Writing off mortgage debt

Monty Burnz · 24-04-2012 12:05PM

daltonmd wrote: »

Why are the banks not repossessing those in arrears?

Two reasons, I would suggest:

1. Extend and pretend: they let people stay in houses they are not paying for, hoping that something will turn up (global boom, property bubble mark 2 - something like that) and they won't have to recognise the losses.

2. The difficulty of actually repossessing a house in Ireland. We all saw the media storm over getting extremely wealthy property moguls out of one of their houses where they hadn't paid a cent in mortgage in years and didn't even own if for the last 2 years.

The banks aren't motivated to resolve the issue at all - they have billions of euros of taxpayers' money sitting on their balance sheets, they have cushy jobs, and they don't care about what is good for the Irish economy or Irish society. Hence they will let people sit in houses for free, preventing those who can afford them from moving into them, and they will starve the country of credit as they spend the next couple of decades as zombies, banks in name only.

daltonmd · 24-04-2012 12:10PM

carm wrote: »

That's my point Bannasidhe. There is a belief like the post above that just moving the person out of the home or turning the house over to the Council and making the previous owners pay rent is the answer. In many cases, the rent they would require will be far more and far more generous than the mortgage supplements they may be 'entitled to' at present.

In essence, they could be getting more money from the government than if they were in the house paying the mortgage with interest supplements. Obviously, there are cases where the mortgage is beyond that but it could, in many cases, mean the taxpayer paying more for the person to rent.

I doubt very much if the bank would simply "turn over" a house to the council. If the bank were to repossess the house and rent it out then if the occupants couldn't afford the mortgage in the first place then it stands to reason that the rent would have to be lower.
in order for the tenant to pay.

daltonmd · 24-04-2012 12:17PM

Monty Burnz wrote: »

Two reasons, I would suggest:

1. Extend and pretend: they let people stay in houses they are not paying for, hoping that something will turn up (global boom, property bubble mark 2 - something like that) and they won't have to recognise the losses.

Well we know that this won't happen - there is no upturn on the way.

Monty Burnz wrote: »

2. The difficulty of actually repossessing a house in Ireland. We all saw the media storm over getting extremely wealthy property moguls out of one of their houses where they hadn't paid a cent in mortgage in years and didn't even own if for the last 2 years.

The house was bought in 2004, mortgage paid until end of 2007 and then negotiations started in 2008. 12 months negotiation and 12 months to court and in 2010 repo order issued. Since 2010 no mortgage paid. The difficulty started with the issueing of the repo order not in the repossession act itself, if you get me. Once that is issued then the deed is done.

Monty Burnz wrote: »

The banks aren't motivated to resolve the issue at all - they have billions of euros of taxpayers' money sitting on their balance sheets, they have cushy jobs, and they don't care about what is good for the Irish economy or Irish society. Hence they will let people sit in houses for free, preventing those who can afford them from moving into them, and they will starve the country of credit as they spend the next couple of decades as zombies, banks in name only.

My own view is that they are not repossessing en masse because this will bust them. Yes we will have fire sales but we'll also have a great big stinking hole in the banks that will have to be filled again. The taxpayer - who is now sitting in his firesale house, will be on the hook again, for more billions.

My own 2 cents.

Farmer Pudsey · 24-04-2012 12:26PM

daltonmd wrote: »

The real thing that gets me is that there are people here who are fighting for the rights of banks to get their pound of flesh - imagine that.

The question they should ask themselves is - why is there is not more repo's? We are now in year 5 from the collapse and no (or very few )repo's? Why?

Why are the banks not repossessing those in arrears?

England late 80's early 90's property crash banks do not reposses houses lets orginal owners insitu after five years property prices have recovered banks repossess and sell. If a house is empty within a few months it is ususlly subject to vandalism and squatters within 2 years they become derlict.
I have no issue with repossessions however I believe that people are entitled to a fresh start after 1-2 years not a 12 year bankrupty. also the banks want mortgages exempt from the personel insolvency bill.
People that rode the tiger 2+ houses I have no issue with them being put through the riggers however if they are willing to go through the personnell insolvency or banhrupty process I bel;ieve that after 2 years they should be able to start again there is a saying I was told years ago ''the person who never made a mistake never did anything''

I also see no reason that why ordinary joe soaps are not entitled to a fresh start as David Drumm will get in the US and the other developers will get through the English process

daltonmd · 24-04-2012 12:36PM

Farmer Pudsey wrote: »

England late 80's early 90's property crash banks do not reposses houses lets orginal owners insitu after five years property prices have recovered banks repossess and sell. If a house is empty within a few months it is ususlly subject to vandalism and squatters within 2 years they become derlict.

I thought there were a lot of repossessions in the UK at that time - difference there is that they have a more humane approach to bankruptcy - after 12 months you are discharged from the debt - so maybe repossession was not widespread but bankruptcy was?

Agree re: derelict buildings.

[QUOTE=Farmer Pudsey;78304819I have no issue with repossessions however I believe that people are entitled to a fresh start after 1-2 years not a 12 year bankrupty. also the banks want mortgages exempt from the personel insolvency bill.[/QUOTE]

Of course the banks would - new law on the way, 3 year bankruptcy law and I can see many people opting for it.

Farmer Pudsey wrote: »

People that rode the tiger 2+ houses I have no issue with them being put through the riggers however if they are willing to go through the personnell insolvency or banhrupty process I bel;ieve that after 2 years they should be able to start again there is a saying I was told years ago ''the person who never made a mistake never did anything''

Absolutely - it's not intended to be a free ride or incentive to do it again.

Farmer Pudsey wrote: »

I also see no reason that why ordinary joe soaps are not entitled to a fresh start as David Drumm will get in the US and the other developers will get through the English process

Indeed - tis funny how the law and public mood can adapt.

Zamboni · 24-04-2012 01:12PM

daltonmd wrote: »

Why are the banks not repossessing those in arrears?

Now that the state owns and part owns Irish banks, it would be political suicide for any party to order repossessions.

daltonmd · 24-04-2012 01:19PM

Zamboni wrote: »

Now that the state owns and part owns Irish banks, it would be political suicide for any party to order repossessions.

Not at all Zamboni. It would be financial suicide. If it was in the banks interest to repossess then they would give yet another finger to the state and taxpayer that has bailed them out.

It is not in their interests to repossess.

24-04-2012 02:44PM

Tigerandahalf wrote: »

Ya something that is often forgotten. Landowners made a killing. Auctioneers even more so as they were just the middle man with nothing to lose. However, many of these very people invested in shares in the banks and got wiped. Undoubtedly there is still money there. However FG is a landowners party and would be unlikely to agree to any move where their affairs would be subject to the taxman.

Sounds like you want a refund but you also want to keep what you bought!

24-04-2012 02:47PM

Tigerandahalf wrote: »

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.

If someone rents a place they cant afford surely it makes sense for people to stay in their homes until the economy has picked up etc

No? Is it different for renters?

24-04-2012 02:50PM

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 interest of the country that people are unshackled from their debt. We need people to be spending their money

oh my, rob peter so paul can spend money in the economy. It doesnt increase economic activity it merely takes money from one group of people in the economy and passes it onto others. A real zero sum game.

Monty Burnz · 24-04-2012 03:00PM

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?

To be spending whose money? Money taxed from other people who wanted to spend it on their own stuff rather than on your house?

daltonmd · 24-04-2012 03:13PM

Deleted User wrote: »

If someone rents a place they cant afford surely it makes sense for people to stay in their homes until the economy has picked up etc

No? Is it different for renters?

Question:

What is Rent Supplement.

daltonmd · 24-04-2012 03:15PM

Monty Burnz wrote: »

To be spending whose money? Money taxed from other people who wanted to spend it on their own stuff rather than on your house?

So let me ask you monty - if the banks repossessed every home in trouble how do you see it playing out?

Monty Burnz · 24-04-2012 03:21PM

daltonmd wrote: »

So let me ask you monty - if the banks repossessed every home in trouble how do you see it playing out?

It depends on how many mortgages cannot be restructured - the hopeless cases. But you seem to forget that it is the loans that are the banks' assets, not the properties, so falling property prices do not necessarily entail further recapitalisations.

daltonmd · 24-04-2012 03:42PM

Monty Burnz wrote: »

It depends on how many mortgages cannot be restructured - the hopeless cases.

That's the big question.

Monty Burnz wrote: »

But you seem to forget that it is the loans that are the banks' assets, not the properties, so falling property prices do not necessarily entail further recapitalisations.

But if the "assets" are non performing and the collatoral on which the loans were issued, worth far less than the loan?

If the mortgage crisis continues and more and more loans become troubled or non performing then this means that the banks will need further injections from the taxpayer - that to me is inevitable.

Tigerandahalf · 24-04-2012 06:13PM

People bought these properties at inflated prices. Wages are decreasing and taxes/charges are going up. Thus very simply all of the mortgages are not going to be repaid in full. Some people are pissed about that but it is reality. The only question is how the debt writeoff will be shared out. Whether there are mass repossessions or not there will be debt writeoff.
The problem is how do you make people pay their fair share? Bankrupt the owner, repossess and sell the house again - you still end up with a writeoff. You then have to put up the family in rented accommodation, incurring extra costs and causing an uproar with children having to move schools perhaps, etc. If new legislation comes in the person is free again after 3/4 years.
Alternative - Keep the person in the house and appraise their situation to see if they can afford to pay, taking income etc into account and hope that as the economy gradually improves their ability to repay improves. This means that you don't have a heap of property on the market and it lessens the fallout.
However, it is very hard to manage the situation no matter what options you take. It is a lot easier for the gov to stall the process as taking any action is going to piss off a certain section of the people. You can't win.

Monty Burnz · 24-04-2012 06:28PM

Tigerandahalf wrote: »

People bought these properties at inflated prices. Wages are decreasing and taxes/charges are going up. Thus very simply all of the mortgages are not going to be repaid in full. Some people are pissed about that but it is reality.

Yes. Ideally it will be the people who don't pay back their mortgages and have to surrender the properties they are not paying for who are pissed off - there will be a lot fewer of them than the hundreds of thousands of people you suggest robbing to pay their mortgages.

Tigerandahalf wrote: »

The only question is how the debt writeoff will be shared out. Whether there are mass repossessions or not there will be debt writeoff. The problem is how do you make people pay their fair share? Bankrupt the owner, repossess and sell the house again - you still end up with a writeoff.

I've no particular problem with people going bust if they cannot pay their way. Let them go bankrupt and have their debt burden wiped out, allowing them a fresh start. Of course, their big assets will have to go.

Tigerandahalf wrote: »

You then have to put up the family in rented accommodation, incurring extra costs and causing an uproar with children having to move schools perhaps, etc.

Why can't they put themselves up in rented accommodation, like...oh I don't know...renters do?

It's not rocket science. The country is full of empty houses as it is. There's a couple of hundred thousand of them.

Tigerandahalf wrote: »

If new legislation comes in the person is free again after 3/4 years.
Alternative - Keep the person in the house and appraise their situation to see if they can afford to pay, taking income etc into account and hope that as the economy gradually improves their ability to repay improves. This means that you don't have a heap of property on the market and it lessens the fallout.

Why would we not want property on the market? Do you think the cure is higher property prices?? That's the f*cking disease! I've a better idea: if you can't pay your mortgage, you move into a property that you CAN afford. It's fair, it's easily implemented, and it minimises messing with the market.

Tigerandahalf wrote: »

However, it is very hard to manage the situation no matter what options you take. It is a lot easier for the gov to stall the process as taking any action is going to piss off a certain section of the people. You can't win.

Well they've stalled for years already, and all their efforts to keep people in 'their' homes and prop up prices have cost us tens of billions already. Meanwhile there's another generation of people coming who may never get a chance to buy houses they CAN afford because they are being occupied by people who CAN'T afford them but are somehow allowed to stay in them.

Eoghan25 · 24-04-2012 06:40PM

I am finding alot of comments on this that the people who bought in the boom where living it up Champagne Charlies 8 holidays year looking down there noses at everyone...realistically a huge proportion of people worst affected where first time buyers who where young there first finicial move who where naive + influenced by according leading expert economist. Most of the people that i know where staying in scrimping and saving as of there 'last chance' to get on the ladder. But ok a foolish decision you make your bed and you lie in.
But realistically we bailed out the banks because in order to have stable economy you need banking system. In order to have stable economy you also have to have a incentive to work. The incentive to work for alot of people is starting to go who are hugely in negative equity which huge proportion of the population. Why go to work if your going spend the next 15 + years working in stressful jobs trying to get to a stage where your back ready to start again. Why wouldnt a person take the view ok give up work declare bankruptcy get housed by the goverment and in 12 yrs time start again?? Lose Lose situation for the tax payer your paying to hold up the banks with bad debts and now paying for another person on the social system.

Tigerandahalf · 24-04-2012 06:41PM

@ Monty I take it you are a renter and are waiting hoping for a great deal. That's fine, just be careful where you pick.
Ok so a lot here are saying the banks should foreclose and sell the property. Fine, aren't we the ones who are going to have to make up the writeoff/loss on the house. And we'll have to pay for it right now if every house is repossessed and put on the market as the banks will be bust. Obviously some people want that because they want to get a house for a bargain, yet for that bargain the ordinary person is having to make up the difference in paying for the writeoff.

If people are allowed to start afresh by going bankrupt, wouldn't every homeowner do this if they were free again after 3/4 years. Since most people have no assets other than their wage and house you can't seize any other assets thus they would gladly go down this route.

Monty Burnz · 24-04-2012 06:46PM

Eoghan25 wrote: »

I am finding alot of comments on this that the people who bought in the boom where living it up Champagne Charlies 8 holidays year looking down there noses at everyone...realistically a huge proportion of people worst affected where first time buyers who where young there first finicial move who where naive + influenced by according leading expert economist. Most of the people that i know where staying in scrimping and saving as of there 'last chance' to get on the ladder. But ok a foolish decision you make your bed and you lie in.

Of course, many (most?) people were not motivated by greed - but they made a big mistake and as you say they need to deal with it.

Eoghan25 wrote: »

But realistically we bailed out the banks because in order to have stable economy you need banking system. In order to have stable economy you also have to have a incentive to work. The incentive to work for alot of people is starting to go who are hugely in negative equity which huge proportion of the population. Why go to work if your going spend the next 15 + years working in stressful jobs trying to get to a stage where your back ready to start again. Why wouldnt a person take the view ok give up work declare bankruptcy get housed by the goverment and in 12 yrs time start again?? Lose Lose situation for the tax payer your paying to hold up the banks with bad debts and now paying for another person on the social system.

Well bankruptcy reform will see the 12-year system go out the window - not before time. But I'm not sure if renters and the next generation of first-time buyers have an incentive to work either if people who are not paying their mortgages are occupying the houses that they should be able to afford but can't buy...

Monty Burnz · 24-04-2012 06:59PM

Tigerandahalf wrote: »

@ Monty I take it you are a renter and are waiting hoping for a great deal. That's fine, just be careful where you pick.
Ok so a lot here are saying the banks should foreclose and sell the property. Fine, aren't we the ones who are going to have to make up the writeoff/loss on the house. And we'll have to pay for it right now if every house is repossessed and put on the market as the banks will be bust. Obviously some people want that because they want to get a house for a bargain, yet for that bargain the ordinary person is having to make up the difference in paying for the writeoff.

I am renting but I'm not in the market at least until the medium term so I'm neutral enough on this question - but of course everybody has some manner of vested interest. My parents and family members own property.

The banks won't go bust if houses are repossessed. You are going to have to flesh out this argument if you want us to accept it - what level of repossessions are you talking about, what kind of losses are implied for the banks, to what extent losses can be mitigated by guarantors and so forth. The banks already have billions on their balance sheets to absorb the actual losses incurred. So give us some numbers to work with and we can test your claim.

Tigerandahalf wrote: »

If people are allowed to start afresh by going bankrupt, wouldn't every homeowner do this if they were free again after 3/4 years. Since most people have no assets other than their wage and house you can't seize any other assets thus they would gladly go down this route.

You can only go bankrupt if you can't pay your debts. You can't just declare bankruptcy if you don't feel like paying your debts.

Tigerandahalf · 24-04-2012 07:01PM

Monty there are plenty houses out there for you to buy. You just seem to want to make a killing when some lad is flogged out of his house and you can pick it up for a bargain. Who do you think is going to make up the difference? The taxpayer.

Reading through the posts here it is easy to see why it is very difficult to find a solution. When you suggest one solution another man/woman pops up and states 'that's not fair on me.'

Similarly you have the people who saved or had a nest egg and paid a large deposit down on their house so their mortgage is a lot less. Again they are crying that they are losing out while their neighbour is getting relief. Well maybe you shouldn't have put down such a large deposit. I know that logic sucks but hey no matter what is suggested someone is losing out. If the gov tackle this they will face a certain group in the election who will vote them out.

So what do you do?
I still think people should be left in their house. If they don't pay or can't pay they should be assessed by their bank and an appraisal of their ability to pay laid out. Legislation may be needed to force the person to pay over a certain amount of their wage/dole.

Monty Burnz · 24-04-2012 07:12PM

Tigerandahalf wrote: »

Monty there are plenty houses out there for you to buy. You just seem to want to make a killing when some lad is flogged out of his house and you can pick it up for a bargain.

What do you mean, 'make a killing'? Do you still have the idea that a property is a profit centre? The Celtic Bubble attitude is alive and well I see.

You, conversely, are happy to see people who never even had the chance to buy stuck in crappy rented houses paying extortionate rates of rent for the rest of their lives - is that it? Just to protect people who bought things they can't afford?

Tigerandahalf wrote: »

So what do you do?
I still think people should be left in their house.

And I think this is the most unfair solution of all - forcing renters to subsidise people to live in houses that they can never afford themselves. Ridiculous.

Tigerandahalf · 24-04-2012 07:24PM

If you don't like the place you are renting Monty leave the place. There are plenty other places available to rent. And why are you paying high rent?

There is undoubtedly great value out there now with certain properties. Some people are unrealistic and expecting to pick up a gem of a property for nothing. As we have seen from the fire sale auctions good properties are still in demand and can be paid for as we have seen some places selling for well above the reserve price. Crap places haven't sold as you would expect.

votecounts · 24-04-2012 07:27PM

This mortgage debt forgiveness idea is a joke and is one that is being peddled by the government to keep voters on side. If it was as straight forward as people buying a "home" for themselves i might have some sympathy but it was not, people got huge mortgages in the hope of making a killing down the line, ie the Kellys, etcThey gambled and they must pay up. So unless you fancy paying more taxes in to the banks so they can cover these gamblers, show this idea the door.

Monty Burnz · 24-04-2012 07:31PM

Tigerandahalf wrote: »

If you don't like the place you are renting Monty leave the place. There are plenty other places available to rent. And why are you paying high rent?

Because you have to pay market rent. Same as buyers of houses pay market prices. Why did bubble buyers pay so much for their houses? Why didn't they just pay less? And people who are stuck in unsuitable houses due to negative equity - why didn't they just by suitable places? :rolleyes:

Tigerandahalf wrote: »

There is undoubtedly great value out there now with certain properties. Some people are unrealistic and expecting to pick up a gem of a property for nothing. As we have seen from the fire sale auctions good properties are still in demand and can be paid for as we have seen some places selling for well above the reserve price. Crap places haven't sold as you would expect.

I don't see the value that you do. Just because prices have halved, it doesn't mean that there is value. If I offered you a Mars bar for €50 and cut it to €25, would it be good value?

Tigerandahalf · 24-04-2012 07:39PM

It costs so much to buy land and build a house so a property has to have a minimum value. Expecting prices to drop below a certain value is unrealistic. Just as much as prices can become overvalued they can also become undervalued.
Some people are holding out hope that they get a real bargain but if you do you have to remember who could be your neighbour? Buying a house for a knock down price may seem like a steal but if your neighbour is a nightmare it isn't much good. Similarly if an investor buys up the property next to you and you have every Tom, Dick and Harry renting it. So you have to be careful. The price isn't everything.

Monty Burnz · 24-04-2012 07:45PM

Tigerandahalf wrote: »

It costs so much to buy land and build a house so a property has to have a minimum value. Expecting prices to drop below a certain value is unrealistic.

This is a misconception. Things can certainly fall to below the input costs required to make them - think about it for a minute.

Tigerandahalf wrote: »

Just as much as prices can become overvalued they can also become undervalued.
Some people are holding out hope that they get a real bargain but if you do you have to remember who could be your neighbour? Buying a house for a knock down price may seem like a steal but if your neighbour is a nightmare it isn't much good. Similarly if an investor buys up the property next to you and you have every Tom, Dick and Harry renting it. So you have to be careful. The price isn't everything.

I'm not holding out for a bargain. If I needed a house today I would buy one. You've got to get out of your head this strange competitive thing where people are trying to out-do each other with property - we surely had enough of that during the bubble as people over-borrowed to outbid each other.

Tigerandahalf · 24-04-2012 07:49PM

It is not in my head. But it certainly is in others. All you have to do is look at the crowds who turned up for the initial fire sales of property all hoping to get a bargain.
If you look at Dublin I don't think prices will fall. They could even increase. Certainly rents will as more workers get jobs with the likes of the Technology companies announcing jobs. So buying in Dublin represents value. Prices won't go down.

daltonmd · 24-04-2012 08:00PM

Monty Burnz wrote: »

Yes. Ideally it will be the people who don't pay back their mortgages and have to surrender the properties they are not paying for who are pissed off - there will be a lot fewer of them than the hundreds of thousands of people you suggest robbing to pay their mortgages.

You mean paying back the banks assets don't you?

Monty Burnz wrote: »

I've no particular problem with people going bust if they cannot pay their way. Let them go bankrupt and have their debt burden wiped out, allowing them a fresh start. Of course, their big assets will have to go.

Which will happen - yet you cannot see the problems that this will cause can you? Once the bankruptcy law comes in there will be 1000's queueing up and the banks will all but collapse - of course then the government will have to inject (or rob) taxpayers again to keep them open. Same ending really isn't it?

Monty Burnz wrote: »

Why can't they put themselves up in rented accommodation, like...oh I don't know...renters do? It's not rocket science. The country is full of empty houses as it is. There's a couple of hundred thousand of them.

Which is a fine solution - no-one said it wasnt but their debt is still wiped and the taxpayer still pays.

Monty Burnz wrote: »

Why would we not want property on the market? Do you think the cure is higher property prices?? That's the f*cking disease! I've a better idea: if you can't pay your mortgage, you move into a property that you CAN afford. It's fair, it's easily implemented, and it minimises messing with the market.

But what if the property you are in is now worth 150k (instead of 300k) and they can afford that? What then?

Monty Burnz wrote: »

Well they've stalled for years already, and all their efforts to keep people in 'their' homes and prop up prices have cost us tens of billions already. Meanwhile there's another generation of people coming who may never get a chance to buy houses they CAN afford because they are being occupied by people who CAN'T afford them but are somehow allowed to stay in them.

They've been propped up to save the banks - not the taxpayer - always rememeber that.

Writing off mortgage debt

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