Balance of responsibility

mariaalice · 26-02-2018 10:38am #1

Listening to a piece on the radio last week about the sell-off of Ptsb nonperforming property loans, anyway one the contributors says they know of someone who was facilitated by a bank to have 600k of property debt despite only having an income of 40k.

Does the financial institution have any responsibility in that situation?

Would the responsibility be some, none, or most of the responsibility?

Raging_Ninja · 26-02-2018 10:44am

mariaalice wrote: »

Listening to a piece on the radio last week about the sell-off of Ptsb nonperforming property loans, anyway one the contributors says they know of someone who was facilitated by a bank to have 600k of property debt despite only having an income of 40k.

Does the financial institution have any responsibility in that situation?

Would the responsibility be some, none, or most of the responsibility?

The policy of giving out loans to people who lacked the means to pay is the responsibility of those that created that policy and in so doing put the bank into a precarious financial position.

But the person who took the money not knowing or not caring how he or she was going to pay it back is responsible for their financial position.

Franz Von Peppercorn · 26-02-2018 10:44am

mariaalice wrote: »

Listening to a piece on the radio last week about the sell-off of Ptsb nonperforming property loans, anyway one the contributors says they know of someone who was facilitated by a bank to have 600k of property debt despite only having an income of 40k.

Does the financial institution have any responsibility in that situation?

Would the responsibility be some, none, or most of the responsibility?

Personally I would say most of it. Otherwise we are in a strange position where we legislate against other missold items but not the most significant purchase of a lifetime - a mortgage.

mariaalice · 26-02-2018 10:48am

Raging_Ninja wrote: »

The policy of giving out loans to people who lacked the means to pay is the responsibility of those that created that policy and in so doing put the bank into a precarious financial position.

But the fool who took the money not knowing or not caring how he or she was going to pay it back is responsible for their financial position.

So should the PAC not be compelling the bank staff whom during the boom facilitated such carry-on and the bank management that roled out the policies that encourage it and ask them for an explanation.

Guy:Incognito · 26-02-2018 10:52am

Was the whole 600k for one home for themselves or did they purchase a revenue generating rental property. Because there's a big difference.

mariaalice · 26-02-2018 10:58am

Guy:Incognito wrote: »

Was the whole 600k for one home for themselves or did they purchase a revenue generating rental property. Because there's a big difference.

That bit was not clear but it is still bizarre that a financial institution would lend that amount of money to someone with that income even if it was for property investment. They should have been even more careful about lending for property investment if thats what it was.

26-02-2018 10:59am

Without knowing the assets backing the transaction (not just the income) it's a bit of a shot in the dark

SEPT 23 1989 · 26-02-2018 11:01am

you didnt really need to apply for a loan for anything under 30k they rang you and if you had a pulse you were approved

Guy:Incognito · 26-02-2018 11:13am

mariaalice wrote: »

That bit was not clear but it is still bizarre that a financial institution would lend that amount of money to someone with that income even if it was for property investment. They should have been even more careful about lending for property investment if thats what it was.

Sure people get big loans to start businesses all the time. That's all a buy to let is at the end of the day.

The buy to let is a better bet for them if anything because it's secured on an asset. In a proper functioning economy they'd just take it off the people if they don't pay.

Hector Bellend · 26-02-2018 11:44am

mariaalice wrote: »

Listening to a piece on the radio last week about the sell-off of Ptsb nonperforming property loans, anyway one the contributors says they know of someone who was facilitated by a bank to have 600k of property debt despite only having an income of 40k.

Does the financial institution have any responsibility in that situation?

Would the responsibility be some, none, or most of the responsibility?

At it's very simplest, banking should be straightforward and boring.

Mortgages should be granted on the basis of the borrowers ability to repay and previous track record of borrowing. This is a simple outlook but should be foremost in the mind of any responsible lender. There'll be other factors.

On this basis, the banks were totally irresponsible in how they handled a lot of the mortgages they gave to people.

However, the borrower needs to accept a certain amount of the blame. People need to borrow according to their means. Taking a loan at 7 or 8 times your annual salary is tantamount to committing financial suicide.

I'm doing an accountancy degree at present. One of my lecturers told us a stoy that sums up the whole situation really well.

His first job was with AIB a short while before the banking and property collapse happened.

Before the celtic tiger you'd be given 3 times your salary. That was it.

At the height of the celtic tiger it had risen to around 8 times your salary.

He said he was earning just over 30k a year and was approved for a 250k mortgage at staff rates. So they were cheaper that usual.

Then the crash happened. When a struggling company needs to cut costs the first place it looks is the wage bill.

However, if they laid off staff how would they pay back their mortgage?

They couldnt fire these staff members as they'd have been on the hook for around 150 million worth of bad mortgage debt

kneemos · 26-02-2018 11:48am

The banks are the experts in lending and should therefore bear most of the responsibility. The punter has no requirement to know about financial matters.

The bottom line is the same though either way.

Guy:Incognito · 26-02-2018 11:52am

kneemos wrote: »

The banks are the experts in lending and should therefore bear most of the responsibility. The punter has no requirement to know about financial matters.

The bottom line is the same though either way.

Are people not required to engage the services of a solicitor when buying a house?

Anyway, let the banks take back house, just like it says in the contract everyone signed and the banks can take more responsibility. Telling them to shoulder the blame then not letting them enforce the contract is stupid.

BrokenArrows · 26-02-2018 11:52am

Hector Bellend wrote: »

At it's very simplest, banking should be straightforward and boring.

Mortgages should be granted on the basis of the borrowers ability to repay and previous track record of borrowing. This is a simple outlook but should be foremost in the mind of any responsible lender. There'll be other factors.

On this basis, the banks were totally irresponsible in how they handled a lot of the mortgages they gave to people.

However, the borrower needs to accept a certain amount of the blame. People need to borrow according to their means. Taking a loan at 7 or 8 times your annual salary is tantamount to committing financial suicide.

I'm doing an accountancy degree at present. One of my lecturers told us a stoy that sums up the whole situation really well.

His first job was with AIB a short while before the banking and property collapse happened.

Before the celtic tiger you'd be given 3 times your salary. That was it.

At the height of the celtic tiger it had risen to around 8 times your salary.

He said he was earning just over 30k a year and was approved for a 250k mortgage at staff rates. So they were cheaper that usual.

Then the crash happened. When a struggling company needs to cut costs the first place it looks is the wage bill.

However, if they laid off staff how would they pay back their mortgage?

They couldnt fire these staff members as they'd have been on the hook for around 150 million worth of bad mortgage debt

Thats some solid job security!!

Hermy · 26-02-2018 12:02pm

I don't know much about banking and finance but I've always wondered why it was only the banks that were bailed out.

Would it not have made more sense instead to bail out the mortgage holders who couldn't make their repayments which in turn would have had the knock-on effect of bailing out the banks?

Maybe it's a stupid question but it's something I've always wondered about.

kneemos · 26-02-2018 12:08pm

Guy:Incognito wrote: »

Are people not required to engage the services of a solicitor when buying a house?

Anyway, let the banks take back house, just like it says in the contract everyone signed and the banks can take more responsibility. Telling them to shoulder the blame then not letting them enforce the contract is stupid.

A solicitor is for transferring property rights,they don't involve themselves in the finances.

redcup342 · 26-02-2018 12:16pm

mariaalice wrote: »

Listening to a piece on the radio last week about the sell-off of Ptsb nonperforming property loans, anyway one the contributors says they know of someone who was facilitated by a bank to have 600k of property debt despite only having an income of 40k.

Does the financial institution have any responsibility in that situation?

Would the responsibility be some, none, or most of the responsibility?

So it's a case of someone knew of somebody ... 600k and 40k ... sounds a bit like they overheard someone raving on about it in a pub.

Raging_Ninja · 26-02-2018 12:25pm

Hermy wrote: »

I don't know much about banking and finance but I've always wondered why it was only the banks that were bailed out.

Would it not have made more sense instead to bail out the mortgage holders who couldn't make their repayments which in turn would have had the knock-on effect of bailing out the banks?

Maybe it's a stupid question but it's something I've always wondered about.

How do you know the delinquent mortgage holders you propose giving the free money to would have been used to pay off the mortgage?

Banks are used for more than simply giving out mortgages - people's life savings are held there, business get short and long term loans to operate, etc. Better to bail out the few troubled financial institutions than an unknown number of mortgage-holders.

Additionally, the bailouts given to banks weren't simply free cash - they were loans or else nationalised. There stood the possibility (probability in some cases) of the government getting a profit once the loans were paid off and the shares sold. In the US, the TARP funds used made the US government roughly 10% profit once the loans were paid back.

Hector Bellend · 26-02-2018 12:29pm

kneemos wrote: »

The banks are the experts in lending and should therefore bear most of the responsibility. The punter has no requirement to know about financial matters.

The bottom line is the same though either way.

Surely the borrower has a responsibility, at least to themselves, to borrow responsibly.

It's a cop out to absolve the borrower of their responsibility.

redcup342 · 26-02-2018 12:30pm

Hector Bellend wrote: »

Surely the borrower has a responsibility, at least to themselves, to borrow responsibly.

It's a cop out to absolve the borrower of their responsibility.

If we had that as a rule in society then Loan Sharking wouldn't be called Loan Sharking.

Raging_Ninja · 26-02-2018 12:31pm

redcup342 wrote: »

If we had that as a rule in society then Loan Sharking wouldn't be called Loan Sharking.

If you're relying on an unregulated loan shark then you're probably beyond the point at which you should have declared bankruptcy.

redcup342 · 26-02-2018 12:52pm

Raging_Ninja wrote: »

If you're relying on an unregulated loan shark then you're probably beyond the point at which you should have declared bankruptcy.

Ya but if someone takes the money from the loan shark you could just say its their fault they should have known better.

VinLieger · 26-02-2018 12:58pm

redcup342 wrote: »

Ya but if someone takes the money from the loan shark you could just say its their fault they should have known better.

Well they should..... loan sharks don't have a bad name for no reason

riffmongous · 26-02-2018 2:40pm

While the borrower can never be free of responsibility of course, but it definitely should not be the case where the banks are able to profit from irresponsible lending.

Balance of responsibility

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