# Making sure I can get debt forgiveness.



## z107

Debt forgiveness for mortgage holders seems to be gathering steam. There seems to be more articles in newspapers about it, and I also noticed this today:
http://www.breakingnews.ie/ireland/noonan-banks-have-capital-for-debt-forgiveness-518454.html



> Finance Minister Michael Noonan said today that the capital is already in Irish banks to allow them to write off loans in a debt forgiveness scheme.
> 
> Minister Noonan said that it is a pressing issue for some families and will have to be dealt with, but insisted that it is manageable.



I expect that what may happen is that anyone with mortgage arrears on a certain date (eg 1 jan 2012, after the next budget when the scheme may be announced) could have chunks of their mortgage written off. If any other approach is taken, then we'll end up with no one paying back their mortgage.

So the question is, to maximise my chances of this, should I stop paying my mortgage now? Instead put the money way, then if there is no debt forgiveness on the horizon, I'll just pay it off. My mortgage also allows me to take back money I've already overpaid. I might as well get this back anyway.

Could be worth it to get a few thousand written off.


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## monagt

A Troll me thinks.
http://www.ronanlyons.com/2011/08/30/top-ten-facts-in-relation-to-ireland’s-mortgage-debt-arrears/


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## z107

I'm not trolling. I'm just illustrating one of the main flaws of debt forgiveness.


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## Chris

umop3p!sdn said:


> I'm not trolling. I'm just illustrating one of the main flaws of debt forgiveness.



I absolutely agree. Two things to keep in mind, if you stop paying your mortgage your credit rating would be affected. This is of course only a problem if tend to take out loans; if you only spend what you save then this would be completely irrelevant. Your other option of taking out the overpaid money would possibly be a better option.


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## Sunny

It's not a flaw because you are unwilling to pay, not unable to pay. People haven't chosen to lose their jobs. No bank will restructure your mortgage or write off debt while allowing you keep a large cash pile. No Court would have sympathy for you if the bank issued proceedings against you if they see you still have a job, brining in the same income and just deciding not to pay. I am against debt forgiveness but arguments like this are as ridiculous as the idea of just writing off debt in the first place.


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## Brendan Burgess

If someone quits their job, then they would be unlikely to get any sympathy.

But if someone just blows their money on holidays and cars and private schools instead of repaying their mortgage, it would be very difficult for some debt management agency to say that they don't qualify for debt forgiveness. 

Certainly while the government is still talking about debt forgiveness, there is little incentive to struggle to pay your mortgage.


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## Sunny

Brendan Burgess said:


> Certainly while the government is still talking about debt forgiveness, there is little incentive to struggle to pay your mortgage.


 
I agree that for those just about making repayments, they are probably going to start thinking about why bother struggling to make the payments. 

It shouldn't really be the difficult to sort out the genuine hardship cases though from the ones that are just not bothered. The banks are sitting on a load of uselss mortgage underwriters. Get them working on revisiting individual mortgages and lets get a clear picture about what's happening out there


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## Duke of Marmalade

The Minister is repeating Professor Karl Whelan's line that because the capital has been put in the banks can now afford debt forgiveness.  So much wrong with this statement but the biggest flaw is what about the foreign banks?

Are mortgage holders in AIB etc. going to get a softer approach than in say BoS? If not, is the Minister going to force BoS to go soft or is he going to give it taxpayer money as well?


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## Chris

Sunny said:


> It's not a flaw because you are unwilling to pay, not unable to pay. People haven't chosen to lose their jobs. No bank will restructure your mortgage or write off debt while allowing you keep a large cash pile. No Court would have sympathy for you if the bank issued proceedings against you if they see you still have a job, brining in the same income and just deciding not to pay. I am against debt forgiveness but arguments like this are as ridiculous as the idea of just writing off debt in the first place.



I think that the idea put forward is for the case of a general or blanket debt forgiveness. I certainly would agree that each case needs to be looked at individually and ideally through a streamlined court process and bankruptcy proceedings.


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## Sunny

Seems like the Minister slept on it:

   DUBLIN, Aug 31 (Reuters) - Irish banks must remain prudent with their capital and only write-off the mortgage debt of people who can't pay their home loans, Finance Minister Michael Noonan said on Wednesday.  
   The government is considering options to deal with the 10 percent of Irish mortgages that are in arrears or restructured but is eager to avoid a new injection of taxpayers money to deal with the growing problem.  
   "Any approach would have to distinguish between those who can't pay which is the real issue and those who won't pay where people could avail of an opportunity," Noonan told Newstalk radio.  
   "The banks have capital which they can use to assist people but at the same time they have to be prudent with that capital, the banks have to continue to be viable and they can't fritter away capital either."  
   The government has rejected calls for a blanket debt forgiveness scheme to help stretched borrowers and is instead signaling the banks can deal with the problem after they have been recapitalised to the tune of 70 billion euros ($100  billion).     
   Noonan said the government would wait to receive an expert group's report on the issue of rising mortgage arrears, expected in around three weeks, before making any policy decisions.  
   "It is not a question of coming up with a new pool of money to deal with bad debt," Noonan told state broadcaster RTE.  
   The number of mortgages in arrears or restructured due to financial distress jumped 10 percent in the second quarter from the previous three months, heaping pressure on a government which needs to introduce yet another austerity budget in December. [ID:nL5E7JT0PX]   
   Noonan said the government was looking at ways to help small businesses who are forced to lay people off due to property debts.  
   Mortgage holders will enjoy some relief from ECB indications that it will not increase interest rates in the coming 12 months, Noonan said. More than half of Irish mortgages track the ECB rate.   
   "It seems now there will be no increases in interest rates for the next 12 months," he said.   
   Financial markets have moved to price out any chance of a rise in interest rates by the ECB for the foreseeable future.  
   While propping up households is vital to get Ireland's economy growing again, concern has grown about banks across Europe suffering from the fallout of three years of financial turmoil. The head of the IMF warned at the weekend that the financial sector may need further forced recapitalisation.    
  Ireland's banks have been recapitalised to deal with nearly seven percent of their combined residential mortgage book being written off.


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## 44brendan

I take issue with the term "debt forgiveness". the impression given is that the Governmant will in some way introduce legislation where a wholesale write down of mortgage debt occurs. This is not going to happen. I accept that a number of people will disagree but there is no logical rationale for this approach to be taken. It makes no economical sense on a number of fronts. What is likely to happen is a more pragmatic solution to the current impasse. I.e. a realisation that there are a number of borrowers in negative equity who cannot afford to pay their mortgages at the current level. In those cases there is a need to write off a portion of the amount owning (as any creditor would do) and restructure the balance to enable the remaining debt to be serviced. Portion of the debt may well be postponed rather than written off. I have worked all my life in finance and banking and a common approach to bad debt problems has always included an element of write-off where necessary. This is a pragmatic approach to a bad debt problem. It is not "Debt Forgiveness" and useage of this term is giving many people false hope and expectation.


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## Slaphead

I've abig student loan to pay off from a bank abroad. Should i start paying more into that and less into my mortgage as im not going to get debt forgiveness for the student loan?

I can live without a good credit rating?


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## Slaphead

Or should i quit/get sacked from my job, get debt forgiveness and then get a new job which wouldnt be hard for me?


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## monagt

I guess that any person in mortgage distress would be disheartened by the content in this thread.
There have been suicides, marriage break ups and nervous breakdowns, households where the children are stressed over the their parents fighting and crying as the contemplate losing their homes, a lifetime of debt and being unable to see a way out.

I think this thread does not do justice to the many decent kind hearted and generous people on this forum.

Its not a joke and some of you should be ashamed.


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## NorfBank

Slaphead said:


> Or should i quit/get sacked from my job, get debt forgiveness and then get a new job which wouldnt be hard for me?



Don't quit, you would have to get sacked for your plan to work. 

Apart from that it' s foolproof, just send a one liner to your  bank saying "I can't pay" signed Slaphead and they'll fall over  themselves to write off your debt.

Fair play, it's original  thinking like this that will get Ireland back on it's feet. Maybe you  should write an opinion piece in one of the papers or start a blog. I  and many others long to follow someone with such radical thought.

Vive la revolution.


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## suemoo1

monagt said:


> I guess that any person in mortgage distress would be disheartened by the content in this thread.
> There have been suicides, marriage break ups and nervous breakdowns, households where the children are stressed over the their parents fighting and crying as the contemplate losing their homes, a lifetime of debt and being unable to see a way out.
> 
> I think this thread does not do justice to the many decent kind hearted and generous people on this forum.
> 
> Its not a joke and some of you should be ashamed.



PLUS 1 totally agree


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## Slaphead

NorfBank said:


> Don't quit, you would have to get sacked for your plan to work.



I could of course arranged to be sacked, ie not turn up for a few weeks etc.

Just saying, if they're going to cut amounts off people's mortgages they have to do it for everyone. Not going to happen of course but i would accept it if they just allowed ppl to rent the houses for a long period of time and if/when things improve they can start paying the mortgage again.


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## STEINER

surely if there was some debt forgiveness scheme in place, the people availing of it would not be able to get another mortgage again.  What bank would ever lend to them again?


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## dereko1969

STEINER said:


> surely if there was some debt forgiveness scheme in place, the people availing of it would not be able to get another mortgage again. What bank would ever lend to them again?


 
Yes and what would this mean for the already huge lists for council housing? This whole thing needs to be thought through in huge detail, I think people have already forgotten the debate about moral hazard.

To those saying people commenting on here should be ashamed of themselves, no-one on here has downplayed the problems some people are facing, it's the fact that what seemed to be coming out of Govt was a blanket plan which would be unfair to those struggling to pay and would benefit those not bothering to pay. 

Discussion of this topic is hugely important.


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## monagt

To those saying people commenting on here should be ashamed of themselves, no-one on here has downplayed the problems some people are facing,

I disagree. Remarks from people who are not in a distressed situation that they should jump on the bandwagon are such.


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## Gervan

As someone who drives a 17 year old car because I chose NOT to get a loan for a new car, who has an old kitchen and unfashionable bathroom because I did NOT get a loan for "doing up the house" I am furious that people who did not plan for the future should be rewarded by debt forgiveness.
I do not wish to see anyone thrown out of their house for being unable to afford the mortgage, but believe the debt should be held on file, and not "forgiven". I know of people who received windfalls and spent it on luxury holidays etc who are now in trouble with mortgage repayments. Why should I pay for their luxuries when I chose to live within my means?
I can quite understand those who are thinking of manoeuvering to take advantage of any debt forgiveness that might be available.


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## Slaphead

Same as above poster, i could have gotten a mortgage for nearly double what i eventually took, and me and the missus could drive better cars than our 99 & 00 1.4 engines.
Ill be damn annoyed if ppl are getting amounts wiped off their mortgage, I would however be all for allowing ppl to go interest only etc and have the deeds changed accordingly. Just dont want to see the madness that went on rewarded.


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## Sunny

I took a much smaller mortgage and paid 20% deposit when they were offering me a much larger 100% one. Doesn't mean I am somehow superior to people who fell for all the sales guff from politicians, bankers, economists, commentators, media outlets, estate agents etc etc. 

There seems to be an almost 'they are getting what they deserve' attitude floating around. There is a real problem out there and trying to solve it will not only help those individuals but will also help the economy and therefore everyone else. 

I have already said that I am not in favour of debt forgiveness but we are still talking and nowhere near restructuring our bankruptcy laws which are completely unfair on individuals. All this talk about debt write off's for the masses, debt for equity swaps, renting from the Government and all the other mad schemes won't solve the problem. People need a way out and that means, they should be allowed to enter bankruptcy but be allowed a fresh start after a resonable period. If this means, we have to pour more capital into the banks to deal with losses on personal debt, then so be it.


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## truthseeker

Gervan said:


> As someone who drives a 17 year old car because I chose NOT to get a loan for a new car, who has an old kitchen and unfashionable bathroom because I did NOT get a loan for "doing up the house" I am furious that people who did not plan for the future should be rewarded by debt forgiveness.
> I do not wish to see anyone thrown out of their house for being unable to afford the mortgage, but believe the debt should be held on file, and not "forgiven". I know of people who received windfalls and spent it on luxury holidays etc who are now in trouble with mortgage repayments. Why should I pay for their luxuries when I chose to live within my means?
> I can quite understand those who are thinking of manoeuvering to take advantage of any debt forgiveness that might be available.


 
Youre talking as though debt forgiveness is going to be aimed at the '4 bed semi d, investment apartment to rent, 2 disgustingly large petrol guzzling jeep type vehicles' only.

What about the people just like you, who chose to live within their means, but are still in trouble?

Are you saying we just condemn people who have no hope of paying off their debt, and just have them living a life of servicing debt and struggling?

I know its irritating, I lived within my means, but both myself and my partner are out of work - and despite best efforts, the savings wont last forever, every job advertised in his field is a government sponsored slave labour internship (funny how internships want 5 years professional experience eh?). Neither of us has any loans bar mortgage but social welfare wouldnt cover that, so if the savings run out and no jobs in sight, we WILL stop paying - itll be that or stop eating - which would you have people do?


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## orka

I think the debt forgiveness that would gall most people is a debt forgiveness that allows people to retain ownership of assets that, in hindsight, they can't afford. There will, of course, have to be the debt forgiveness that has always existed - when houses are repossessed and the banks accept that the bad debt will never be repaid. I personally think the only officially-structured debt forgiveness that will work is where the asset is given up and the borrower retains some level of debt - maybe a % of the amount outstanding after the house is sold, capped at some level and repayable on mortgage-type terms (low interest rate, long duration). Allowing someone to walk away with a completely clean slate is unfair to those who are managing to meet their negative equity commitments - and would encourage more people to somehow not be able to meet their commitments.


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## monagt

> There seems to be an almost 'they are getting what they deserve' attitude floating around.


 Sunny.

+ 1

A bit of Schadenfreude going on here.



> Nobody can be complacent about the figures that show 55,000 mortgages are in arrears for more than three months. And nobody can be unaware of the ocean of pain and anxiety of which the figure only indicates the surface.


http://www.independent.ie/opinion/editorial/price-of-holding-on-to-your-home-2860720.html

And I like this quote: 





> But none of this comes anywhere near justifying the hysteria among the "chattering classes".


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## Firefly

orka said:


> I think the debt forgiveness that would gall most people is a debt forgiveness that allows people to retain ownership of assets that, in hindsight, they can't afford. There will, of course, have to be the debt forgiveness that has always existed - when houses are repossessed and the banks accept that the bad debt will never be repaid. I personally think the only officially-structured debt forgiveness that will work is where the asset is given up and the borrower retains some level of debt - maybe a % of the amount outstanding after the house is sold, capped at some level and repayable on mortgage-type terms (low interest rate, long duration). Allowing someone to walk away with a completely clean slate is unfair to those who are managing to meet their negative equity commitments - and would encourage more people to somehow not be able to meet their commitments.



+1 orka


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## Sunny

This isn't about negative equity. This is about people unable to meet their mortgate repayments.

Why should someone lose the asset and then have debt follow them? The banks took as much risk in the transaction as the mortgage holder but this isn't reflected when things go bad. There is nothing unfair about the mortgage holder giving the bank the asset as settlement for the outstanding mortgage.  

This doesn't mean that everyone in negative equity gets to hand back their keys. You can't just into court and declare yourself bankrupt and it is easy enough to put steps in place to ensure that only genuine 'unable' to pay cases are allowed to declare themselves bankrupt. These people should then spend a reaosnable amount of time paying back whatever debt they can (if any) and then be allowed to start again.


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## Firefly

Sunny said:


> Why should someone lose the asset and then have debt follow them? The banks took as much risk in the transaction as the mortgage holder but this isn't reflected when things go bad. There is nothing unfair about the mortgage holder giving the bank the asset as settlement for the outstanding mortgage.



Hi Sunny, 

I agree with this in principle, but the fact here is that the government (ie the taxpayer) now owns the banks. If there is a shortfall after the bank actually sell the house (not merely accepting the house back) then this is a loss payable by the taxpayer. Perhaps it would be fairer to all if a large portion of this remaining debt (such as 50%) followed the mortgage owner and payable over a long period of time at a low interest? That way they are clear of the mortgage but still pay something which the taxpayer isn't on the hook for.


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## Sunny

Firefly said:


> Hi Sunny,
> 
> I agree with this in principle, but the fact here is that the government (ie the taxpayer) now owns the banks. If there is a shortfall after the bank actually sell the house (not merely accepting the house back) then this is a loss payable by the taxpayer. Perhaps it would be fairer to all if a large portion of this remaining debt (such as 50%) followed the mortgage owner and payable over a long period of time at a low interest? That way they are clear of the mortgage but still pay something which the taxpayer isn't on the hook for.


 
The fact that the Banks are owned by the State isn't the fault of the struggling mortgage holder. The same mortgage holders are (were once) also taxpayers. Also, not all banks are owned by the State. There is going to be a cost to the State in all of this one way or another. We can either spend the next 5 years coming up with mad schemes to try and put off the inevitable or we can bite the bullet, realise that some people cannot afford their mortgages and deal with it. And the only way to deal this is through insolvency legislation. I am not saying this should be a get out of jail debt free card but bankruptcy shouldn't be a life sentance for people either. 

I don't like paying for wealthy pensioners to have medical cards. I don't like paying for child benefit. I don't like paying for numerous things that our tax dollars get spent on. Adding more capital into banks to deal with genuine hardship cases if needs be is just one other thing on the long list.


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## Firefly

Sunny said:


> The fact that the Banks are owned by the State isn't the fault of the struggling mortgage holder. The same mortgage holders are (were once) also taxpayers. Also, not all banks are owned by the State. There is going to be a cost to the State in all of this one way or another. We can either spend the next 5 years coming up with mad schemes to try and put off the inevitable or we can bite the bullet, realise that some people cannot afford their mortgages and deal with it. And the only way to deal this is through insolvency legislation. I am not saying this should be a get out of jail debt free card but bankruptcy shouldn't be a life sentance for people either.
> 
> I don't like paying for wealthy pensioners to have medical cards. I don't like paying for child benefit. I don't like paying for numerous things that our tax dollars get spent on. Adding more capital into banks to deal with genuine hardship cases if needs be is just one other thing on the long list.




I agree with all of that, but I think it should be a case for case basis. Someone who borrowed recklessly IMO shouldn't be able to walk away scott-free with the rest of us picking up the tab. Consider someone who got a 95% plus mortgage for property for 800k that they now can't afford. All they'll lose is the 5% deposit (40k). This house is probably now worth somewhere around 450k. Do we pay for the other 400k? If so, then the phrase "Sure you can't lose with property" springs to mind


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## orka

Sunny said:


> This isn't about negative equity. This is about people unable to meet their mortgate repayments.


This is very much about negative equity.  We have always had people unable to pay their mortgage but people in negative equity don’t have the out that non-negative equity people have – sell the property, pocket the positive equity and start again.  The big difference now is that people in NE are trapped. 



Sunny said:


> Why should someone lose the asset and then have debt follow them?


Mad concept like ‘they still owe the money’?





Sunny said:


> There is nothing unfair about the mortgage holder giving the bank the asset as settlement for the outstanding mortgage.


There’s everything unfair about it.  This would be allowing people a one-way bet – house prices go up, I win; house prices go down, I hand the property back to the bank.  Irish mortgage lending is not generally set up on this non-recourse basis so it can’t be changed in hindsight (well not without retrospectively changing all the contracts).  I think there’s a lot to be said for structuring mortgage-lending this way (I think most US mortgages are done this way) – but it would mean that people would need much larger % deposits and the banks would be extremely picky about who they lend to – not a bad thing, but home ownership would become a lot less common than it is now.



Sunny said:


> This doesn't mean that everyone in negative equity gets to hand back their keys. You can't just into court and declare yourself bankrupt and it is easy enough to put steps in place to ensure that only genuine 'unable' to pay cases are allowed to declare themselves bankrupt. These people should then spend a reaosnable amount of time paying back whatever debt they can (if any) and then be allowed to start again.


How is this different to what I suggested? – hand back asset, pay back what you can over time.


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## Shawady

orka said:


> This is very much about negative equity. We have always had people unable to pay their mortgage but people in negative equity don’t have the out that non-negative equity people have – sell the property, pocket the positive equity and start again.


 
I would be aware of a couple of people in arrears that are not in negative equity. In one case I suggested that they sell there house but was greeted with "We want to keep our home". I imagine most people, particularly with young families would be reluctant to move from their home.
These types of examples make the whole Debt Forgiveness issue difficult to understand. It would be interesting to know how many of the 50,000 mortgages in arrears are actually in negative equity so that the problem can be assesed accurately.


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## Sunny

orka said:


> This is very much about negative equity. We have always had people unable to pay their mortgage but people in negative equity don’t have the out that non-negative equity people have – sell the property, pocket the positive equity and start again. The big difference now is that people in NE are trapped.
> Mad concept like ‘they still owe the money’?There’s everything unfair about it. This would be allowing people a one-way bet – house prices go up, I win; house prices go down, I hand the property back to the bank. Irish mortgage lending is not generally set up on this non-recourse basis so it can’t be changed in hindsight (well not without retrospectively changing all the contracts). I think there’s a lot to be said for structuring mortgage-lending this way (I think most US mortgages are done this way) – but it would mean that people would need much larger % deposits and the banks would be extremely picky about who they lend to – not a bad thing, but home ownership would become a lot less common than it is now.
> How is this different to what I suggested? – hand back asset, pay back what you can over time.


 
The problem is not negative equity. That only takes away the option of selling the property to pay back the debt. Negative equity doesn't cause mortgage arrears which is what we are talking about. It removes an option for struggling mortgage holders and causes a problem for banks when the repocess properties. 

It's not a one way bet. There are still consequences. BANKRUPTCY. I am not talking about people going into Court, declaring themselves bankrupt and then walking out the door with a big smile on their face and drinking champagne.

Recourse or non-recourse isn't really the issue. Contracts don't need to be changed. The bankruptcy laws need to be changed. That way it doesn't matter if the mortgage is recourse or not.

Yes, because the US with their non-recourse mortgages were very picky who they lent to and required stringent underwriting. 

Being in debt is not a criminal offence. Being genuinely unable to pay is not a criminal offence and yet we seem to think that we should make people carry the burden on their shoulders of unsustainable debt for the rest of their lives as some sort of lesson.


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## Sunny

Firefly said:


> I agree with all of that, but I think it should be a case for case basis. Someone who borrowed recklessly IMO shouldn't be able to walk away scott-free with the rest of us picking up the tab. Consider someone who got a 95% plus mortgage for property for 800k that they now can't afford. All they'll lose is the 5% deposit (40k). This house is probably now worth somewhere around 450k. Do we pay for the other 400k? If so, then the phrase "Sure you can't lose with property" springs to mind


 
Again, people need to stop thinking that going bankrupt is just waving goodbye to debts and getting away scott free. 

Rapists and murderers are allowed out of jail after a period of time. Why should bankrupt people not be allowed the same opportunity?


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## orka

Sunny said:


> The problem is not negative equity. That only takes away the option of selling the property to pay back the debt. Negative equity doesn't cause mortgage arrears which is what we are talking about. It removes an option for struggling mortgage holders and causes a problem for banks when the repocess properties.


We have always had people unable to pay their mortgage - even in boom times people lost their jobs, separated, divorced, had failed businesses etc. - why does the problem need different solutions just because it's a more extensive problem now?


Sunny said:


> It's not a one way bet. There are still consequences. BANKRUPTCY. I am not talking about people going into Court, declaring themselves bankrupt and then walking out the door with a big smile on their face and drinking champagne.


And yet we have people on AAM looking for advice on going abroad for an easier bankruptcy.  Making bankruptcy easier will undoubtedly encourage more people into the process.  I know if I was facing having to pay a 400K mortgage that I couldn't afford on a property worth 200K, I would be quite happy to go the bankruptcy route to get my life back.  And if I could just about afford the mortgage but had a poor quality of life, I would go down that route too.  And if I could afford the mortgage but wanted to start getting some luxuries back into my life (because I'm worth it), I might go down that route too.  Clean slate looks so much more appealing than a personal balance sheet of negative 200K...


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## Firefly

Sunny said:


> Again, people need to stop thinking that going bankrupt is just waving goodbye to debts and getting away scott free.



But in my example above they would be getting away without paying for an obligation of 450k that taxpayers will have to pay. There may be some inconvenience in going bankrupt, but it's relatively scott free compared to paying back the 450k owed if you ask me


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## grackal

orka said:


> We have always had people unable to pay their mortgage - even in boom times people lost their jobs, separated, divorced, had failed businesses etc. - why does the problem need different solutions just because it's a more extensive problem now?
> And yet we have people on AAM looking for advice on going abroad for an easier bankruptcy.  Making bankruptcy easier will undoubtedly encourage more people into the process.  I know if I was facing having to pay a 400K mortgage that I couldn't afford on a property worth 200K, I would be quite happy to go the bankruptcy route to get my life back.  And if I could just about afford the mortgage but had a poor quality of life, I would go down that route too.  And if I could afford the mortgage but wanted to start getting some luxuries back into my life (because I'm worth it), I might go down that route too.  Clean slate looks so much more appealing than a personal balance sheet of negative 200K...



The trick will be to make bankruptcy unpalatable enough so that the people that can pay, continue to pay, but make it a viable option for those that are hopelessly trapped and will never be able to pay off their debts. 3 years or so of the present regime (i.e. your income is managed by a 3rd party) followed by... maybe 15 years suspension from being able to apply for a mortgage or loan over 5000 euro?

People who made a terrible mistake and just want to get back to life and are prepared to accept that they have shown themselves of being incapable of paying back a mortgage, will not have the opportunity to own another home for 15 years.

People who would think of pulling a sly one and dumping their negative equity on others will think twice when they cannot get another mortgage for an extended period.


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## grackal

orka said:


> We have always had people unable to pay their mortgage - even in boom times people lost their jobs, separated, divorced, had failed businesses etc. - why does the problem need different solutions just because it's a more extensive problem now?
> 
> And yet we have people on AAM looking for advice on going abroad for an easier bankruptcy.



During boom times, property was appreciating in double figures most years, negative equity was unheard of, people generally did well any time they sold, so property was rarely the cause of a bankruptcy.

Going abroad is simply the smart thing to do. Why make yourself a martyr for 12 years in Ireland, when you can go across the border and get it over with in 3 years? Even so, bankruptcy is much, much more than "a minor inconvenience".


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## Firefly

grackal said:


> The trick will be to make bankruptcy unpalatable enough so that the people that can pay, continue to pay, but make it a viable option for those that are hopelessly trapped and will never be able to pay off their debts.



I agree with this bit.



grackal said:


> 3 years or so of the present regime (i.e. your income is managed by a 3rd party) followed by... maybe 15 years suspension from being able to apply for a mortgage or loan over 5000 euro?



I think this is way too harsh. And anyway, whether it's 2 weeks or 15 years before they can get another mortgage, the result is still the same for the taxpayer...they are left with the debt of the original mortgage.


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## grackal

Firefly said:


> I agree with this bit.
> 
> 
> 
> I think this is way too harsh. And anyway, whether it's 2 weeks or 15 years before they can get another mortgage, the result is still the same for the taxpayer...they are left with the debt of the original mortgage.



Firefly, given the present situation:
1. The taxpayer owns the banks.
2. The banks own the mortgages.
3. _*Some*_ of those mortgages are *never* going to be paid back.

Ergo - yes, the taxpayer is going to be left holding the tab no matter what kind of scheme is concocted.

In the case of bankruptcy, the tab will be: the outstanding debt of the original mortgage, minus whatever the bank manages to sell the property for.

I do not see how it is harsh. If someone has _proven_ that they are incapable of paying back a mortgage, then they must be prevented from making the same mistake twice. 

This is also crucial for ensuring that chancers do not think they can strategically dump their negative equity on the taxpayer, slum it for 3 years and then buy back an equivalent house for half the price. 

Would my last point be why you think its "harsh"?


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## Firefly

grackal said:


> I do not see how it is harsh. If someone has _proven_ that they are incapable of paying back a mortgage, then they must be prevented from making the same mistake twice.



If someone is bailed out by either Debt Forgiveness or enters Bankruptcy, then the next lender will have access to this information. This will make it a lot more difficult to get a mortgage in any case without imposing a jail-like sentence of 15 years (which basically confines the debtor to a life of renting).



grackal said:


> This is also crucial for ensuring that chancers do not think they can strategically dump their negative equity on the taxpayer, slum it for 3 years and then buy back an equivalent house for half the price.



I agree as per post #40


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## grackal

Firefly said:


> If someone is bailed out by either Debt Forgiveness or enters Bankruptcy, then the next lender will have access to this information. This will make it a lot more difficult to get a mortgage in any case without imposing a jail-like sentence of 15 years (which basically confines the debtor to a life of renting).



Well I wont argue over details, but yes it confines them to a long period of renting. Hardly a jail sentence, many people have rented for long periods without getting shanked at the dinner table.


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## Firefly

grackal said:


> Well I wont argue over details, but yes it confines them to a long period of renting. Hardly a jail sentence, many people have rented for long periods without getting shanked at the dinner table.



Why not let the next lender, armed with the information that the person has previosly defaulted on a mortgage, decide on whether the applicant should get a mortgage or not?


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## monagt

Are we now beating a dead horse?


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## shnaek

Firefly said:


> Why not let the next lender, armed with the information that the person has previosly defaulted on a mortgage, decide on whether the applicant should get a mortgage or not?



Because, when the lender messes up again, the taxpayer will be on the hook again, and the cycle continues. We have seen how banks reckless lending has been rewarded. We tend to reward strange things here in Ireland. And we tend to punish acting responsibly.


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## Sunny

People should be discharged from bankruptcy after a 2-3 year period. The banktuptcy should be kept on a persons credit report for longer than that (say 6 years) and you should be legally obliged to tell the lender after this period that you were once bankrupt if you wish to borrow over a certain amount e.g. 50k. Then it becomes the lenders decision.


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## shnaek

Sunny said:


> Then it becomes the lenders decision.


But we are on the hook for the lenders decision. All lenders decisions are one way bets. If they win, they make a profit. If they lose, they walk away and hand the losses to the taxpayer. The bailout (worldwide) has ensured that there is no consequences, not now, not in the past, nor in the future, for bad lending.


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## Sunny

shnaek said:


> But we are on the hook for the lenders decision. All lenders decisions are one way bets. If they win, they make a profit. If they lose, they walk away and hand the losses to the taxpayer. The bailout (worldwide) has ensured that there is no consequences, not now, not in the past, nor in the future, for bad lending.



There won't be another crisis like this in Ireland. Things like this tend to repeated in large economies because they are harder to stop but Ireland will be like the Nordic countries and learn the lesson. This will be scarred on our national psyche like the famine. We might as well tell banks never to lend money again if we are not willing to move on. The Country messed up. We are not unique. It's time to stop the guilt and remorse and move on.


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## Duke of Marmalade

shnaek said:


> But we are on the hook for the lenders decision. All lenders decisions are one way bets. If they win, they make a profit. If they lose, they walk away and hand the losses to the taxpayer. The bailout (worldwide) has ensured that there is no consequences, not now, not in the past, nor in the future, for bad lending.


Ask anybody who bought "safe" AIB shares at €20 for their pension and now find they are worth 4c.  I don't think they would agree that they had a one way bet.


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## monagt

> Ask anybody who bought "safe" AIB shares at €20 for their pension and now find they are worth 4c. I don't think they would agree that they had a one way bet.



+1 and don't forget BOI, Anglo, Irish Life n Permo.


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## Chris

Sunny said:


> The fact that the Banks are owned by the State isn't the fault of the struggling mortgage holder. The same mortgage holders are (were once) also taxpayers. Also, not all banks are owned by the State. There is going to be a cost to the State in all of this one way or another. We can either spend the next 5 years coming up with mad schemes to try and put off the inevitable or we can bite the bullet, realise that some people cannot afford their mortgages and deal with it. And the only way to deal this is through insolvency legislation. I am not saying this should be a get out of jail debt free card but bankruptcy shouldn't be a life sentance for people either.
> 
> I don't like paying for wealthy pensioners to have medical cards. I don't like paying for child benefit. I don't like paying for numerous things that our tax dollars get spent on. Adding more capital into banks to deal with genuine hardship cases if needs be is just one other thing on the long list.


I fully agree with what you are saying, there are a lot of people that cannot service their debt and will have to default through some sort of a bankruptcy/insolvency process. But I also agree with Firefly, that it is the taxpayer who will be burdened further and therefore there would have to some extremely stringent consequences involved. 



orka said:


> but it would mean that people would need much larger % deposits and the banks would be extremely picky about who they lend to – not a bad thing, but home ownership would become a lot less common than it is now.[/FONT][/COLOR]


I agree this would be an extremely good thing. But I don't think that it would mean that less people would own their homes. It would mean that people fresh out of college don't buy property and that the average age of a first time buyer goes up a lot, but ultimately people will still be able to buy their homes. They would have to either save more per month or for a longer period of time, both are perfectly good solutions and purely depend on personal priorities.



Firefly said:


> Why not let the next lender, armed with the information that the person has previosly defaulted on a mortgage, decide on whether the applicant should get a mortgage or not?





shnaek said:


> Because, when the lender messes up again, the taxpayer will be on the hook again, and the cycle continues. We have seen how banks reckless lending has been rewarded. We tend to reward strange things here in Ireland. And we tend to punish acting responsibly.


I agree with both of you, but I think that the underlying problem goes back to putting tax payers on the line for bank losses. Ultimately I think that many individuals will have to default which will put the bill on the taxpayer. But I don not believe that this crisis will end without the state, i.e. the taxpayer, defaulting on some of the debts racked up. The taxpayer will be out of pocket, there is no way of avoiding that. The question is how do you deal with personal bankruptcy to make it very unpalatable but at the same time an efficient process.



Duke of Marmalade said:


> Ask anybody who bought "safe" AIB shares at €20 for their pension and now find they are worth 4c.  I don't think they would agree that they had a one way bet.


People who bought bank shares invested in a business, not in the debt. Bond holders invested in the debt and walked away with all their money after a few weeks of worry.


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## monagt

> The way to solve a local or global banking crisis is through the medium of “co-responsibility”, where the debtor and the creditor equally share the blame and the cost. One party borrowed too much in the good times and the other lent too much. That’s about the height of it.



[broken link removed]

Like him or hate him, he was prescient on the current shambles.


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## Duke of Marmalade

Chris said:


> People who bought bank shares invested in a business, not in the debt. Bond holders invested in the debt and walked away with all their money after a few weeks of worry.


I really do not know what you are talking about. Neither senior bondholders nor depositors have lost any money, we know that. _shnaek _said *banks* can lend money as a one way bet, that means the business i.e. the shareholders and clearly this has not been the case. Bondholders make no decisions at all about what banks do with their money, that is a decision for its shareholders as represented by the Board and clearly they were not making these decisions as a one way bet, they lost everything.


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## shnaek

Shareholders were not the people making the decisions on who to loan to, day to day. Shareholders had a responsibility to keep a check on their investments, the didn't, and they lost big. 
But the banks are still there, the same sorry cabal. This is not the first time AIB has been 'rescued' by the taxpayer. Can you be convinced that it will be the last? Are we not more like Britain and America than Scandanavia? After all, acting responsibly is taken for granted in Scandanavian countries. I can never see us going that route. 
AIB, BOI, ANGLO, Irish Nationwide - they should all be banks that we used to know. That they are still going, and hoovering up money, is a disgrace that we will live with for a long time to come. And every time we see the names of one of those banks lording over us, we know that they are laughing at us.


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## Duke of Marmalade

shnaek said:


> But the banks are still there, the same sorry cabal.


Do you mean that Bankcentre is still there, that the branch network is still there, that the bank infrastructure is still there?  Yes of course it is, the idea that we would just throw all that away and keep any sort of functioning economy is ludicrous.  The State owns 99.8% of AIB and most of the senior management/directors who were implicated in AIB's demise are long gone.

You made a cheap throw away comment that banks make one way bets and I have shown that up for the fallacy that it is. End of.


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## monagt

The Banks and BS's should have been flattened.

BOI and AIB taken into state ownership and quickly sold off for a €1 to what ever foreign bank would come in and take over the accounts and infrastructure.

The rest closed immediately.

Same as any business.


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## hastalavista

Lots of mistaken views here on shareholders and their rights/powers/etc

Under company law, shareholders have the right to vote at general meetings.

They have no legal right to speak.

The only info they are entitled to get are annual and quarterly financial information as required by company law or the various jurisdictions where they operate: eg report to SEC in US

The quality of this information is poor at best


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## micmclo

I back debt forgiveness
However, I expect to get a room rent free.
I'm sure a single home owner in a nice three bed can get me a spare room

Only fair, I'm paying towards their lovely house after all


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