fault of their own and thus the family may not be able to rent in their area. Surely it makes sense to allow people to stay in their homes until the economy has picked up and people have a fair chance of getting work and paying their mortgage.

Here's the thing: if the bottom could actually fall out of the market, the same family that is paying a $2500/month mortgage would likely be able to rent a similar house in the area for far less money. This is exactly why many people in the US have simply moved out of the homes they are underwater on and rented a similar house nearby for much less money - they are saving hundreds of dollars a month. But this can't happen when people are still tied to their overvalued homes.

jased10s · 22-04-2012 11:25PM

hmmm wrote: »

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.

It does not have to be magiced , it's plan robbery , and manure i think not .

AltAccount · 22-04-2012 11:42PM

Tigerandahalf wrote: »

But does it make sense to put people out of their homes. Whole families being uprooted and forced to move to where? To rent? To go on a council list?
Many people in this position are unemployed through no fault of their own and thus the family may not be able to rent in their area. Surely it makes sense to allow people to stay in their homes until the economy has picked up and people have a fair chance of getting work and paying their mortgage.

People won't be put out of their homes for being in negative equity, only for not being able to pay their contractual mortgage payments.
I'm not sure how debt forgiveness affects the people in your post above, surely what they need is forbearance until they're back on their feet. Why should the amount they owe change?

carm · 23-04-2012 01:02AM

Deleted User wrote: »

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?

They apply for the extremely generous rent allowances on offer through the HSE.

green123 · 23-04-2012 01:58AM

Anybody who can't afford to pay their mortgage should have their house repossessed as per the agreement that they signed up to.

That is the contract that they agreed to.

A deal is a deal.

Simple as that.

Nobody gets made homeless. The house is transferred over to the local authority or council and the previous owners start paying rent or get rent allowance.

StudentDad · 23-04-2012 02:17AM

Moral Hazard on toast please and some tea.

SD

golden lane · 23-04-2012 02:23AM

green123 wrote: »

Anybody who can't afford to pay their mortgage should have their house repossessed as per the agreement that they signed up to.

That is the contract that they agreed to.

A deal is a deal.

Simple as that.

Nobody gets made homeless. The house is transferred over to the local authority or council and the previous owners start paying rent or get rent allowance.

who would pay the money that was borrowed to buy the house...????

Farmer Pudsey · 23-04-2012 11:19AM

green123 wrote: »

Anybody who can't afford to pay their mortgage should have their house repossessed as per the agreement that they signed up to.

That is the contract that they agreed to.

A deal is a deal.

Simple as that.

Nobody gets made homeless. The house is transferred over to the local authority or council and the previous owners start paying rent or get rent allowance.

This is not the issue if most people that have huge morgtages issue could give back the keys and walk away this would happen
However unlike in the US where if you cannot pay back your morgtage you can send the keys back to the banks ( I believe it is call somthing like the jingle post) and move on rent for a while move States and start again. In Ireland if your house is repossed and the house will not cover the morgtage you are left with personal debt which then throws them back on the state.
Also if the banks knew that this could have happened 10 years ago they might not have been as free with money.In the US morgtage are nonrecourse ie they are on the house alone.

Bannasidhe · 23-04-2012 11:46AM

carm wrote: »

They apply for the extremely generous rent allowances on offer through the HSE.

So rather then the State acting to help people stay in their mortgaged homes we should have a situation where people are evicted and the State then subsidises their rent?

Plus - not everyone is 'entitled' to rent allowance.

NakedNNettles · 23-04-2012 12:36PM

Tigerandahalf wrote: »

I think a lot of people here are seeing the issue as black or white and that those who bought a house that was overpriced and cant pay should be punished. It is in the interets of the country that people are unshackled from their debt. We need people to be spending their money and not worrying that they are going to be turfed out on the street. What will allowing ordinary people go bankrupt achieve?

Unfortunately this is the problem thats landed the country in the current mess, some people out spending left, right and centre on shi*e like cash grows on trees or something.

If they got a bailout, what's to stop them repeating all the same mistakes and landing the country in an even worse state.

I don't buy your sympathy story. Life isn't called a 'rat race' for nothing you know.

Sponge Bob · 23-04-2012 12:41PM

NakedNNettles wrote: »

Unfortunately this is the problem thats landed the country in the current mess, some people out spending left, right and centre on shi*e like cash grows on trees or something.

If they got a bailout, what's to stop them repeating all the same mistakes and landing the country in an even worse state.

Hopefully we have the short legal bankruptcy procedure in place by years end and they can process themselves through that if they are in serious trouble.

The rest of us will carry on paying our bills, same as ever. :cool:

bbam · 23-04-2012 01:05PM

How about a debt for equity swap? Would be a better option than debt forgiveness.
A fund to reduce debt for those who are in trouble but. You have to sign over equity in your home at say 10% less than market value ( for a 20% bailout you sign over 30% of your equity )To be recovered on the future when the property changes hands.
The big problem with any scheme is where does this magical pot of money come from?

BFDCH. · 23-04-2012 01:08PM

Mr.Micro wrote: »

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.

Possibly in the same country that bailed out those foreign institutions that made a bad investment in this country.

Many people in the country did buy because they believed what the government and media were preaching at the time (prices were going to keep going up and so they needed to buy ASAP). You should be able to believe the advice coming from a govenrment, you shouldn't have to second guess them all the time, they are elected and paid to guide the country. how was the average punter to know that they were a bunch of power mad clowns and gombeen men when the media was telling everyone that would listen what a good job they were doing.

the country would be better off people were allowed to hand the houses back the bank who own them. It'lll allow the house prices to fall to their natural level rather than being kept artifically high.
The people that walk away from their loans wouldn't be able to get another loan except at very high rates, so this should be enough punishment for them.

vard · 23-04-2012 01:13PM

Tigerandahalf wrote: »

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.

interest rates.... that's what needs to be frozen. The debt should be capped, they should say okay you owe us 200000 - discuss a reasonable long term period to pay it back interest free.

It's not the debt that's the problem... it's interest rates. That is what is crippling people and leaving so much of the country in an impossible situation from which there is no escape... but that's the whole idea if interest rates anyway isn't it? Keep people indebted for life...

beeftotheheels · 23-04-2012 01:15PM

BFDCH. wrote: »

Many people in the country did buy because they believed what the government and media were preaching at the time (prices were going to keep going up and so they needed to buy ASAP). You should be able to believe the advice coming from a govenrment, you shouldn't have to second guess them all the time, they are elected and paid to guide the country. how was the average punter to know that they were a bunch of power mad clowns and gombeen men when the media was telling everyone that would listen what a good job they were doing.

the country would be better off people were allowed to hand the houses back the bank who own them.

I'd be in favor of this with one minor amendment. They also have to surrender their right to vote in any further Irish elections.

If they were so misled by politicians, and so incapable of judging politicians or electing responsible ones, they should henceforth surrender their right to vote and leave that to those of us who didn't get into such a mess.

Otherwise, they should live with the consequences of their actions.

mkdon05 · 23-04-2012 01:34PM

It always amazes me when one of these threads crop up.
I never knew Ireland was producing so many economic experts back in 2004-2007 that were able to predict how it was going to pan out. Fair play to you all deciding not to buy a home when you were in a position to do so, but decided to rent instead. Bravo.

NakedNNettles · 23-04-2012 01:49PM

mkdon05 wrote: »

It always amazes me when one of these threads crop up.
I never knew Ireland was producing so many economic experts back in 2004-2007 that were able to predict how it was going to pan out. Fair play to you all deciding not to buy a home when you were in a position to do so, but decided to rent instead. Bravo.

It wasn't a difficult decision for me as I was priced out of the market what with the banks firing out money left, right and centre for lads wanting to boxrooms at 500k.

Christ I had some laugh when I got to Australia late '06 and saw what I could get for that kind of dough.

:pac:

NakedNNettles · 23-04-2012 01:53PM

vard wrote: »

interest rates.... that's what needs to be frozen. The debt should be capped, they should say okay you owe us 200000 - discuss a reasonable long term period to pay it back interest free.

It's not the debt that's the problem... it's interest rates. That is what is crippling people and leaving so much of the country in an impossible situation from which there is no escape... but that's the whole idea if interest rates anyway isn't it? Keep people indebted for life...

If we had higher interest rates i'd be getting a better return on the cash I have on deposit. Hoping they go up here.

Unrealistic · 23-04-2012 02:19PM

mkdon05 wrote: »

It always amazes me when one of these threads crop up.
I never knew Ireland was producing so many economic experts back in 2004-2007 that were able to predict how it was going to pan out. Fair play to you all deciding not to buy a home when you were in a position to do so, but decided to rent instead. Bravo.

I didn't have to be down to superhuman economic forecasting. I think in most cases it wasn't driven by an expectation that prices would fall but rather by a reluctance to take on personal debt at a level where you ended up stretched so far that a couple of months out of work or a drop in salary for any reason could have in default and evicted. Personally I didn't buy in Ireland because I wasn't prepared to live with the amount of debt that would have been required. Instead I bought a modest home outside Ireland and lived and worked abroad, borrowing only about 1/5 of what an Irish bank would have been willing to offer me to do so. There was no sense of being smug and waiting for a crash. I just decided that I wasn't going to borrow to a level I considered reckless and that a home in Ireland was therefore beyond my reach. I paid of my overseas mortgage in five years and then kept saving hard. When the crash did happen the equation had changed and I was able to afford a house in Ireland after all. It's not a very fancy house but it's mine, paid for with my own money, and no bank can take it away.

Sponge Bob · 23-04-2012 02:19PM

Talking to a senior banker late last year and he reckoned 1 in 3 arrears cases was by choice not by compulsion/circumstances. This may have risen since.

Them lads are in for a nasty surprise.

Head The Wall · 23-04-2012 02:22PM

Tigerandahalf wrote: »

But does it make sense to put people out of their homes. Whole families being uprooted and forced to move to where? To rent? To go on a council list?
Many people in this position are unemployed through no fault of their own and thus the family may not be able to rent in their area. Surely it makes sense to allow people to stay in their homes until the economy has picked up and people have a fair chance of getting work and paying their mortgage.

For the second time you don't own a house until you finish paying the mortgage. Buying a house also doesn't give you the right to live in the same location for the rest of your life. People that can pay their mortgages have to move at times so why the hell should people that can't get preferential treatment?

I'm guessing from your posts that you have a mortgage you don't feel like paying.

Fighting Irish · 23-04-2012 02:32PM

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.

lol so stupid

Farmer Pudsey · 23-04-2012 02:40PM

Sponge Bob wrote: »

Talking to a senior banker late last year and he reckoned 1 in 3 arrears cases was by choice not by compulsion/circumstances. This may have risen since.

Them lads are in for a nasty surprise.

You may be right bob but there are alot punters out there who through unemployment or shear volume of debt are in trouble. This issue will not go away also as intrest go'es up and trackers go up this problem will arise again in a couple of years time.
I do not believe that a lot of people are making the choice not to pay morgtage's more likey with fuel prices after taking a hike people working in mid-low paid jobs are under pressure. take a person in a badly insulated house in last few years oil gone from 50 ish c/l to 1 euro/l on 2000l/year =1000euro.
Car fuel bill from 1500/year- 2500/year cartax, household charge, Medical insurance ESB bills etc.

All in all in last few years even if on a tracker your cost of living may have gone up by 100 euro/week and your take home down by the same the well has run dry

I see a certain elite group starting to emerge trying to blame everything on people greed I agree with a mkdon05 people had a right to believe that the government were not ignoring economic advice like the article in yesterday Independant about the Public servant who had her advice ignored as it was politicaly unacceptable.

Tigerandahalf · 23-04-2012 02:45PM

green123 wrote: »

Nobody gets made homeless. The house is transferred over to the local authority or council and the previous owners start paying rent or get rent allowance.

That would have consequences for others though. Let's say I bought a house for 300,000. I'm doing well, got a promotion at work and am paying back my debt but having to keep things tight. Next I hear that my neighbour's house is now a council house. I bet you wouldn't be happy and the value of all the other houses in the estate would be reduced. The only way to prevent that is to allow people to stay in their homes.
I agree that a debt for equity swap is probably a good idea. It forces the homeowner to try to pay back their debt. Otherwise they gradually lose equity in their home. However, I think you would have to give people a timeframe until the economy has picked up and are in a position to to get employment and repay again.

Joe 90 · 23-04-2012 02:47PM

southsiderosie wrote: »

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.

I saw a suggestion somewhere that the Revenue don't like the idea. Makes sense.

Joe 90 · 23-04-2012 02:54PM

vard wrote: »

interest rates.... that's what needs to be frozen. The debt should be capped, they should say okay you owe us 200000 - discuss a reasonable long term period to pay it back interest free.

It's not the debt that's the problem... it's interest rates. That is what is crippling people and leaving so much of the country in an impossible situation from which there is no escape... but that's the whole idea if interest rates anyway isn't it? Keep people indebted for life...

Wait until interest rates rise to realistic levels. They will at some point.

BFDCH. · 23-04-2012 02:55PM

beeftotheheels wrote: »

I'd be in favor of this with one minor amendment. They also have to surrender their right to vote in any further Irish elections.

If they were so misled by politicians, and so incapable of judging politicians or electing responsible ones, they should henceforth surrender their right to vote and leave that to those of us who didn't get into such a mess.

Otherwise, they should live with the consequences of their actions.

That's a bit mental TBH. They voted for the politicians in good faith, the media was compliant in all of this, there were no real questions raised by them when all of this was going on.
Look at how the media is acting now (every second story is about waste in the PS, this was going on during the boom to a greater degree but there were few stories highlighting it). If the kind of focus that the media are applying now was applied in the past we would not be where we are and jokers like Bertie wouldn't have gotten away with doing as they pleased with our country.
The people who should've been punished further are the politicians who got off with mismanaging and misleading the public. They got out of government with their pensions and wealth intact, hardly the type of message you want to give an already sneaky group of people- fck up our country and we won't punish you.

Not getting a loan again and probably not being able to afford anything beyond what they can pay for with their income, while watching others who didn't live beyond their means reap the benefits of being able to take out loans should be punishment enough.

Writing off mortgage debt

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