# unsustainable mortgage in negativ equity - how best to proceed?



## question12 (1 Apr 2013)

*property - * 
Lender: Bank of Ireland
Amount outstanding: 272,000
Value of home: 125,000
Interest rate: tracker, 
Monthly repayment 1142 euro
Amount in arrears 0 
Monthly rent received 750 (but currently tenant 2,200 in arrears) - trying to currently evict/ clear tenant and 'start again;

*Other loans and creditors - *delete those which don't apply to you
Credit Card 1,100
Car loan 18000 left at 5.5% 

*Other savings and investments : one policy due to come to fruition July 2013 - 8,500euro


How important is retaining the family home to you? 
*
It was our family home, but due to economic climate combined with work opportunites relocated to UK two years ago.  If there was a way going forward to get rid of it while minimising the shortfall hit (hope to return to Ireland in next 2-3 years but not same area) so I could start focussing on building a deposit for a new home.

*Any other relevant information

What is your preferred realistic outcome? 
* The house will never regain full amount I paid for it and l do not anticipate ever be in a position to repay the loan fully. So I would prefer to sell the house and deal with the shortfall


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## jdwex (1 Apr 2013)

What's your income/salary, other commitments?


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## question12 (2 Apr 2013)

Sorry - current salary is £110,000 GBP.  Apart from ongoing bills electric, gas, council tax, etc,  No other current commitments


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## peteb (2 Apr 2013)

Maybe its just too early in the morning for me but i fail to see how with 110k salary your mortgage is unsustainable!


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## dub_nerd (2 Apr 2013)

peteb said:


> Maybe its just too early in the morning for me but i fail to see how with 110k salary your mortgage is unsustainable!


 
It's in negative equity and he wants to live somewhere else. How much more unsustainable can you get?


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## David_Dublin (2 Apr 2013)

dub_nerd said:


> It's in negative equity and he wants to live somewhere else. How much more unsustainable can you get?



Surely an unsustainable mortgage is one you cannot service. Not one you dont want to pay because its in negative equity.

And he's getting rent for the property, so I dont think you are right about him wanting to live somewhere else, or maybe he lives in it and part rents.


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## Dermot (2 Apr 2013)

dub_nerd said:


> It's in negative equity and he wants to live somewhere else. How much more unsustainable can you get?



So anyone in negative equity who decides that they would like to live somewhere else should be free to dump all their debts on the IRISH TAXPAYER even where the have an obvious ability to pay.

Everyone should remember that it is the Irish Taxpayer who will be footing all these bills. There is a mythical notion out there that it is the banks who are paying for all these write offs. 

We will be very lucky if we have not to look for another bail out before all these write offs are sorted out and the T & C's might not be too nice.


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## dub_nerd (2 Apr 2013)

David_Dublin said:


> ...I dont think you are right about him wanting to live somewhere else...


 
That was based on this statement:



question12 said:


> If there was a way going forward to get rid of it while minimising the shortfall hit (hope to return to Ireland in next 2-3 years *but not same area*) so I could start focussing on building a deposit for a new home.


 
As I said, it's unsustainable because he is in negative equity, wants to live somewhere else, and would like to start saving for his new home a.s.a.p.


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## Dermot (2 Apr 2013)

The DEBT is not unsustainable for him


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## Joe_90 (2 Apr 2013)

Agree "unsustainable" is not the correct word in this case.

Whats the plan:
1. Sell up & transfer the 150k to unsecured debt repay over 20 years at 4.5%.  Repayments €950pm.
2. Hang on to it and sub the loan by €950 per month for 20 years and have something to show.
3. Declare bankrupt in the UK?


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## aondotri (2 Apr 2013)

Joe_90 said:


> Agree "unsustainable" is not the correct word in this case.
> 
> Whats the plan:
> 1. Sell up & transfer the 150k to unsecured debt repay over 20 years at 4.5%.  Repayments €950pm.
> ...



Can you declare yourself bankrupt if you clearly have the means to repay a debt? 

There should be no interest or property tax payable on the negative equity portion of the lone but debts should be repaid where possible otherwise society falls apart.


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## murphaph (2 Apr 2013)

This debt isn't at all unsustainable. The op just wants to dump his bad investment on the Irish taxpayer. He can quite clearly manage his debt, just doesn't want to.


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## Delboy (2 Apr 2013)

dub_nerd said:


> That was based on this statement:
> 
> 
> 
> As I said, it's unsustainable because he is in negative equity, wants to live somewhere else, and would like to start saving for his new home a.s.a.p.



I'm not sure whether your being sarcastic or for real !!!! if it's the latter, wow...just wow!


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## Romulan (2 Apr 2013)

Does the OP not state that he wants to deal with the shortfall?

He also states that he wants to minimise the financial hit, he can hardly be faulted for that?


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## gaius (2 Apr 2013)

question12 said:


> *property - *
> Lender: Bank of Ireland
> Amount outstanding: 272,000
> Value of home: 125,000
> ...



Unlike some here, I'm going to assume the best case and state that you have my sympathy. Far too many people have been caught out having to move for work. If you sell now and crystalise the nearly 150k loss, you may be able to negotiate different terms of payment as the capital will be reduced and the payment a good deal more affordable. I doubt the bank will let you away with anything else as your means are more than sufficient to pay.

The monthly repayment should be reduced by a good bit and you may be able to get the term shortened down. It should be easier to get a new loan for another house in the UK with a €147k unsecured loan rather than a secured €272k loan. You'll also save yourself a lot of stress brought upon by being an accidental landlord.


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## Negotiator (3 Apr 2013)

freeandclear said:


> People are not debt machines no matter what the Irish taxpayer , Banks , or Government may like to think , they will make decisions  which is in their best interests  and if that means walking away and planning for the future so be it .



Hear hear.......60% to 70% has been knocked of the value of properties and many people think it's perfectly normal to be a prisoner of debt for the rest of your life regardless.....even if it makes no economical sense to do so!

Borrowers need to stand up to banks and ignore the 'moral hazard brigade' who are in cuckoo land!


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## quinno (3 Apr 2013)

sorry am I the only one who's missing something here, the OP has a salary far in excess of the national wage and the ability to pay the debt. Yes, the house has fallen in value but there's an opportunity to rent it and pay for the shortfall. Either that or sell the house and wrap up the NE into a loan you can pay off. Why do people continually expect to just walk away from their obligations and foist is on the rest of us?


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## Negotiator (3 Apr 2013)

quinno said:


> sorry am I the only one who's missing something here, the OP has a salary far in excess of the national wage and the ability to pay the debt. Yes, the house has fallen in value but there's an opportunity to rent it and pay for the shortfall. Either that or sell the house and wrap up the NE into a loan you can pay off. Why do people continually expect to just walk away from their obligations and foist is on the rest of us?



It's called 'incentive'.....that's the reason! In the US borrowers have the option of non recourse loans which effectively mean they can hand the keys back to the bank and move on. It keeps these individuals as a positive contributor to the economy hence why the unemployment rate there is only 7.5% despite having a major recession back in 08/09 and a property crash. They allow debt forgiveness and encourage entrepreneurship.......no moral hazard brigades out there!

And by the way, as long as we keep pressing borrowers to the pin of their collars to squeeze every last cent out of them this economy will never recover meaningfully and that effects 'the rest of us'!


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## quinno (3 Apr 2013)

Well this house is in Ireland so different rules apply. The OP is wrapping up the shortfall into a NE loan, which is the responsible approach and avoids this lump being further added to our national debt. Some people have suggested declaring bankruptcy, which on a salary of £110k might be a stretch.


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## dub_nerd (3 Apr 2013)

Negotiator said:


> Hear hear.......60% to 70% has been knocked of the value of properties and many people think it's perfectly normal to be a prisoner of debt for the rest of your life regardless.....even if it makes no economical sense to do so!
> 
> Borrowers need to stand up to banks and ignore the 'moral hazard brigade' who are in cuckoo land!


 
Basically you're saying people should only pay their mortgages if they feel like it. In this case, the OP earns about four times the Irish average wage, pays tax under a lower tax regime, has his house rented out, and has relatively few outgoings. If he really put his mind to it he could be out of negative equity in five years and own his house free and clear in another three.

But you say he'd have nothing to show for those first five years so it doesn't make economic sense. Instead of being "a prisoner of debt" he should "stand up to the banks", which basically means taking the taxpayer for a ride. I'm sure everyone else will appreciate how clever that is when their bank deposits are being taken to pay for the next bailout.


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## Negotiator (3 Apr 2013)

Admittedly this example isn't exactly a distressed borrower but if people feel they're gonna have to pay several hundred Euro per month for the next 20 years for absolutely nothing then that doesn't exactly help them to spend and stimulate an economy.

In a normal climate I would understand people's concern about 'walking away from their debts' but we're living in unprecedented times!

I'm all for economic growth and low unemployment no matter what that takes to get there!


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## bugler (3 Apr 2013)

And the costs of strategic defaulting, namely the costs to the taxpayer (the banks' owners in many cases) and increased SVRs for other borrowers, does that help the economy too?


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## Negotiator (3 Apr 2013)

bugler said:


> And the costs of strategic defaulting, namely the costs to the taxpayer (the banks' owners in many cases) and increased SVRs for other borrowers, does that help the economy too?



It has proven to work very well in the US thank you very much! And Iceland has actually written down loans to 110% of the value of their house and guess what, yep, their economy is growing faster than the US and Europe. So pause and think about that for a moment, debt forgiveness isn't necessarily a case of letting people off scot free, it actually serves the economy as a whole and everyone living in it better in the long run! 

We've had the mother of all property crashes and those losses need to be crystallized sooner rather than later so the economy can start functioning normally. Saddling people with debt and negative equity for the next 20 years certainly isn't going to help anyone.


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## RichInSpirit (3 Apr 2013)

Not saying anything about the right or wrong of this situation, but just taking a long term view on the OP's situation.
Given the OP's earning capacity versus the level of debt I would say that the OP would be off his rocker to sell at the moment.
Hold for 15 or 20 years and wait for the market to return. Even if he never rented the property out in the meantime.


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## Bronte (3 Apr 2013)

We need to be clear on something here and that is the OP has the title wrong as his debt is sustainable. His options are:

Option 1 - sell

Get bank to agree on sale and allowing him to repay the loan either at the current interest rate and term or over a shorter term if he can afford it. Problem is that the NE is 147 plus costs so a debt of 150K miniumum with no income against it.

Option 2 - continue

Continue to subsidise it, it's only costing about 400 Euro a month which should be well affordable on a salary of 120 GBP. And OP has not mentioned if his spouse is also working. 

If he could pay extra to pay down the NE, plus inflation over time, as for everybody mentioning 20 years, well we're not allowed to talk about property prices but OP needs to think about that too. The ideal would be to get it to a level where he could sell at zero loss or see it as an investment with eventually the rent coving most of the costs.

Option 3 bankruptcy

I don't believe OP can do this on a salary of 120K. I think he would be left a certain (fairly basic) minimum amount to live on out of the 120K as per the UK rules and the remainder would be taken away from him and if I correctly recall Steve Thatcher's advice this can be extended for those who can afford it rather than the quickie 1 year bankrupty that is the norm. In addition Steve advised people to only take low paying jobs and I'm assuming there were very good reasons he gave that advice. 

As OP certainly has the cash he should hire an expert to see if bankruptcy is an option for him.  Also there are repercussions for bankruptcy in relation to future loans and eligibility for certain jobs.  And of course it's not just the OP, it's also his wife.  


In my opinion OP should do the right thing and go for option 2 but that's easy for me to say.


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## David_Dublin (3 Apr 2013)

aondotri said:


> There should be no interest or property tax payable on the negative equity portion of the lone but debts should be repaid where possible otherwise society falls apart.



Really? Do you think this approach should be applied in general? There dont seem to be any reasons why it should only apply here, so presumably you do.

So what does the bank do - go a whistle in the wind for interest payments on a secured loan, where the value of the asset is below the value of the loan. If that were the case, interest rates would not be affordable, they would need to take into account the risk of no interest being paid. Or else mortgages would only be offered at 50% LTV or less or something like that.

What if the borrower has substantial income and wealth elsewhere? Because he makes a bad investment decision the bank cops the hit on it, and he gets to reap profit from his profitable investments.

Honestly, I really despair with some peoples' comments on here. I am all for banks crystallising losses so we can move forward, get the economy growing etc but it has to be fair. If someone is earning 120k per year then tough luck that he has a property in NE. Let him pay the property tax, let him pay up his debt.

The fairness of the solution needs to take into account people who have worked hard the last 20 years, and didn't have borrow 90%+ LTV and are still working hard to pay their debt back. i.e. those who paid 1million for a house now worth 300k, or paid 500k for a house in an unfinished building site. 

If there is some sort of write off then the bank should take ownership or some sort of right to proceeds from the eventual sale. It's just not fair that people who had more money to bring to the purchase of a house end up paying their way, and others that are in NE get a write off. Theoretically, they could own the house for 20 years, and profit from its sale, which just isn't fair on those who didn't technically qualify for the write off but who lost substantially more.


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## Bronte (3 Apr 2013)

David_Dublin said:


> Because he makes a bad investment decision the bank cops the hit on it, and he gets to reap profit from his profitable investments.
> 
> .


 
There is a certain belief of some people that this is so, it's called socialising losses and capitalising gains.  

Funnily enough on my trips over during the tiger I saw no one willing to share their new found wealth with me as they rode the massive pyramid scheme.  But there are plenty of them now screaming for me to share their losses.  

I suppose the likes of Sean Dunne et al doesn't help anybody.


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## dub_nerd (3 Apr 2013)

Negotiator said:


> And Iceland has actually written down loans to 110% of the value of their house and guess what, yep, their economy is growing faster than the US and Europe. So pause and think about that for a moment, debt forgiveness isn't necessarily a case of letting people off scot free, it actually serves the economy as a whole and everyone living in it better in the long run!


 
You should probably read about what's really happening in Iceland, as written by an actual Icelandic person, instead of what Krugman and his disciples want you to believe...

http://studiotendra.com/2012/12/29/what-is-actually-going-on-in-iceland/

Iceland continues to be a basket case.


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## dub_nerd (3 Apr 2013)

aondotri said:


> There should be no interest or property tax payable on the negative equity portion of the lone but debts should be repaid where possible otherwise society falls apart.


 
Plenty of negative equity resulted from people treating their houses as ATMs, and withdrawing their equity to pay for cars and holidays. Where do you think the bubble money actually came from? There was something like six billion in top-up mortgages in 2006 alone and you can bet it wasn't all being spent on worthwhile home improvements.


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## Delboy (3 Apr 2013)

freeandclear said:


> People are not debt machines no matter what the Irish taxpayer , Banks , or Government may like to think , they will make decisions  which is in their best interests  and if that means walking away and planning for the future so be it .



looks like another few new posters from the forgive debt brigade have joined up to AMM. 'Forgive everyone's debt and let the silent majority pay for it, even if you earn 100k+ stg'

Perhaps they're buoyed up by the 'success' of their leader in Meath East recently

http://www.nytimes.com/2013/03/30/b...tgages-nears-an-end.html?pagewanted=all&_r=1&
'Ben Gilroy, one of tens of thousands who over-borrowed in the giddy property boom that preceded Ireland’s economic collapse, has made no mortgage payments for two years. But he says he does not worry that he will lose his home any time soon'


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## Negotiator (3 Apr 2013)

dub_nerd said:


> You should probably read about what's really happening in Iceland, as written by an actual Icelandic person, instead of what Krugman and his disciples want you to believe...
> 
> 
> 
> Iceland continues to be a basket case.



4.7% unemployment, decent growth rates, already returned to the bond markets and no major private debt overhand for nearly all the population........not what I would describe as a basket case but I don't think we'll both agree on this!


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## Negotiator (3 Apr 2013)

While the 'moral hazard brigade' (MHB) are so busy trying to make sure that a tiny % of borrowers don't 'get away with it' they completely ignore the fact that the economy won't get going again until the whole debt situation is sorted out.....that includes NE and yes even people who can afford to repay the mortgages!

And the MHB will still be here in 10 years time moaning that unemployment is still very high and the economy is still depressed......but at least not a single person got a penny written off their mortgage!


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## Delboy (3 Apr 2013)

Negotiator said:


> While the 'moral hazard brigade' (MHB) are so busy trying to make sure that a tiny % of borrowers don't 'get away with it' they completely ignore the fact that the economy won't get going again until the whole debt situation is sorted out.....that includes NE and yes even people who can afford to repay the mortgages!
> 
> And the MHB will still be here in 10 years time moaning that unemployment is still very high and the economy is still depressed......but at least not a single person got a penny written off their mortgage!



tiny % you say!!!....the rest of the World are starting to notice the shenanigans going on here and are asking questions as to how unemployment has stabilised and yet Mortgage default is rocketing which is not exactly a scenario that is replicating itself in other troubled countries.....that's what no repossessions, years of rent/mortgage free living and the idea of debt forgiveness can bring about
http://www.theatlanticcities.com/ho...ers-world-champs-not-repaying-mortgages/5168/


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## Negotiator (3 Apr 2013)

Delboy said:


> tiny % you say!!!....the rest of the World are starting to notice the shenanigans going on here and are asking questions as to how unemployment has stabilised and yet Mortgage default is rocketing which is not exactly a scenario that is replicating itself in other troubled countries.....that's what no repossessions, years of rent/mortgage free living and the idea of debt forgiveness can bring about



Please provide one example of where a property market crash resulting in a drop in property values of up to 70% and there hasn't been MASSIVE mortgage default.......I can't think of any recent examples but I'd imagine it would be much higher than it has been here already. By the way, look at Japan and it's 'lost decade' (possibly 2 decades) and how the debt situation still has a stagnating effect on their economy!


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## dereko1969 (3 Apr 2013)

Negotiator said:


> Please provide one example of where a property market crash resulting in a drop in property values of up to 70% and there hasn't been MASSIVE mortgage default.......I can't think of any recent examples but I'd imagine it would be much higher than it has been here already. *By the way, look at Japan and it's 'lost decade' (possibly 2 decades) and how the debt situation still has a stagnating effect on their economy*!


 
But one of the reasons for that is stated in the excellent article that delboy linked to where it states

_Some suspect it's not just legal haziness keeping foreclosures low. Irish banks may also dragging their feet on restructuring or foreclosing. That's because if they dealt with those problem loans by foreclosing or restructuring them it would, through the magic of accounting, transform hazy "problem" loans into real losses. In fact, there's a well-documented history of banks procrastinating on recognizing bad loans in the aftermath of financial crises. *Such widespread "evergreening" of bad loans was an insidious side effect of *__Japan's financial collapse in the early 1990s__._


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## Negotiator (3 Apr 2013)

dereko1969 said:


> But one of the reasons for that is stated in the excellent article that delboy linked to where it states
> 
> _Some suspect it's not just legal haziness keeping foreclosures low. Irish banks may also dragging their feet on restructuring or foreclosing. That's because if they dealt with those problem loans by foreclosing or restructuring them it would, through the magic of accounting, transform hazy "problem" loans into real losses. In fact, there's a well-documented history of banks procrastinating on recognizing bad loans in the aftermath of financial crises. *Such widespread "evergreening" of bad loans was an insidious side effect of *__._



But forbearance and debt forgiveness are 2 different things. Forbearance in my mind is 'kicking the can down the road' and debt forgiveness is accepting the reality and writing down the loans to a sustainable level to allow people to get back to normal and start spending again etc. Without this we will end up the same as Japan!


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## Dermot (3 Apr 2013)

There are a number of people on here who think that OP should basically be forgiven. If this were to happen there would be tens of thousands joining him too that would feel "why not me too". So if this were to happen and the banks cannot afford it they then have to be bailed out again and the terms will be much stiffer than before on the taxpayer. Is this they new way of creating employment as insinuated by some posters. We had some of the usual cheerleaders praising the Cypriot Government for the great job they had done in their negotiations with Europe only to find out later that the package that they now have will leave them an economic basket case within a couple of years. 
The OP is obviously an intelligent person who really wants ideas from others of how he may get away with paying what he owes. He is different from a lot of others in that he can pay. Some people want a one way street. take the profits and run away from debt.


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## demoivre (4 Apr 2013)

dub_nerd said:


> Plenty of negative equity resulted from people treating their houses as ATMs, and withdrawing their equity to pay for cars and holidays. Where do you think the bubble money actually came from? There was something like six billion in top-up mortgages in 2006 alone and you can bet it wasn't all being spent on worthwhile home improvements.



And most of those people are paying their mortgages on time but it's getting the economy nowhere, a point that continues to elude most, as consumption expenditure is moribund. Add exchequer austerity to that and you get 14% unemployment and 87000 people emigrating ( Eurozone unemployment just hit 12% for the first time ever last month ). But I guess we  gots to put manners on the people who were bold boys and girls in the noughties.........unless you're a banker.


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## Delboy (4 Apr 2013)

demoivre said:


> And most of those people are paying their mortgages on time but it's getting the economy nowhere, a point that continues to elude most, as consumption expenditure is moribund. Add exchequer austerity to that and you get 14% unemployment and 87000 people emigrating ( Eurozone unemployment just hit 12% for the first time ever last month ). But I guess we  gots to put manners on the people who were bold boys and girls in the noughties.........unless you're a banker.



take 150,000 people or so in arrears...give them debt forgiveness, let them start spending (of course all that spending will be in Ireland!), and the economy will get going again. 
Wow, did'nt reliase that was all it would take ...let the debt write-off begin!


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## David_Dublin (4 Apr 2013)

..And for those who are currently paying on-time but are under huge pressure, those that have foregone new bikes/cars/holidays/clothes/heating to keep paying what they borrowed - well they are able to pay so let them keep paying and lets ignore them.

The fact of the matter is there are lots of people not paying who have greater disposable income & less outgoings than those who are. It's natural that different people define "being broke" differently, we all have different baselines.

In a lot of cases, obviously not all, those not paying at all could be paying something. Or those paying something could be paying more. The complexity of all of this is that there cannot be any across the board forgiveness. It just cannot work fairly. Unless the lending institution takes control of the assets, or a call on the value they have forgiven when the asset is liquidated. Otherwise you get the same cute hoors that bought properties off the plans and leveraged themselves up to the gills benefiting again from pathetic government policies.


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## dub_nerd (4 Apr 2013)

demoivre said:


> And most of those people are paying their mortgages on time but it's getting the economy nowhere, a point that continues to elude most, as consumption expenditure is moribund. Add exchequer austerity to that and you get 14% unemployment and 87000 people emigrating ( Eurozone unemployment just hit 12% for the first time ever last month ). But I guess we gots to put manners on the people who were bold boys and girls in the noughties.........unless you're a banker.


 
I'm struggling to understand what you are implying. We should give money to the imprudent because they already have a proven track record in splurging their cash? While the prudent cannot be trusted with free money because they might save it instead of spend it?

Tell you what, I'm just as capable of spending money as the next man. I have zero debts, so unlike your negative equity "victim" who might have other debts in addition to his mortgage, I'm ready and willing to spend free money on bling and tat. Why give the free 150k to him -- he might only save it or pay down other debts, while I promise to spend it and stimulate the economy.

And that, I think, is the answer to the ridiculous suggestion that we should write off debts "so that people can become economically productive again". The people who are not in debt are just as capable of spending. Why favour one over the other? There may be other reasons for writing down debt, but this isn't it. Any debt written down has to be paid for by someone, so anyone promoting debt forgiveness needs to stop just parading their own magnanimity with other people's cash, and say where they think the money is coming from.

The plain fact of the matter is that consumption in this country got miles ahead of earning. We "pre-spent" money that now has to be paid back. Our recession is the logical consequence -- the figures show that saving is now miles ahead of spending. What is horrific is that some people think the "solution" to all of this is that we go back to spending more money we don't have on cars, holidays, decking, and granite countertops. Personally I'd like to think we could spend on something a bit more productive, like entrepreneurship and genuine social goods, instead of going back to the ugly consumerism and mé féinism that ruined the country.


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## demoivre (4 Apr 2013)

Delboy said:


> take 150,000 people or so in arrears...give them debt forgiveness, let them start spending (of course all that spending will be in Ireland!), and the economy will get going again.
> Wow, did'nt reliase that was all it would take ...let the debt write-off begin!



You missed the point, I never mentioned people in arrears. Government , corporate and private debt servicing in this country is costing us dearly. We will not recover unless we address the situation. Arrears cases make the headlines, it's only part of the problem.



dub_nerd said:


> the figures show that saving is now miles ahead of spending.



Some of our deluded government ministers think the same . In Economics that part of income that is not consumed ( spent ) is classed as savings - the savings you are talking about are debt repayments. You can cut it whatever way you want but this country is at least a generation a way from recovery unless we address our overall indebtedness.



> And that, I think, is the answer to the ridiculous suggestion that we  should write off debts "so that people can become economically  productive again". The people who are not in debt are just as capable of  spending. Why favour one over the other? There may be other reasons for  writing down debt, but this isn't it. Any debt written down has to be  paid for by someone, so anyone promoting debt forgiveness needs to stop  just parading their own magnanimity with other people's cash, and say  where they think the money is coming from.



Ah right, and we're not paying the price now? The Exchequer adjustments needed for  obliterated tax revenues are €3.5bn this year, €3.1bn next year and €2.5bn the year after. #Austerity rocks


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## David_Dublin (4 Apr 2013)

Demoivre - I really think you are missing the point. By a long way. 

One of the main issue with getting the economy going is confidence. What this means is getting people to spend rather than save. It's not altering what money is there - there is ample saved money in the economy, but people are saving for the rainy day, worried that more bad stuff is around the corner. The idea that giving the flahulach more money to waste is laughable.

I'm not sure about your definition of savings to be honest, but in layman terms I think dub_nerd was referring to private cash on deposit, i.e. the total amount Irish people have saved up in bank accounts. Estimates vary wildly between 80 billion and 350 billion. I dont know what it is, but I believe I am right in saying it has nothing to do with what you are talking about. 

What government needs to do is to encourage people back into the shops, get people spending again, spending their savings. Not throwing money at the problem.


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## Dermot (4 Apr 2013)

I agree with you David_Dublin


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## Luternau (4 Apr 2013)

I dont think the OP's position is unsustainable and it amazing that they think this is the situation. It is strange that the OP has not been back to comment on some of this-which really makes me wonder why post in the first place. 

A few weeks ago there was a thread started (now locked) by another new poster that was equally incredible in that the poster did not want to pay what he owed or make any effort to do so-yet he was in a pretty good position to do so. It makes for interesting reading : 

I would agree that the banks should share the pain to the same degree that struggling borrowers are and will feel for a long time to come-but sadly thanks to that famous October 2008 night, that means every taxpayer of this country gets hit every time there is a re-structure or debt deal. 

However, I do hope that those that can pay are coralled by every bank and made to feel the same hardship and austerity as those that want to pay their debt - but just cant. If this happens, I would begin to think we are making progress with 'moral hazard' and introducing confidence back into the economy.


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## Dermot (4 Apr 2013)

Luternau said:


> I would agree that the banks should share the pain to the same degree that struggling borrowers are and will feel for a long time to come-but sadly thanks to that famous October 2008 night, that means every taxpayer of this country gets hit every time there is a re-structure or debt deal.
> 
> However, I do hope that those that can pay are coralled by every bank and made to feel the same hardship and austerity as those that want to pay their debt - but just cant. If this happens, I would begin to think we are making progress with 'moral hazard' and introducing confidence back into the economy.



That would come close to my opinion too


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## dub_nerd (4 Apr 2013)

demoivre said:


> Some of our deluded government ministers think the same . In Economics that part of income that is not consumed ( spent ) is classed as savings - the savings you are talking about are debt repayments. You can cut it whatever way you want but this country is at least a generation a way from recovery unless we address our overall indebtedness.


 
Yes, I understand that. And that was indeed what I meant by savings. Some people are saving cash on deposit, being nervous to spend in a depressed economy. Others are paying down debt -- that's saving too in economics terms.

And yes, I understand that we have to speed up the recovery and that means growng our way out of the problem to some extent. That in turn means persuading the people with real cash to start spending again, and have more confidence in the economy. 

What it _doesn't_ mean is shifting money from one column on the balance sheet to another. I mean -- everyone would be in favour of debt forgiveness if it was free money. But it's not. How do you think the economy is going to be improved by setting up a situation where we need another bank bailout?



demoivre said:


> Ah right, and we're not paying the price now? The Exchequer adjustments needed for obliterated tax revenues are €3.5bn this year, €3.1bn next year and €2.5bn the year after. #Austerity rocks


 
We haven't had any austerity yet. We have reduced capital expediture. As far as I know our current expenditure has gone _up_ every year since the recession hit. We've barely begun to make the adjustments needed. 

What we have done is go back to the level of exchequer revenue that would have prevailed if we hadn't been living on borrowed money for a decade. We've got to start realising that going back to that same situation is neither possible nor desirable. We need growth and revenue to be based on a whole new model. Selling houses to each other won't work anymore.


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## dub_nerd (4 Apr 2013)

Dermot said:


> That would come close to my opinion too


 
I'd agree with Luternau too.


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## AlbacoreA (4 Apr 2013)

David_Dublin said:


> Demoivre - I really think you are missing the point. By a long way.
> 
> One of the main issue with getting the economy going is confidence. What this means is getting people to spend rather than save. It's not altering what money is there - there is ample saved money in the economy, but people are saving for the rainy day, worried that more bad stuff is around the corner. The idea that giving the flahulach more money to waste is laughable....



Isn't the point you want the financially sustainable people to spend, not the unsustainable.

That said every move the Govt seems to be making is taking money from me, that I won't be spending in the economy.


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## commonsense (5 Apr 2013)

Negotiator said:


> It has proven to work very well in the US thank you very much! And Iceland has actually written down loans to 110% of the value of their house and guess what, yep, their economy is growing faster than the US and Europe. So pause and think about that for a moment, debt forgiveness isn't necessarily a case of letting people off scot free, it actually serves the economy as a whole and everyone living in it better in the long run!
> 
> We've had the mother of all property crashes and those losses need to be crystallized sooner rather than later so the economy can start functioning normally. Saddling people with debt and negative equity for the next 20 years certainly isn't going to help anyone.



You seem to be connecting the write down with growth? That is simply not true and Iceland is really not the country to be comparing Ireland with.

Firstly, regarding the 110% mortgage debt write - down, you should know that household debt in Iceland comes in two forms:

A. Loans linked to a currency index. 
 B. Loans linked to the consumer price index.


Type A loans doubled during the crash. These loans were illegal and there are numerous court cases underway.


The type B loans are a little more complicated.  If you borrow 100k  and a  year passes with 10% inflation (after a crash this wouldn't be unusual)  at the end of the year you  will owe 110k even if you have been paying interest. You will never pay off your mortgage. They did bring in debt relief, but it didn't change anything for those in trouble and those it did initially help were back to were they started within a few months. 





The index linked loans rose to double the debt relief. 



Icelandic households are worse off, not better off. 



Icelands economy grew by 2.7% in 2012, but inflation was 4%. In Iceland because the loans are linked to inflation, you cannot trot out "Iceland has the fastest growth in the world" without mentioning inflation.




There is no easy way out. There is no magic bullet. Debt forgiveness does not equal a growing economy.


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## Negotiator (5 Apr 2013)

Ok perhaps Iceland is not a good example when you factor in all the inflation as outlined in your post. How about the US and non recourse loans?  Hand back the keys and the shortfall is written off. That's as real as it  gets with regards to debt write off!


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## commonsense (5 Apr 2013)

Negotiator said:


> Ok perhaps Iceland is not a good example when you factor in all the inflation as outlined in your post. How about the US and non recourse loans?  Hand back the keys and the shortfall is written off. That's as real as it  gets with regards to debt write off!



There's a difference between non recourse loans and debt write off.

There is no inital contract from the borrower to repay the entire loan. 

The banks factor in the risk using higher interest rates and lower LTVs in the first place. In a lot of cases while the original mortgage was non recourse, remortgaging and equity releases create recourse loans. 

What I am hearing more frequently here in this country is "I have money to pay, but don't want to" or " I want to keep my home paying a reduced mortgage".

In the states if you cannot pay your mortgage then you lose the asset. If the bank has many defaulters then it closes.

Edit - To be honest if there was one way I'd like us to copy America is their bankruptcy system. You fail, you go bust and are allowed to start up again.


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## Negotiator (5 Apr 2013)

commonsense said:


> In the states if you cannot pay your mortgage then you lose the asset. If the bank has many defaulters then it closes.



Isn't this the way it should be......basic market forces allowed to play out naturally? 

The notion of people having to hand back their home and being chased forever and a day for the balance is just ludicrous......and so is forcing people to live within incredibly tight budgets for potentially the rest of their lives!


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## commonsense (5 Apr 2013)

Negotiator said:


> Isn't this the way it should be......basic market forces allowed to play out naturally?
> 
> The notion of people having to hand back their home and being chased forever and a day for the balance is just ludicrous......and so is forcing people to live within incredibly tight budgets for potentially the rest of their lives!



I don't disagree. In the states though it's not completely plain sailing todeclare bankruptcy, you really have to be in dire straits, unemployed or already having payments garnished from your income, you home is on the brink of being foreclosed on, you owe taxes, you're being sued. 

There are two types of bankruptcy, chapter 7 which is basically if you are unemployed and can't repay anything, in this case you lose everything.
Or chapter 13, whereby you enter into a repayment programme for between 3 and 5 years. 

It stays on your record for 10 years, meaning that you'll probably get a loan in the future, but you'll pay more interest. 

There is no solution anywhere whereby you walk away and suffer no ill effects from bankruptcy/debt write-down. It just doesn't happen. A lot of people in this country are jumping on a bank wagon that doesn't exist.


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## mark71 (5 Apr 2013)

Negotiator said:


> Isn't this the way it should be......basic market forces allowed to play out naturally?
> 
> The notion of people having to hand back their home and being chased forever and a day for the balance is just ludicrous......and so is forcing people to live within incredibly tight budgets for potentially the rest of their lives!



The amount of stress being put on people by our system is frightening.  In the last two weeks two men took their own lives in my area due to debt stress.  Both with young families.


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## Negotiator (5 Apr 2013)

commonsense said:


> I don't disagree. In the states though it's not completely plain sailing todeclare bankruptcy, you really have to be in dire straits, unemployed or already having payments garnished from your income, you home is on the brink of being foreclosed on, you owe taxes, you're being sued.
> 
> There are two types of bankruptcy, chapter 7 which is basically if you are unemployed and can't repay anything, in this case you lose everything.
> Or chapter 13, whereby you enter into a repayment programme for between 3 and 5 years.
> ...



Good to get a deeper insight into the US Bankruptcy process. I totally agree that there is no ill side effects from any type of debt writedown and again so it should be. But these ill effects shouldn't be near half as bad as being given a budget that strips borrowers of living a decent economic life in the long term. The notion that there is lots of 'strategic defaulters' is nonsense in my opinion, off course there will be a few but so be it, that's life! It shouldn't influence a policy that will help the vast majority of distressed borrowers.


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## commonsense (5 Apr 2013)

Negotiator said:


> Good to get a deeper insight into the US Bankruptcy process. I totally agree that there is no ill side effects from any type of debt writedown and again so it should be. But these ill effects shouldn't be near half as bad as being given a budget that strips borrowers of living a decent economic life in the long term.



But that's like what happens in a chapter 13 bankruptcy. Your income is means tested, a living allowance given, not based on your living allowance but by  Internal Revenue Service's National Standards. I don't see anything wrong with this if people want a write down of debt. 

I do believe though that a lot of what is in the media is smoke, mirrors and populist. What will happen is you are given X amount and can spend it as you will. 




Negotiator said:


> The notion that there is lots of 'strategic defaulters' is nonsense in my opinion, off course there will be a few but so be it, that's life! It shouldn't influence a policy that will help the vast majority of distressed borrowers.



But unfortunately they are influencing policy and by virtue of this fact it is clear that there are more than "some" defaulters. Now I have to say at this point that some people could be defaulting to repay other debt - but they should not be doing this, they should be negotiating with these unsecured creditors before not paying their mortgage. 

I hate to say it but Irish people are really going to have to wake up to the fact that if they want debt write down then it will not come easy or without restrictions.


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## Bronte (5 Apr 2013)

mark71 said:


> The amount of stress being put on people by our system is frightening. In the last two weeks two men took their own lives in my area due to debt stress. Both with young families.


 

That's terrible sad Mark.

This thread has probably scared off the OP and others. I'm as mad as anyone with stratetic defaulter but that debate should be elsewhere.


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## Luternau (5 Apr 2013)

Bronte said:


> This thread has probably scared off the OP and others. I'm as mad as anyone with stratetic defaulter but that debate should be elsewhere.



I would agree there. No advice for the OP.
Suggest moving all off topic posts to a new thread in letting of steam!


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## gaius (5 Apr 2013)

Delboy said:


> take 150,000 people or so in arrears...give them debt forgiveness, let them start spending (of course all that spending will be in Ireland!), and the economy will get going again.
> Wow, did'nt reliase that was all it would take ...let the debt write-off begin!


 And the people who won't be spending because they are paying higher taxes to fund this don't matter!


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