stop blaming mortgage holders

[hastalavista]

......IMHO what drives media content is usually not the most important social or economic issues.

This is spot on with the addendum that fair and balanced reporting is for 'others'.

Just take the sub-prime debt example used in Slime Time the other night.

Sad? yes.

A typical example of what is happening? No.

 

[liaconn]

It appears that anyone who does not want to wallow in pity and head shaking is heartless. Did we learn nothing from the tribunals – years passed, millions were spent and there was little or nothing productive achieved. We are not going to get back banker’s bonus’s, we are not going to put the editor if the Independent property supplement on trial, shoddy conveyancy solicitors are not going to end up in Mountjoy. The simple fact is that the efforts spent on solutions to people's problems are far more important than the blame game.

I am tired of platitudes such as Liaconn's that drive the discussion in to a cul de sac. If the efforts were focused on the resolution of personal bankruptcy in Ireland, then the individuals in the worst financial positions can at least see closure to a very difficult time in their life.

I would love to see the likes of Fingleton pay for the disaster that he contributed to but I would be far happier if their were 50 families who were getting out from under their debts and able to focus on their family. It may not make the best media headlines but IMHO what drives media content is usually not the most important social or economic issues.

It is not a platitude. I am trying to point out that a lot of people in difficulties did not bring it on themselves by stupidity or greed and are deserving of a bit of sympathy not 'oh well what did you expect. You should have know the market would crash'. That is not asking people to 'wallow in pity', it's just asking for some degree of understanding and sensitivity towards people who are going through a very bad time. It's not black and white, you know and I don't want to live in a society where people who are in bits about their mortgage and bills are just told 'sorry, nothing we can do. Now jog on' by people who congratulate themselves on being pragmatic and realistic (usually people who were lucky enough to buy at the 'right' time even though, in retrospect, they will decide they made a good, informed decision or definitely wouldn't have bought during the housing boom no matter what their situation).

 

[Bronte]

It's not black and white, you know and I don't want to live in a society where people who are in bits about their mortgage and bills are just told 'sorry, nothing we can do.

I can feel your pain and that of others. But there is nothing any of us on here can do for that. To give financial advice one has to try and be detached. This site is littered with desperate stories. Please don't think that we don't have sympathy, but sympathy will not pay the mortgage.

There is no one on here who does not have family in dire circumstances.

I nearly vomited with the Prime time pod cast last night on Nama. Too cross to even discuss today as I'll have to rewatch when I'm calmer.

Ontour and 44brendan I would agree with everything you both said. The waste in Ireland, and what could have been done instead, so sad. What a corrupt country I'm sorry to say. And what a circus Nama is. In 10 or 20 years we'll know the pay, the pay offs, the settlements with developers, the people in Nama being those who were involved in the boom etc. And no doubt the Nama properties being sold back to developers at rock bottom prices. It's a commin.

 

[demoivre]

If a bank CEO earning over a million a year (and still on a pension of a third of that) tells young couples that they'd be silly not to buy and here's loads of money - is anyone really saying that the bank should not share the loss?

There are loads saying it it. Yet Bankers are the ones who came up with the idea of 100% mortgages, six plus times salary multiples, offering 3 year fixed rate mortgages so that borrowers didn't have to be stress tested in the same way as variable rate mortgages etc. Two parties sign a mortgage agreement so there is at best equal culpability though I personally blame the banks more because of their ludicrous lending practices.

 

[bugler]

I think everyone would be ok with the bank sharing the loss. The taxpayer on the other hand...

 

[Ryandd]

Just wanted to reply to Galwayous on some unfair comments, I don't know if its the D in pass Maths or the 10years living in a tiny house, Firstly I don't have an excessive mortgage as you put it and nobody who took out a mortgage perdicted the hugh number of job losses with little evidence that this will improve in the medium term. Rental prices if you remember were sometimes in excess of mortgage repayments and out of control so no it didn't occur to me to rent a house and paying dead money. And with regard to education funds for my children you have no basis to comment on my situation without knowing the facts. Im sure your landlord is grateful to you for paying their mortgage.

 

[Greensquare]

I think everyone would be ok with the bank sharing the loss. The taxpayer on the other hand...

Yes, but the bank = taxpayer, because the banks are broke. Any losses to be absorbed by the banks are going to be have to be paid for by the taxpayer, through further capitalisation of the banks.

If the banks make losses, the money to pay for it doesn't magically appear to fix it, it ultimately comes from the tax payer. So if there is any sort of "loss sharing" or "Debt forgiveness" it will be paid for the average Joe on the steet, who is still lucky enough to have a job to be able to pay tax. Becasue it sure as hell won't come out of the bumper pensions paid to Seanie & fingers.

 

[aidanmac]

"People in Glass Houses shouldn't throw stones"

"Let he who is without sin cast the first stone."

etc., etc..

I know a man who lost everything in the 80's recession. His family and their security was destroyed by banks and currency speculators. He lost his home to repossession and the bank pursued him for every penny and he also had to service the other debts we all have and the normal cost of living. He ,more or less, ended up paying for a house he no longer owed so the bank could get it's pound of flesh!

It took him 20 years to recover.

With the economy going so well, he up-skilled in 2005 in his 50's and went after a more responsible post in the industry he worked in.

He got up the ladder in a small company and was earning what for him was reasonably good money (70K) in what appeared to be a safe business.

Having fought so hard to get back to normality he and his wife got a new mortgage of just 200K and bough a SMALL bungalow in the country as their family home. His mortgage was costing the same as his rent had been - a good move all round.

In 2009 the banks turned off the company's credit, my friend was made redundant.

His Mortgage Protection Insurance covered his repayments for 1 year then stopped.

Three months later he was diagnosed with a slow terminal illness and can never work again. (He wasn't able to afford Critical Illness Insurance when he was working - he wasn't that well paid.)

He now lives on a Social Welfare Invalidity Pension - lucky he wasn't self employed!

The bank has now taken his home, again because he will never be able to meet the repayments and he's renting again, and all he did was to work hard and try to recover his family's security.

You don't know what's around the corner for any of us and there are people out there who genuinely should have their debts taken off them because they didn't create the situation they find themselves in today.

All mortgages should be non-recourse. Borrowers and lenders are both taking a risk. A borrower cannot predict the future and cannot protect against every eventuality. We only have one life and it's much more important than banking or money

Only a fool or a banker would argue against that.

aidanmac

 

[oldnick]

I agree with the sentiments -although making all mortgages completely non-recourse would mean that lenders would probably want such large deposits that buying would be impossible for most people.

As regards the story about the poor chap with a terminal illness whose bank so quickly took the house off him.....

 

[Bronte]

We are never going to have non recourse mortgages in Ireland. The cost of borrowing would be much higher if they existed.

Aidanmac your story is a very sad story. Could you clarify something please. Why did the man not stay in the house and the state would have paid his mortgage? Also did he have life insurance, they normally pay out in cases of terminal illness and life insurance would have been a condition of the mortgage?

 

[ontour]

We are never going to have non recourse mortgages in Ireland. The cost of borrowing would be much higher if they existed.

The cost of borrowing would be higher and the deposit requirement would be greater. That is not the full picture as these would result is a more stable housing market that is less prone to overheating. For many people the amount borrowed would be less as they would not be bidding against people that have no deposit and no credit history. Some people who were able to buy property in the last decade would not have been in a position to purchase if the mortgages were non-recourse, in hindsight many realise that that would not have been a bad thing.

Introducing non-recourse loans would be as much about constraining the banks as it is about constraining the prospective borrower.

 

[Ryandd]

Just wanted to know if anyone knows if the terms of your mortgage warn of negative equity like when you take out an investment and they warn that the value of this investment may rise and fall in line with markets or something to that effect, its not that important but just wanted to know.

 

[SteveW9]

In fairness you should have the cop on to know that you task a risk when you get a mortgage. If youre house went up 100k would you give this back to the taxpayers that you are looking to bail you out??

 

[oldnick]

steve -in reponse to the post prior to yours:-

- use of terms like " should have add the cop-on" , "looking to taxpayers to bail you out" are misleading and slightly offensive...

1) Are you saying that people should have known that buying property was such a risky business? That is, there was no need for the clever banks to issue any sort of warning to inexperienced buyers, as opposed to banks constant persuasion to buy? Did more than 1% of the population believe that property would crash over 50% and that unemployment would reach record highs ?

2) "bail you out" -I've never clearly understood this term .I think that you used it in the sense " pay for your debts" or "give you money ". Why take that extreme tone to people in difficulty? Some help, not "bail-outs" is what most need - help that need not cost "the tax payer" any more than not helping those in mortage trouble.

3) Your point about the "tax -payers" is assumedly because most banks are now owned by the taxpayer. The banks were stupidly guaranteed by the govnt and because of this crazy guarantee the banks were taken over . Absolute madness. But no way the fault of the individual person in trouble. If someone is looking for help ,or burden sharing from the bank this should not be denied because the govnt crazily took over the bank. Should banks deny loans to businesses because they are risking the "tax payers" money ?

Steve -you started your post "in fairness". It was anything else but fair.

 

[Chris]

A question for the OP would be whether you had a rainy day fund that would tie you over if things went bad. Most people I have talked to that are in difficulties with their mortgages had no additional savings from the day they took out their mortgage. In my opinion it is irresponsible to not have a significant rainy day fund, especially when you have a large mortgage. Even when I had a mortgage I had insurance and savings that would cover at least 12 months of no income and basic living expenses. I do not know many people that have the same.

The cost of borrowing would be higher and the deposit requirement would be greater. That is not the full picture as these would result is a more stable housing market that is less prone to overheating. For many people the amount borrowed would be less as they would not be bidding against people that have no deposit and no credit history. Some people who were able to buy property in the last decade would not have been in a position to purchase if the mortgages were non-recourse, in hindsight many realise that that would not have been a bad thing.

Introducing non-recourse loans would be as much about constraining the banks as it is about constraining the prospective borrower.

Deposit requirements would not necessarily be higher. Most states in the US have non-recourse mortgages and almost all of them had extremely low deposit requirements and still do. Non-recourse mortgages would fuel speculation, as the downside risk would be almost nonexistent. If prices go below a certain amount you can walk away, that would result in higher house prices not lower.

 

[oldnick]

Chris

Property prices have crashed in most of the USA -in some states by more than 50% No expert has reported any sign that property prices will generally increase .

So, it seems that non-recourse mortgages do not result in higher prices.

Also, are you sure USA banks (of which hundreds have closed/merged in recent years) are still asking for low deposits and giving nonrecourse mortgages ?

You are right about the rainy day savings point. Some people were silly. But the rain has been falling on many(often quite sensible and cautious) people for far more than a year now.

 

[Alwyn]

Interesting read. The article is over a year old. Has there been any update?

 

[ontour]

Deposit requirements would not necessarily be higher. Most states in the US have non-recourse mortgages and almost all of them had extremely low deposit requirements and still do. Non-recourse mortgages would fuel speculation, as the downside risk would be almost nonexistent. If prices go below a certain amount you can walk away, that would result in higher house prices not lower.

True, the US are not a great example of how to implement non recourse loans. It would fuel speculation if the deposit requirement was low and the approval process was very loose. The banks should be more risk adverse because the loans are non-recourse, it is this more cautious approach by lenders that should quell speculation. The recent banks action has shown that banks do not act logically which is a bit of a problem.....for all of us !

 

[Ryandd]

Steve
In fairness if my house went up 100k we wouldn't be talking about bailouts, its clear the reason behind the crash it and it wasn't you or I.

 

[kaplan]

I would suggest posters positing people borrowed recklessly consider the two LRC reports which contain insightful synopsis of why people get into debt traps and what should be done. "A Behavioural Approach to Law and Economics" - Jolls, Sunstein & Thaler is a wordy article also worth reading. Blaming individuals for what is understood to be a rational human phenomena is rather naive.