# Mortgage bail out



## Danielle24 (15 Apr 2010)

Did anyone else see the front line the other night? I can't get my head around this scheme they're talking about to bail people out that are in mortgage arrears. Whats your views, opinions on it?


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## Howitzer (15 Apr 2010)

What are the details of it?


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## Danielle24 (15 Apr 2010)

*Hi*

I didn't get that much info on it but what I gathered was they were planning to help out people in trouble via the taxpayer.


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## Danielle24 (15 Apr 2010)

[broken link removed]

Here's an article on it.


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## csirl (15 Apr 2010)

I've had enough of paying for other peoples financial stupidity (banks etc.). I dont want any more of my hard earned money being used to bail out more stupid people.


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## Danielle24 (15 Apr 2010)

I can't understand how in the world this is fair, I can't afford my own mortgage why should my tax be going towards funding someone elses. I have all the sympathy in the world for people who have lost their jobs are in mortgage arrears etc, *but *at the end of the day having your own home is a luxury whether people accept that or not, what's next would anyone like to pay my car loan.


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## Howitzer (15 Apr 2010)

Ok I did watch the program and the notion that there will be a "bail out" for mortgage holders is somewhat of a misnomer. 

Whilst he ranted on a bit hysterically Karl Deeter made a number of points which I'm pretty sure will start forming the guts of this "bail out".

First off, no-one is writing blank checks, no-one is getting blank checks. The term to note is [broken link removed].


> A *short sale* is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the _deficiency_.


 
So the bail out really just facilitates those who have no choice (delinquent on the loan or need to move) in clearing the loan and moving on with their lives. It reduces the costs involded for all parties and really just formalises the process that banks currently undertake. The 2 year moratorium needs to be removed. The stigma attached dismissed. And the personal consequences to bankruptcy in Ireland reduced.

The last thing the Irish Economy needs is 10s of thousands of households putting every penny they have into paying interest payments on overpriced property. Not to mention mortgage interest relief and mortgage interest supplement, which are really just trasfers of money from the Iirsh taxpayer to the banks.

The advisory group on which Brendan now sits will seemingly have the ultimate word of this.

Will this have consequences for the Irish tax payer? Well first off this would be on a case by case basis. The number of likely cases would be thousands over a number of years and so fairly managable. Currently banks still have to go through the same process, it just takes longer and costs more.

The largest lender during the boom was ILP. They have sufficient resources to take the hit without recourse to Govt funds. The shareholders will get pasted. I've no problem with that.

Foreign owned lenders formed another significent portion of the market (Ulster, ACC, BOSI, First Active. National Irish Bank). These guys will make massive losses. I've no problem with that.

AIB was known to be quite prudent with regards to it's residential loan book during the boom - in stark contrast to it's Commercial loan book. Losses there may be manageable.

BOI ?

EBS ? 

Irish Nationwide ? 

Anglo: As far as I know they didn't have much of a residential loan book, bar some dodgy looking deals with freinds and family.

If you are in negative equity and are currently servicing your mortgage - tough.


The hit to the taxpayer doesn't look too bad, IMO.


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## Danielle24 (15 Apr 2010)

Hmm I don't know what to believe anymore


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## Howitzer (15 Apr 2010)

Danielle24 said:


> Hmm I don't know what to believe anymore


That's just my opinion. There's no bailout for anyone at the moment. What do you currently construe the situation to be?


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## tenchi-fan (15 Apr 2010)

My house is modest and so is my mortgage. I pay enough tax.
I do not want to bail out idiots who spent half a million on a house when they were only earning €40k.


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## Howitzer (15 Apr 2010)

tenchi-fan said:


> My house is modest and so is my mortgage. I pay enough tax.
> I do not want to bail out idiots who spent half a million on a house when they were only earning €40k.


If the mortgage is taken out with a foreign owned bank or ILP then you won't be bailing out anyone.


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## Danielle24 (16 Apr 2010)

Howitzer said:


> That's just my opinion. There's no bailout for anyone at the moment. What do you currently construe the situation to be?


 
I'm not undermining your opinion at al Howitzer, you're more educated on the whole situation than I am. I just heard, mortgage bail outs, banks and taxpayers and thought here we go again.


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## TheRed (17 May 2010)

I disagree in principle with allocating any tax resources to  householders in negative equity. I also disagree with NAMA.

People in real hardship will be helped via social welfare, if they  declare bankruptsy or sell their house at a significant loss (agree that  bankruptsy laws and self-employment welfare entitlements should be  reformed). Our social welfare system is generous and is sufficient to  meet the needs of those who are truly in dire straits. The emotive  language of people being homeless and sleeping in doorways if they lose  ownership of their house is a nonsense. Renting is always an option.

People who cannot afford to be homeowners because of changes in their  circumstances cannot expect others to subsidise their lifestyle choice.  Whatever happened to cutting your cloth according to your means, and  lying in the bed you made. While the ownership of a home was massively  and widely hyped throughout in the early noughties and people received  bad advice, ultimately the people who decided to pay exorbitant prices  were adults and have to take responsibility for their decisions. Moral  hazard must apply to everyone. Life is brutal, families face adjustment  and ruin, these are the harsh realities. More nanny-statism and handouts  from the taxpayer,in particular from people who were prudent with their  financial resources are not the answer.


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## doubledeb (17 May 2010)

For what its worth heres my view.
I think an idea to get people spending again is to take the negative equity that people have in their homes and put it on "hold". Say i have a mortgage here for 280k, 274k remaining. My home is currently worth circa 210k. That leaves me 64k in neg eq. The bank would effectively hold back on getting the 64k back until things improve. they would also retain 23% of my home. Therefore I would only be paying back (temporarily) on what the house is worth (210k) meaning a lower repayment, more disposable income to put back into the economy.

In turn retaining some jobs as me and others spending more would help retain other jobs i.e having a knock on effect within the country. retail etc..Also it may stimulate the property markets. when I can afford it then, I would up the repayments back to the level they are now and continue to reduce the stake the banks have in my home. 
Its probably a rediculous suggestion but it might help those that are finding it really difficult to keep up mort payments
Any thoughts?


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## spreadsheet (17 May 2010)

doubledeb said:


> For what its worth heres my view.
> I think an idea to get people spending again is to take the negative equity that people have in their homes and put it on "hold". Say i have a mortgage here for 280k, 274k remaining. My home is currently worth circa 210k. That leaves me 64k in neg eq. The bank would effectively hold back on getting the 64k back until things improve. they would also retain 23% of my home. Therefore I would only be paying back (temporarily) on what the house is worth (210k) meaning a lower repayment, more disposable income to put back into the economy.
> 
> In turn retaining some jobs as me and others spending more would help retain other jobs i.e having a knock on effect within the country. retail etc..Also it may stimulate the property markets. when I can afford it then, I would up the repayments back to the level they are now and continue to reduce the stake the banks have in my home.
> ...


 
If you go Interest Only, isn't that the same or similar result? You postpone paying the principal. More disposable income put back into the economy etc..


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## doubledeb (17 May 2010)

Yes, but if mortgage holders have already been down this road maybe this might be the next step for them. I think most lenders will give you 6 months interest only but what options are after that?
In the case when one person or both have been made redundant, maybe they could put it the (neg eq) on hold until they return to work.
Last resort for some I know but it would at least keep a roof over the ol heads?


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## Howitzer (17 May 2010)

doubledeb said:


> Last resort for some I know but it would at least keep a roof over the ol heads?


Hardly a last resort to keep a roof over your head. A last resort list lower than that might be: Rent, Rent a Council property, Move back in with parents/relatives.

I'm not being conceited. These are genuine last resorts. Creating a convoluted scheme which solves absolutely nothing for either the person, the bank or the state is worse than useless.

This isn't a criticism of you but of the idea. Matt Cooper has floated a flavour of this. I do genuinely agree with the idea that those deep in negative equity AND unable to service their mortages need help. But the help they need is in winding up their position, clearing the debt with the bank and starting again.

That's a solution* that works for all 3.

*(There is no solution)


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## csirl (17 May 2010)

> For what its worth heres my view.
> I think an idea to get people spending again is to take the negative equity that people have in their homes and put it on "hold". Say i have a mortgage here for 280k, 274k remaining. My home is currently worth circa 210k. That leaves me 64k in neg eq. The bank would effectively hold back on getting the 64k back until things improve. they would also retain 23% of my home. Therefore I would only be paying back (temporarily) on what the house is worth (210k) meaning a lower repayment, more disposable income to put back into the economy.


 
Someone has to pay the interest on the full 274k remaining - if you're not doing it who is? The taxpayer? The banks cant afford it, so ultimately it will come from the taxpayers pocket in the form of higher taxation.


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## Howitzer (17 May 2010)

csirl said:


> Someone has to pay the interest on the full 274k remaining - if you're not doing it who is? The taxpayer? The banks cant afford it, so ultimately it will come from the taxpayers pocket in the form of higher taxation.


No it won't. We don't own all the banks.

Ok, for a convoluted scheme such as that outlined the state would have a liability as they would be interferring in the market, but in general who cares if someone defaults on a sub-prime lender?


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## TheRed (18 May 2010)

Quote:
Many people who bought houses during the recent boom did so because they  wanted a home not to make a profit. Why should these people suffer while those who bought before the  property boom saw their properties soar in value.

Emm... why should those who would have liked to buy a house to raise their families but make a financially prudent decision to keeping renting fork out for those who were profiligate. Perverse, though not quite as perverse as NAMA.

Handouts should be the reserve of those who are truly desperate, as Howitser said householders who cannot afford that status should wind up their position.


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## UFC (19 May 2010)

1234 said:


> Many people who bought houses during the recent boom did so because they wanted a home not to make a profit.
> 
> Why should these people suffer while those who bought before the property boom saw their properties soar in value.


 
You could apply your logic to anything.

Many people bought Berkshire Hathaway shares when they were only $18. I bought them when they were $113,000. BWAAAAA!


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