# Would you be prepared to pay higher interest so that people who pay nothing don't get repossessed?



## Brendan Burgess (7 Aug 2018)

Brian Carey asks this question in the Sunday Times 

_How many first time buyers would happily lob an extra 1/4% or so onto their mortgage to allow someone who has not paid a cent for fiver years to stay in their home? 

...
Nobody seems to draw a line between the priciest mortgages in Europe and a 10 year period of forbearance. _

I couldn't have put it better myself, except that it's more like 1% extra and not 1/4% extra.


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## cremeegg (7 Aug 2018)

It all depends Brendan.

If they are nice people doing their best, with photogenic children, then of course I would be delighted. After all they are among the most vulnerable in our society.

If they are overweight hirsute middle aged men. Then, no way! get those scroungers out.


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## Palerider (7 Aug 2018)

Is this April 1st ?, if so its official, the lunatics have finally taken control of the asylum, another old saying comes to mind, paper never refused ink, seriously, what a daft article.


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## Sarenco (7 Aug 2018)

Palerider said:


> Is this April 1st ?, if so its official, the lunatics have finally taken control of the asylum, another old saying comes to mind, paper never refused ink, seriously, what a daft article.


Why do you think it's a daft article?  Genuine question.


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## Jim2007 (7 Aug 2018)

Palerider said:


> Is this April 1st ?, if so its official, the lunatics have finally taken control of the asylum, another old saying comes to mind, paper never refused ink, seriously, what a daft article.



It is very strange that you think asking the obvious question, who is going to pay for the defaulters, is a daft idea.  Perhaps you could expand on your vision????????  Or do you believe in the magic money tree??????


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## Bronte (7 Aug 2018)

I don't think people who paid nothing should be helped. In general.  But I think where a bank write down would keep someone in the home, avoid legal costs, avoid wasting bank's time (money) sorting things out for year, then yes I'm prepared to pay a bit more. 

Particularly where a bank is at fault for having allowed borrowers to borrow too much and sent them out letters with credit card cheques for 10K to spend (reckless credit). 

And if it costs less to sort out these mortgages without selling to vulture funds, then I see nothing wrong with that.  The banks are mostly to blame for the entire mess.  By loaning way too much, by giving everybody overdrafts, by extending overdrafts as though they were samrties to be given out, by giving loans for this that and the other, and increasing limits on credit cards with a flick of a switch. 

Anyway I did pay more for defaulters. Whether I agreed to or not.


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## odyssey06 (7 Aug 2018)

Badly phrased question... some of those FTBs could be the future defaulters so they may think of it as insurance cover... 
Perhaps a 1% discount if you agree to expedited legal default process would be a better proposal.


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## T McGibney (7 Aug 2018)

Bronte said:


> I don't think people who paid nothing should be helped. In general.  But I think where a bank write down would keep someone in the home, avoid legal costs, avoid wasting bank's time (money) sorting things out for year, then yes I'm prepared to pay a bit more.
> 
> Particularly where a bank is at fault for having allowed borrowers to borrow too much and sent them out letters with credit card cheques for 10K to spend (reckless credit).
> 
> And if it costs less to sort out these mortgages without selling to vulture funds, then I see nothing wrong with that.  The banks are mostly to blame for the entire mess.  By loaning way too much, by giving everybody overdrafts, by extending overdrafts as though they were samrties to be given out, by giving loans for this that and the other, and increasing limits on credit cards with a flick of a switch.



It's over a decade since the bad banking practices you list were commonplace. At some stage, personal responsibility needs to be factored in too.

And the guff over so-called vulture funds needs a dose of reality too. Securitisation and reselling of mortgage books are integral part of mortgage lending.


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## The Horseman (7 Aug 2018)

T McGibney said:


> It's over a decade since the bad banking practices you list were commonplace. At some stage, personal responsibility needs to be factored in too.
> 
> And the guff over so-called vulture funds needs a dose of reality too. Securitisation and reselling of mortgage books are integral part of mortgage lending.




Agreed. Personal responsibility seems to be missing!


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## Steven Barrett (7 Aug 2018)

T McGibney said:


> It's over a decade since the bad banking practices you list were commonplace. At some stage, personal responsibility needs to be factored in too.
> 
> *And the guff over so-called vulture funds needs a dose of reality too. Securitisation and reselling of mortgage books are integral part of mortgage lending.*



We're clearing up the banks bad debts so we can all move on - Yeah
We're selling them to companies who will actually try to get some of this money back - Boo

And lets call them vulture funds as vultures as no one like vultures.


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## Palerider (7 Aug 2018)

Since the beginning of time money lenders then Banks have factored bad debt into their pricing model, agreed they lost the run of themselves but that lesson is learned for now at least.

As part of our culture those interested in bettering themselves by buying their own home seek out the best mortgage rate available then budget accordingly to give themselves the best property they can get at numbers they can cope with, asking mortgage holders to pay a margin on top of their existing margin to the Bank to allow for future defaulters is a daft idea that in my view requires little in the way of explanation.

The starting point must always be good credit assessment on the lenders behalf using a robust credit assessment and stress tests.

We are already paying similar additional premiums on our car insurance for firms that defaulted.

I borrow the money, I will pay back the money.

I borrow the money, I default,  the lender is entitled to get their money back.

The defaulters should pay for their mistakes, a mortgage is a two way contract, the Bank limits its exposure through gearing, asking the applicant for a percentage of the house cost should cover their exposure on say an 80/20 basis for solid borrowers and scaling down as risk increases.

The issue here is that in this country the process of debt recovery is immature especially on private housing stock.

As for vultures, I think they are having a harder time than publicised at getting back a return on any acquired residential portfolio debt.


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## T McGibney (7 Aug 2018)

Palerider said:


> We are already paying similar additional premiums on our car insurance for firms that defaulted.


Agree on almost everything but worth noting that defaulting on motor insurance obligations (ie by evading paying for cover) is a criminal offence routinely punishable by heavy penalties.


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## Palerider (7 Aug 2018)

T McGibney said:


> Agree on almost everything but worth noting that defaulting on motor insurance obligations (ie by evading paying for cover) is a criminal offence routinely punishable by heavy penalties.



My reference was to firms that defaulted not individuals and the impact of those collapses on innocent consumers,  I'm thinking of Quinn Insurance, Setanta, Enterprise Insurance who had 14000 Irish premiums and maybe others I don't recall now. I'm old enough to recall the collapse into State ownership of AIB subsidiary ICI in the 80's where the taxpayer carried that can, my reference was to other innocent consumers carrying the cost of defaults.


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## T McGibney (7 Aug 2018)

Palerider said:


> My reference was to firms that defaulted not individuals....



Indeed. Apologies, I misread it.


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## Sarenco (7 Aug 2018)

Palerider said:


> Since the beginning of time money lenders then Banks have factored bad debt into their pricing model


Of course but surely that's the key point being made in the article.

It's also worth remembering that provisioning for bad debts is very largely based on lenders' historic experience.


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## demoivre (7 Aug 2018)

Brendan Burgess said:


> Nobody seems to draw a line between the priciest mortgages in Europe and a 10 year period of forbearance.



Nobody seems to  draw a line between the priciest mortgages in Europe and the dumbest lending/underwriting practices in Europe by banks in Ireland 10 years ago. Practices that were overseen by clowns in government, even bigger clowns in the Central Bank and a regulator who couldn't regulate a game of Monopoly. The Irish response to this circus was to reward these bozos with massive pensions and a pat on the back for jobs they couldn't do. If the ISI was being used for the purpose it was designed we wouldn't be hearing about vulture funds but at all costs don't give Johnny and Mary a write down, give it to the vulture funds instead.


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## T McGibney (7 Aug 2018)

demoivre said:


> but at all costs don't give Johnny and Mary a write down, give it to the vulture funds instead.



Why on earth should your mortgage costs and mine finance free money for "Johnny and Mary" as you call them, more than a decade after the bad lending/underwriting practices in the banks stopped being commonplace?


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## The Horseman (7 Aug 2018)

demoivre said:


> Nobody seems to  draw a line between the priciest mortgages in Europe and the dumbest lending/underwriting practices in Europe by banks in Ireland 10 years ago. Practices that were overseen by clowns in government, even bigger clowns in the Central Bank and a regulator who couldn't regulate a game of Monopoly. The Irish response to this circus was to reward these bozos with massive pensions and a pat on the back for jobs they couldn't do. If the ISI was being used for the purpose it was designed we wouldn't be hearing about vulture funds but at all costs don't give Johnny and Mary a write down, give it to the vulture funds instead.



The Vulture funds have brought fresh capital into the bank. By giving a write down to "Johnny and Mary" how exactly is that helping the capital structure of the bank?


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## Brendan Burgess (7 Aug 2018)

The write down as such is not putting in fresh capital. 

It's the exchange of cash for NPLs which brings in fresh capital - improves the capital ratios. What the acquirer does afterwards doesn't matter. 

However, the acquirer would not acquire the loan if they could not deal with it through curing it or getting the loan repaid.

Brendan


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## Tebbit (7 Aug 2018)

To answer the question - NO.    I wouldn't pay a cent more.      If they haven't paid for their home in a number of years then out!   I'm already paying too much.       What worries me when I see a question like this posed is ' will I get a choice' or is someone thinking of imposing this on mortgage payers.   ????


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## cremeegg (7 Aug 2018)

Tebbit said:


> ' will I get a choice' or is someone thinking of imposing this on mortgage payers.   ????



Its not a question of *will* you get a choice.

If you are have a standard rate mortgage you are already paying, You have been for a number of years.


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## Brendan Burgess (7 Aug 2018)

That is why I thought it a very clever article. 

A lot of people think: "Oh the big bad banks evicting people or selling their mortgages to the vulture funds who will devour them." 

But if they were given the choice of paying an extra €300 a month to keep people who pay little or  nothing on their mortgages in their homes, they would not do so.

Brendan


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## Gordon Gekko (7 Aug 2018)

The term “Vulture Fund” is utterly ridiculous.

Why not call them “Parasite Providers”?


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## demoivre (9 Aug 2018)

T McGibney said:


> Why on earth should your mortgage costs and mine finance free money for "Johnny and Mary" as you call them, more than a decade after the bad lending/underwriting practices in the banks stopped being commonplace?



Do different people finance Johnny and Mary's write down in a PIA if that's the route they take to stay in their house? If their house is repossessed and they go bankrupt to deal with the shortfall after the house is sold who finances the shortfall ?


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## T McGibney (9 Aug 2018)

demoivre said:


> Do different people finance Johnny and Mary's write down in a PIA if that's the route they take to stay in their house? If their house is repossessed and they go bankrupt to deal with the shortfall after the house is sold who finances the shortfall ?


Your questions appear to be supporting rather than rebutting my point.


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## Sophrosyne (9 Aug 2018)

Brendan Burgess said:


> But if they were given the choice of paying an extra €300 a month to keep people who pay little or nothing on their mortgages in their homes, they would not do so.



How is the €300 per month per mortgage arrived at?


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## Purple (16 Aug 2018)

odyssey06 said:


> Perhaps a 1% discount if you agree to expedited legal default process would be a better proposal.


I think that's a brilliant idea.


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## Brendan Burgess (16 Aug 2018)

Sophrosyne said:


> How is the €300 per month per mortgage arrived at?



It's a general indication of the amount people are overpaying on their mortgage. 

For example, if you have a mortgage of €250k , you are paying around 1.5% more than the eurozone average, which is €3,750 or about €300 a year. 

Brendan


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## Sophrosyne (16 Aug 2018)

Thanks for clarifying Brendan.


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