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Massive Write Down

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13

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    #62
    FishOnABike
    Registered Users Posts: 4,378 ✭✭✭FishOnABike


    Sleepy wrote: »
    When was it agreed? By whom?


    Does the auctioneer actually have to appear in court? I wouldn't have thought so...

    I'm unaware of any area in the country where property is still at 45% of it's (pre-peak) 2005 value and I can't seem to access the data anywhere on the CSO website.

    Unless the PTSB and borrower were in agreement on the valuation I would think the auctioneer would have to be available as an expert witness to stand over their valuation and be available for cross examination.


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    #63
    Cuddlesworth
    Registered Users Posts: 13,981 ✭✭✭✭Cuddlesworth


    40's, owes 350k on a house worth 160k.

    Even if she had a decent tracker mortgage, assuming 20 years left on the mortgage for working years, its about 1900 a month in payments. 1100 in interest alone. If she didn't have a tracker mortgage it wouldn't even be payable, scaling to well 2k a month.

    Its not affordable in the slightest and during this whole time, with paying off other debts and living she has probably been racking up serious interest.

    My only issue is that the judge deemed the parking the debt and securing against the property wouldn't be acceptable, is it would "put a large debt on her at retirement age". I don't see why he gets to make that call, the debt would have been secured against the house not the women.


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    #64
    Old diesel
    Registered Users Posts: 5,788 ✭✭✭Old diesel


    Samuel T. Cogley wrote: »
    https://www.irishtimes.com/news/crime-and-law/courts/high-court/court-approves-insolvency-deal-that-halves-woman-s-mortgage-1.3789632


    And people wonder why we have such high mortgage rates.


    I have to say I completely disagree with this sort of write down, yes prolong the payments and reduce the monthly amount but lopping 160K off a mortgage is just unfair to other mortgage holders.

    How much would that mortgage sell to a vulture fund for.


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    #65
    JDD
    Registered Users Posts: 1,578 ✭✭✭JDD


    My only bugbear is that if she's a public servant, she should be entitled to a lump sum at retirement age, through the public service pension scheme. If she had signed that over to pay off some of the debt write down, that would have been better.

    But I don't begrudge her the write down. If an independent court decides, based on the evidence provided, that the person has made every effort to meet the mortgage repayments, and the bank would be no better off financially in repossessing the house, then I don't begrudge her a penny of the writedown.

    And I wouldn't believe the hype about NPLs being the reason for high variable mortgage rates. The major banks are all very much back making substantial profits and paying out dividends. We get a worse deal on mortgage rates because of a lack of competition, not because of the won't-pay/can't pays of this world.


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    #66
    Browney7
    Registered Users Posts: 3,099 ✭✭✭Browney7


    JDD wrote: »
    My only bugbear is that if she's a public servant, she should be entitled to a lump sum at retirement age, through the public service pension scheme. If she had signed that over to pay off some of the debt write down, that would have been better.

    But I don't begrudge her the write down. If an independent court decides, based on the evidence provided, that the person has made every effort to meet the mortgage repayments, and the bank would be no better off financially in repossessing the house, then I don't begrudge her a penny of the writedown.

    And I wouldn't believe the hype about NPLs being the reason for high variable mortgage rates. The major banks are all very much back making substantial profits and paying out dividends. We get a worse deal on mortgage rates because of a lack of competition, not because of the won't-pay/can't pays of this world.


    Add in the legacy tracker mortgages also where the banks either make very little cash or indeed losses. This also drives the higher interest rates charged on new lending


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    #67
    Villa05
    Registered Users Posts: 4,513 ✭✭✭Villa05


    JDD wrote:
    And I wouldn't believe the hype about NPLs being the reason for high variable mortgage rates. The major banks are all very much back making substantial profits and paying out dividends. We get a worse deal on mortgage rates because of a lack of competition, not because of the won't-pay/can't pays of this world.

    There is a lack of competition because in general a mortgage is a securitized loan, however in Ireland there seems to be great difficulty in accepting that if you fail to pay your mortgage you loose the property.

    As we can see from this case and 40k + other examples this seems to be a grey area and incredibly expensive to resolve

    There have been banks examining entry to the Irish market but have shelved plans for this very reason


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    #68
    marieholmfan
    Registered Users Posts: 2,744 ✭✭✭marieholmfan


    Browney7 wrote: »
    Add in the legacy tracker mortgages also where the banks either make very little cash or indeed losses. This also drives the higher interest rates charged on new lending
    Should all have been forcibly moved to profitable mortgages; unfortunately the scum class are all on trackers.


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    #69
    marieholmfan
    Registered Users Posts: 2,744 ✭✭✭marieholmfan


    Villa05 wrote: »
    There is a lack of competition because in general a mortgage is a securitized loan, however in Ireland there seems to be great difficulty in accepting that if you fail to pay your mortgage you loose the property.

    As we can see from this case and 40k + other examples this seems to be a grey area and incredibly expensive to resolve

    There have been banks examining entry to the Irish market but have shelved plans for this very reason


    It isn't a gray area. You don't lose your family home if you've made a genuine effort to pay.


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    #70
    Arthur Daley
    Registered Users Posts: 4,459 ✭✭✭Arthur Daley


    Try to find a single politician, or so called alternative protest group in this country that opposes this madness, or is even willing to accept that this approach might hold back the lives of others. However the majority foot the bill for this.
    Imagine there being an issue that affects the majority of families but has no voice whatsoever in the political arena, or even in the 'non mainstream' media/opposition. Now that's what dogma looks like.


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    #71
    Wanderer78
    Registered Users Posts: 28,843 ✭✭✭✭Wanderer78


    Arthur Daley wrote:
    Try to find a single politician, or so called alternative protest group in this country that opposes this madness. However the majority foot the bill for this. Imagine there being an issue that affects the majority of families but has no voice whatsoever in the political arena, or even in the 'non mainstream' media/opposition. Now that's what dogma looks like.


    Banks just create the money for loans anyway, so this doesn't necessarily cost the average person


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    #72
    Arthur Daley
    Registered Users Posts: 4,459 ✭✭✭Arthur Daley


    Wanderer78 wrote: »
    Banks just create the money for loans anyway, so this doesn't necessarily cost the average person

    ? Of course it costs the average person. PTSB suffer a loss. This prevents them from paying back the taxpayer. The taxpayer borrowed this money and will need to pay it back eventually. Ireland owes €200bn and these cases are part of the reason why.


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    #73
    Wanderer78
    Registered Users Posts: 28,843 ✭✭✭✭Wanderer78


    Arthur Daley wrote:
    ? Of course it costs the average person. PTSB suffer a loss. This prevents them from paying back the taxpayer. The taxpayer borrowed this money and will need to pay it back eventually. Ireland owes €200bn and these cases are part of the reason why.

    Banks create the money in the first place, from thin air, it's by having this ability that caused the domino effect across the planet. Some major economies across the world are having this exact problem as we speak, such as Australia, Canada, south Korea, China etc etc. This is why these bad loans were lumped onto the public sector balance sheet, it's understandable why some are advocating for debt jubilees, as there's simply too much debt globally, particularly private debt.


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    #74
    Teddy Daniels
    Closed Accounts Posts: 445 ✭✭Teddy Daniels


    Widdensushi wrote: »
    They can still follow the husband for the debt and if she sells the house for more than 160k the bank will get the difference, I am not in favour of the judgement but those two factors give some balance to it. The husband could be doing well and getting away free of the debt

    For how long is the clawback on sale of the house?


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    #75
    Arthur Daley
    Registered Users Posts: 4,459 ✭✭✭Arthur Daley


    Wanderer78 wrote: »
    Banks create the money in the first place, from thin air, it's by having this ability that caused the domino effect across the planet. Some major economies across the world are having this exact problem as we speak, such as Australia, Canada, south Korea, China etc etc. This is why these bad loans were lumped onto the public sector balance sheet, it's understandable why some are advocating for debt jubilees, as there's simply too much debt globally, particularly private debt.

    Banks lend with reference to the amount of capital they hold. As they have done for centuries. People worked hard to pay back their debts because it was ultimately 'other people's money' and we had some respect for civil society and rowing your own boat.

    It is only in the last 10 years, and specifically in Ireland where a minority of people have decided to dishonour the obligations they signed up to and expect to keep the borrowed asset.

    'Banks lend money into thin air' is a half truth that tries to give the illusion that there is not some poor sod at the end of the chain who will have to foot this bill. Currently the bill for this case sits with the obligation on the Irish Sovereign to honour it's debts. It can only honour it's obligations through future tax revenues. It is not a victimless crime.


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    #76
    Mad_maxx
    Registered Users Posts: 13,505 ✭✭✭✭Mad_maxx


    Arthur Daley wrote: »
    Try to find a single politician, or so called alternative protest group in this country that opposes this madness, or is even willing to accept that this approach might hold back the lives of others. However the majority foot the bill for this.
    Imagine there being an issue that affects the majority of families but has no voice whatsoever in the political arena, or even in the 'non mainstream' media/opposition. Now that's what dogma looks like.

    Brendan burgess is the only one shouting about it but every time he opens his mouth, David Hall is there to say "the banks are at fault"


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    #77
    Villa05
    Registered Users Posts: 4,513 ✭✭✭Villa05


    marieholmfan wrote:
    It isn't a gray area. You don't lose your family home if you've made a genuine effort to pay.


    Then it's not a securitized loan and mortgage rates need to increase to reflect this hence on average mortgage payers are paying 1500 more a year compared to our European neighbours.

    This allows bank to have super normal profits in good economic times and pay their staff big bonuses.

    In economic hard times the loans become unsustainable and the banks get in trouble. This can result in the need for a bailout from those people quietly paying their mortgages so yet again they end up paying more for the mistakes of others

    Every action has a consequence that may not be immediately identifiable.
    I am not confident that Ireland has learned the lessons of the past and is doomed to repeat those mistakes but next time the cost will be much greater considering Ireland's massive public and private debt mountain, ageing population, pensions crisis and health crisis. Add in the inability to run an efficient, functioning public services


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    #78
    mariaalice
    Registered Users Posts: 12,376 ✭✭✭✭mariaalice


    They are other issues that are not being considered the person will have their credit rating affected, they will most likely never be able to get another mortgage or if they do it won't be at normal interest rates the clawback will be for the life of the mortgage the only real benefit of the writhe down is that they get to stay in the property.


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    #79
    JDD
    Registered Users Posts: 1,578 ✭✭✭JDD


    In the States, you can hand back the keys without being held liable for the balance of the loan, and the bank either holds onto the property until it increases in value or it sells it at market rate.

    People don't appear to be paying through the nose in interest rates to make up for borrowers handing back the keys and having the remainder of their loan written off. Nor are those banks struggling to make a profit because of this long-standing right.

    Moral hazard has long since bolted from the stable. Once banks were being bailed out because they couldn't fail, you could no longer say that it was immoral for the same leniency to be applied to borrowers. Banks in Ireland charge mortgage holders higher rates than the rest of Europe because we are a small economy with a lack of competition. It is my gut feeling that operational costs of banks in Ireland must be higher than our European counterparts as their systems and methods of operating are archaic (and I know more about this than I've ever cared to know).

    I'll accept that a small proportion of their additional costs may be the costs associated with attempting to repossess houses through our unnecessarily protracted process, or accepting reduced payments from those who have achieved that through court order. I'm a mortgage payer myself. I'll accept that it is part and parcel of the costs of bank to accept that certain mortgages (where sense has been applied) may have to be written down.


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    #80
    professore
    Closed Accounts Posts: 5,857 ✭✭✭professore


    seamus wrote: »
    I'd argue that the moral hazard in Ireland is the fact that banks could hand out mortgages of any size without any real risk that they might lose part of it. A mortgage debt, no matter how large and no matter the value of the underlying asset, would follow the borrower to their grave, basically meaning all the risk is with the borrower and not the lender.

    This case is an example of a properly balanced system where a borrower who hits repayment difficulties and the bank who provided the loan, both experience the fallout of the risk coming to fruition. The borrower is in a six-year PIA, the bank has taken a large write down.

    No moral hazard at all.

    The moral hazard is her getting preferential treatment to others in the same situation.


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    #81
    jimmycrackcorm
    Registered Users Posts: 14,329 ✭✭✭✭jimmycrackcorm


    JDD wrote:
    In the States, you can hand back the keys without being held liable for the balance of the loan, and the bank either holds onto the property until it increases in value or it sells it at market rate.


    Here it's next to impossible for a bank to repossess.


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    #82
    Fian
    Registered Users Posts: 2,188 ✭✭✭Fian


    JDD wrote: »
    In the States, you can hand back the keys without being held liable for the balance of the loan, and the bank either holds onto the property until it increases in value or it sells it at market rate.

    This is because many banks offer "non-recourse" mortgages in the states - Mortgages which it is agreed in advance is lent against the house and not against the borrower. Generally since there is less security for the bank these have higher interest rates.

    Here the mortgages which are being written down are ones where it was agreed between the lender and the borrower that the borrower is liable for the full value of the loan, the house can be sold if payments are not made in full, the balance after the sale price continues to be a debt of the borrower. Instead what is actually happening here is that the house is not sold and the debt is reduced anyway, to the value that would have been realised if the house actually were sold.

    The consequences are not falling so much on taxpayers as on borrowers and renters. On existing borrowers who pay a higher SVR to shore up the banks losses, on new borrowers who enter into mortgages at higher interest rates to reflect the higher risks and on renters who can't get mortgages which would involve repayments lower than their rent - because banks are understandably cautious about lending under these conditions. People holding on to old style trackers are immune and can't be hit to shore this up, if they could they certainly would be.

    As to people who say its a lack of competition - the Irish banks are just ripping us off - How attractive do you think it is for european banks to set up an irish subsidiary to lend into our market under these rules, when they can just set up in another EU country instead and know that if the borrower defaults they can actually realise the security that the loan is based on.

    More importantly they know that in other countries the borrowers realise they can lose their home if their mortgage is unpaid. Here the mortgage is often rationally the last debt in priority to be paid, behind the cable tv bill, mobile phone bill or even holiday fund, since nothing immediate is actually going to happen to you if you don't pay it.


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    #83
    Cuddlesworth
    Registered Users Posts: 13,981 ✭✭✭✭Cuddlesworth


    Fian wrote: »
    As to people who say its a lack of competition - the Irish banks are just ripping us off - How attractive do you think it is for european banks to set up an irish subsidiary to lend into our market under these rules, when they can just set up in another EU country instead and know that if the borrower defaults they can actually realise the security that the loan is based on.

    I think the CBI is acting a barrier to entry for new mortgage providers. Picking out the mortgages with good LTV at low rates would still provide more of a profit then in Europe.


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    #84
    Hotblack Desiato
    Registered Users Posts: 34,026 ✭✭✭✭Hotblack Desiato


    abcabc123123 wrote: »
    I don't see the issue here. Legacy cases from the crash like this need be resolved and the amount is unrecoverable. If the woman were to hand the keys back and declare bankruptcy the bank would realise the same loss anyway.

    It would eliminate the moral hazard.

    I'm reading the details of this case and my blood is boiling. She is earning roughly the same as me and supporting one other person, I have to support three others and pay about 10% more than what she's paying on the mortgage, and tbh I could afford a bit more than that, but the court says that all she can afford is €900 and the arrears written off (from when she thought that paying for hubby's gambling was more important than the house) and she gets to keep the gaff.

    Where's my bailout Joe? I don't have a sob story about gambling or a feckless spouse for the court though.


    P.S. €2900 net a month is a good solid middle management grade salary in the civil service, equates to a gross of about 52-55k per year. She can afford way more than €900p/m with only one teenager to support out of a €2900 net p/m wage, and there's no way she should get to keep 100% ownership of that property while paying for half of it at best.

    Life ain't always empty.



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    #85
    [Deleted User]
    Posts: 14,344 ✭✭✭✭ [Deleted User]


    professore wrote: »
    The moral hazard is her getting preferential treatment to others in the same situation.


    Is it preferential treatment though? Or is this just the 'landmark' case that others will now be allowed to refer back to, and follow.


    ie; your mortgage should never exceed more than your house's current market value. So if we go into a boom/bust cycle again, you just have to tell the bank that your mortgage valuation is 'draconian' and you want it based on todays market value instead.

    The judge in the article this thread is about, has pretty much said that that's how it should be in the eyes of the law, and therefore i have no reason to doubt all other judges wouldn't follow suit.




    (there's a slight hint of sarcasm in my post, but I'm mostly being serious. This creates a very ludicrous ruling from the legal system, that effectively tells people the contracts they willingly signed up to, don't mean anything, if the person decides to prioritise other outgoings instead).


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    #86
    LuckyLloyd
    Registered Users Posts: 36,156 ✭✭✭✭LuckyLloyd


    Arthur Daley wrote: »
    Try to find a single politician, or so called alternative protest group in this country that opposes this madness, or is even willing to accept that this approach might hold back the lives of others. However the majority foot the bill for this.
    Imagine there being an issue that affects the majority of families but has no voice whatsoever in the political arena, or even in the 'non mainstream' media/opposition. Now that's what dogma looks like.

    Might start changing over the next 10 - 15 years as a lost generation from a property perspective builds: working / voting people in their 30’s and 40’s who haven’t been able to buy a property they want. People working and renting who couldn’t buy themselves aren’t going to have the same level of default sympathy. You reap what you sow as they say.


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    #87
    FishOnABike
    Registered Users Posts: 4,378 ✭✭✭FishOnABike


    LuckyLloyd wrote: »
    Might start changing over the next 10 - 15 years as a lost generation from a property perspective builds: working / voting people in their 30’s and 40’s who haven’t been able to buy a property they want. People working and renting who couldn’t buy themselves aren’t going to have the same level of default sympathy. You reap what you sow as they say.
    This in itself is going to be a ticking timebomb.

    Historically people have had their mortgage paid off before they retire and reduced income on retirement has been offset by reduced outgoings by not having monthly accommodation costs.

    People now in their mid thirties who haven't been able to buy a home will also have had their ability to provide for a pension also hampered by rental costs rising in line with inflation whereas real the cost of mortgage payments would usually decrease over time due to inflation.

    In thirty years or so there will be a significant housing problem with people who have been caught in a rental trap not being able to afford market rental rates.


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    #88
    LuckyLloyd
    Registered Users Posts: 36,156 ✭✭✭✭LuckyLloyd


    FishOnABike wrote: »
    This in itself is going to be a ticking timebomb.

    Historically people have had their mortgage paid off before they retire and reduced income on retirement has been offset by reduced outgoings by not having monthly accommodation costs.

    People now in their mid thirties who haven't been able to buy a home will also have had their ability to provide for a pension also hampered by rental costs rising in line with inflation whereas real the cost of mortgage payments would usually decrease over time due to inflation.

    In thirty years or so there will be a significant housing problem with people who have been caught in a rental trap not being able to afford market rental rates.

    Agreed, and such societal changes will create a section of the electorate willing to look again at the sacred attitude we have towards the home owner and ask questions about property rights that haven't been tabled in a substantive way before. A section of the electorate that will be voters and tax payers and not be lazily waved away like the disenfranchised were before them.


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    #89
    Pussyhands
    Registered Users Posts: 8,239 ✭✭✭Pussyhands


    LuckyLloyd wrote: »
    Agreed, and such societal changes will create a section of the electorate willing to look again at the sacred attitude we have towards the home owner and ask questions about property rights that haven't been tabled in a substantive way before. A section of the electorate that will be voters and tax payers and not be lazily waved away like the disenfranchised were before them.

    Nah.

    We've had like 6 years of unsustainable price growth.

    This problem existed always for some people. Majority of young people are doing fine.

    Everything goes in cycles so I predict rural dwellings will become more popular again in the future as the employment structure changes and more people will be able work remotely and broadband infrastructure improves.

    You are extrapolating the last 6 years as if it was normal but it's not. Plus people will inherit properties anyways.


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    #90
    Drumpot
    Registered Users Posts: 19,306 ✭✭✭✭Drumpot


    Did people want the bank to repossess the home, throw the family out and saddle the mother with 160k of debt before she could even look at getting a replacement home? If the home is worth 160k then that’s all the bank will get for it , banks don’t retain property’s that’s not their thing.

    So then the mother and children would end up probably on welfare of sorts (home?) for life which would prob cost the state more. That’s not even factoring In the emotional pain of the family. The mother is more likely to remain in work if she’s given a chance, what if the stress means she can’t work?. Do people actually think through the variables of evicting somebody or just default to outrage mode and grab the pitchforks?

    Asides from it just being the decent thing to do, the compounded positives of keeping a family in their home and helping a struggling parent to keep things together far outweigh the alternative far more damaging negatives. I’ve seen people who struggle with debt and they aren’t looking for a free ride and it’s most definitely not easy money.


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    #91
    Pussyhands
    Registered Users Posts: 8,239 ✭✭✭Pussyhands


    Drumpot wrote: »
    Did people want the bank to repossess the home, throw the family out and saddle the mother with 160k of debt before she could even look at getting a replacement home? If the home is worth 160k then that’s all the bank will get for it , banks don’t retain property’s that’s not their thing.

    So then the mother and children would end up probably on welfare of sorts (home?) for life which would prob cost the state more. That’s not even factoring In the emotional pain of the family. The mother is more likely to remain in work if she’s given a chance, what if the stress means she can’t work?. Do people actually think through the variables of evicting somebody or just default to outrage mode and grab the pitchforks?

    Asides from it just being the decent thing to do, the compounded positives of keeping a family in their home and helping a struggling parent to keep things together far outweigh the alternative far more damaging negatives. I’ve seen people who struggle with debt and they aren’t looking for a free ride and it’s most definitely not easy money.

    I've seen far more people be wreckless and stupid with money and get away with it, live the same life they've always lived. How is that fair????


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