# Will anything be done about the negative equity?



## CrazyOne (9 Apr 2011)

Just wondering what the general consensus is on this - do people think that the government will step in to help people who are in negative equity or will they just leave it for people to deal with on their own?  
I think that if there are two or three more interest rate hikes the number of people who will struggle to keep up their repayments or fall into arrears will be huge - will that be the catalyst to something being done to help?  Will it only be help for those in arrears?


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## tvman (9 Apr 2011)

Why would the government (i.e. taxpayers) pay off some of peoples' mortgages? They entered into a contract freely.

There were no proposals in 2000-2006 to transfer capital gains made by those who had bought properties, which rose in value to those who had not bought properties. That probably sounds like a ridiculous proposal - but it's exactly the same as the taxpayer paying off part of the mortgage of someone who is in negative equity. 

And since the banks are now taxpayer funded - if the banks write off mortgages en masse - the taxpayer will pick up the tab for that. 

Nothing personal - but I just can see any logical argument.


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## Magpie (9 Apr 2011)

The logic is simple. Something will be done if and when it is advantageous to the government to do so. They aren't interested in people and their problems, but they will care when the mess gets too big. 

Its all very well saying people got themselves into this mess (which is only half true) but if you get a lot of people defaulting on negative equity mortgages that will create a SEP (somebody elses problem) that will have to be dealt with.


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## Leaky1 (9 Apr 2011)

Negative equity and mortgage arrears are two separate things. I hate the idea of people deliberately defaulting on a loan they can afford to repay just because the property is in neg equity, like there is no point in honouring the mortgage agreement - the lack of equity is only an issue when you go to sell (which obviously is what some people may need to do to pay off their arrears, so I can see why it's connected in peoples minds).

Personally I have a large enough amount of neg equity and a need to move in the very near future. For some reason I'm the only person I know who doesnt have a tracker! Sorry to be selfish but it would annoy me to be stuck with my tiny 1-bed apt with a payable mortgage, while other people who over-extended themselves would get help to live in houses I can only dream of.


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## orka (9 Apr 2011)

Leaky1 said:


> it would annoy me to be stuck with my tiny 1-bed apt with a payable mortgage, while other people who over-extended themselves would get help to live in houses I can only dream of.


And that's the nub of the problem with trying to help anyone in NE - you are helping them keep something that their earnings don't really entitle them to - at the expense of those who were prudent and/or didn't buy at all or bought something modest/affordable. And as pointed out above, it's not negative equity per se that's the problem - it's inability to pay a mortgage in NE. The only proposal I could see being acceptable is interest-only for as long as necessary - I know we can't speculate on house prices but it's not a mad stretch to predict that prices will have gone up enough in 20/30/40 years time to eliminate NE and the properties can be sold then to pay off the mortgage. They have inter-generational mortgages in Japan so no reason for the concept of a really long mortgage duration not to work here.


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## Magpie (10 Apr 2011)

But arrears are the problem for a lot of people, and intergenerational mortgages are never going to be possible.


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## orka (10 Apr 2011)

Well if someone can't afford interest only on the mortgage + capitalised arrears, then they really can't afford the property - I don't see how it would be fair to subsidise them to retain 100% ownership of a property at the expense of others who were more prudent/less greedy. I suppose an option that might work and I know it (and all the associated problems) has been discussed before - is for the bank to take a silent co-ownership of the property. It would have to be something fairly simple though - 'in return for writing off 12% of the mortgage + arrears, the bank gets 20% of proceeds when sold' or '33% write-off for 50% share of proceeds'. There is a short-term cost in interest foregone but the bank gains an asset - overall probably preferable to making someone homeless and crystalising the loss with a forced sale.


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## Magpie (10 Apr 2011)

Why is there always a need to be nasty? Stupid or greedy aren't the only people caught out, plenty of us were just unlucky. But thanks.


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## orka (10 Apr 2011)

What's nasty? I had two categories - 'less prudent' and 'more greedy' - you chose to take it that you were in the greedy bunch. I suspect the vast majority having problems now are in the 'less prudent' category - not all that many were simply greedy.


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## bluemac (11 Apr 2011)

As I see it the banks borrowed to much money got caught up in the housing boom, they have now had there own mortgage cut, and been provided with funds from the ECB at 1%, NAMA, +tax payers money as funds and garantees..

would it be that unfair to help out ALL house buyers who bought after 2006 and work out a % morgage reduction (back too 2006 price level) or just even a 1% interest rate on that %? until its paid off?

I think its time to take a real look at what was going on in 2007, Had i not been very lucky I would be stuck in a house I nearly bought for 320k and now it would be worth €170 if I could sell, which I would not be able to as the builder still has one for sale..  I can see how anyone and everyone got caught in this.. (I believe we were all missled by a corrupt bank system supported by politicians and with the help of estate agents).


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## dahamsta (11 Apr 2011)

tvman said:


> Why would the government (i.e. taxpayers) pay off some of peoples' mortgages? They entered into a contract freely.



Why would the government (i.e. taxpayers) pay off the bank's screwups? They entered into a contract freely.


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## Gekko (11 Apr 2011)

bluemac said:


> Had i not been very lucky I would be stuck in a house I nearly bought for 320k and now it would be worth €170 if I could sell, which I would not be able to as the builder still has one for sale


 
And some posters would have us believe that you would have been a victim of your own greed and unworthy of assistance from the State.  I fundamentally disagree with that viewpoint.

The social problems of negative equity necessitate action at government level.


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## tvman (11 Apr 2011)

dahamsta said:


> Why would the government (i.e. taxpayers) pay off the bank's screwups? They entered into a contract freely.




I agree - people and institutions who lent to banks shouldn't have been bailed out by recapitalising the banks. I think the banking policy has been stupid and immoral but at least the owners of banks have rightly lost everything and just because we dealt with one aspect of the banking crisis disasterously doesn't mean we should repeat those mistakes in dealing with other aspects of the crisis. 

Steve


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## redfedora (12 Apr 2011)

AlbacoreA said:


> If they only do it for one group, then everyone else will stop paying aswell.


 

like i said what ever solution should be universal. so if its simple a protection against repossession then that would apply to those that have fallen on hard times and those that have not but might. I dont think it should be anything to help with the value of the property or reduce negative equity. at the end of the day when you by something it depreciates in value and economics alwasy has to be considered. it also shouldnt pay off their mortgage because like you said that could encourage others that are borderline to just quit paying too. 

things like further interest relief sounds good, but to me its not universal. for example if they say increase tax relief for those that purchased or drew down in 2006, well what about someone that drew dowen in late 2005? two neighbours purchasing either side of christmas would most probably have similiar mortgages so should both not have the same support?

I consider myself blessed that i've managed to struggle by each month and touch wood have yet to miss a payment on any bill but unlike my neighbours that continually went out drinking, bought newer cars and had multiple holidays i made a conscious choice to curb my spending. I cut out the unneccessary items when shopping, bought what was on special, hell i would spend a day travelling to 3 local super markets in my area to ensure that i was getting the best value for my money. I also consolidated things, for example switched to UPC for TV and phone/internet that saved me at least 50 a month. switched gyms for a while to save 20 a month, didnt take the car out or when i did didnt use the aircon in the summer to save on petrol. all to make what cash i had stretch further, 

but i know people that just got more and more credit cards and didnt change their lifestyle to suit their means, and used one card to pay off another, paid for whole holidays including spending money on credit card  and now have the debt collectors at the door. I feel no sympathy for these people they deserver everything thats coming to them.


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## johnnygman (12 Apr 2011)

There seems to be such an attitude of, "if they are getting it, I want it" very childish and unhelpful.I doubt anyone here who is not in massive negative equity understands the difficulties problems that this mess has caused for young families. Most of the people who are taking this attitude are the one who perhaps through nothing more than blind luck and timing/age are not in this terrible position. It's the ordinary families that I feel for, this was not their doing.
This issue hugely affects labour mobility and as pointed out causes huge social problems, people need to realise that the Goverment will only do somthing in relation to this if it helps the economy and society in general and stop thinking so much about "what's in it for me" I am not in negative equity thank God but as someone pointed out earlier I could easily have been if the timing had been different and would not like to be stuck with that noose around my neck. Take a drive though the midlands North West and tell me you dont feel sorry or want something done some of these people who have paid their taxes like you and I. I find it very sad to see people making comments such as "I would be sickened" if they did something to help thinking only of themselves.


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## Sunny (12 Apr 2011)

I think many people are at cross purposes here. I think people should be helped but I don't think there should be taxpayers money used and I don't think there should be debt forgiveness. There are a few things that can be tried but there is no simple ideal answer. Some possibilities include negative equity mortgages as argued here, extending mortgages up to 50, 60 year terms to reduce current payments, deal with personal bankruptcy laws, look at freeing up money tied up in long term pension funds, speeding up reprocession process to stop arrears climbing (the current moratorium is hurting a lot borrowers).

All them in my opinion have serious drawbacks but we are going to have problems for the next 20 years. We need to look at every possible solution.


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## johnnygman (12 Apr 2011)

Debt forgiveness is more than godly -- it makes fiscal sense by Marc Coleman


I think the author hits the nail on the head right here.


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## johnnygman (12 Apr 2011)

csirl said:


> I dont agree with debt forgiveness. It doesnt sit well with the moral compass i.e. those who were most wreckless are rewarded most. I also dont agree with any plans that will cost the ordinary taxpayer any additional money.
> 
> Then how does bailing out banks and bank bondholders, mostly pension funds and many of them Irish pension funds and bond investors with taxpayers money with no penalty for taking the investment risk sit morally?
> Surely this is far more immoral than helping these young families and taxpayers out, I do not categorise them all as reckless as pointed out, it was beyond many of thems control how they and us all ended up in this mess. Something needs to be done or many of these people would just be better off handing back the keys to these properties and leaving this country and starting their families and living abroad where they can expect to have perhaps a job and an opportunity of some quality of life.
> ...


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## csirl (12 Apr 2011)

johnnygman said:


> csirl said:
> 
> 
> > I dont agree with debt forgiveness. It doesnt sit well with the moral compass i.e. those who were most wreckless are rewarded most. I also dont agree with any plans that will cost the ordinary taxpayer any additional money.
> ...


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## Brendan Burgess (13 Apr 2011)

I have moved the discusson on negative equity mortgages to here

http://www.askaboutmoney.com/showthread.php?t=154200

Brendan


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