"Want to solve arrears crisis? Make repossession faster and cheaper"


If one year forces debt write downs asap, is that not a good thing. Instead we have had about 7-10 years of can kicking by banks. Was that brought up last night, it wasn't in the Indo article. The fact that banks did nothing initially when the crisis hit and have been very slow to deal with borrowers and have in fact been can kicking.

Some things that are clear are:
a) The insolvency legislation is not working
b) The insolvency service has hardly any clients
c) We are not seeing solutions
d) Mabs should have been allowed become involved in helping people through the insolvency rather than broke people having to pay PIP's.

So maybe Jerry Beades is right (on some things)

The fact that borrowers over extended was mentioned, and I agree they were culpable, but they were let down by a) the government and b) the central bank and big time by c) the banks who throw all rulebooks on prudent lending out the window, including people being given money based on 'hypotetical rents' and 'certified' income and 'false' P60's.
 
Bronte said:
Can that be backed up with figures? As in how many people are in this situation?
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I don't have the figures but we have seen a high % of the arrears from the recent county by county data are in Dublin. Unemployment has fallen from 15% to just below 10% and is continuing to fall (it's probably much lower in Dublin and surrounding areas).

I'm in the market for a larger family home having stupidly bought a small/affordable townhouse during the mid noughties when single. It's now too small for a few kids, and with more planned, we need to upsize. But we're now getting whacked by whopping annual house price increases and school availablility (another scandal in this country that is never tackled).
So my mistake was to have been ultra prudent when I should have fallen for the bank/media/peer group hype and bought a much bigger house in a much nicer area. By your logic, I would now have my mortgage written down to suit my current financial means i.e. the person who did this gets rewarded while a prudent eejit like myself has to soldier on and make do.
Thats some lotto win for some
 
I hear where you are coming from. I'm only proposing it for those where the value of the house would not get the bank any more money by selling the house.

For example, if they have a mortgage of 300K on a house worth 150K. And they can afford a mortgage of 150K.

Is it better to evict, and then they have to rent, but they cannot afford the rent and so the government has to step in. So an additional cost to the taxpayer. And lots of money by current bank mortgagees paying over the odds mortgage to pay the receivers, accountants and layers for the evictions and legal process.

At the very beginning of this mess I mentioned on here how a lot of money would go on fees/legal. The top accountants actually hired people for the windfalls coming from insolvencies.

One day I'd like to see the figures for the PIP's, legals, accoutntants, receivers, estate agents. It's a whole industry all of it's own.

Burgess (I think) mentioned last night that people were staying in houses, not paying and speding the spare cash on school fees (he mentioned but I guess holidays or lifestyle). Those people do not deserve any sympathy and honestly it makes no sense to me that banks are putting up with this, but nobody can confirm this for sure.

We don't seem to be able to quantify exactly who is doing what.
 

Hi Bronte

The banks do their very best to come up with a sustainable solution. If someone is engaging with them and is paying something,the banks can come up with solutions in around 80% to 90% of cases.

Let's say I have a mortgage of €300k SVR on a house worth €200k. If I have shown that I can make the repayments on a mortgage of €200k, then the lenders will usually give me a split mortgage i.e. they will warehouse the €100k, usually interest free. I have seen the lenders give split mortgages to people with trackers and very little negative equity. I would not do that as a lender.

That is a better solution than the one you propose of writing down the mortgage to €200k. What happens if the property rises in value to €280k? The borrower sells it and makes a profit of €80k.

If someone sells their home at a loss and has been cooperating with the lender, then I think that the shortfall should be written off or settled over maybe 3 years.

But while someone continues to own their home, then I don't think that their debt should be written down. It should be warehoused.
 

That too seems a good idea, a better one actually, but only if the borrower gets the shortfall written off if house is sold at a loss. And that is to be put in writing. It wouldn't seem right that you pay your 200K, and sell for a loss and have nothing to show for it. It would 'incentivise people to pay, would make people happier and more stable, good for society.

How many split mortgages have been completed and have they worked?

I would always be wary of small print in banks. Not nice if after paying the 200K that the banks then comes for fees, costs, charges on the warehoused bit and that we are here on AAM debating that in 20 years time. Where is the protection in Split mortgages?
 
Thats it, simple as. No one's a winner and the Mortgage/House buying system retains some shred of credibility.
But will it be implemented in a place like this!
 
Brendan Burgess said:
Hi Bronte

Around 75% of those in default are working according to the Central Bank.

Brendan
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Now Brugess, I don't belive a word out of the mouth of the CB. Sorry but I don't. They've lied for years now on mortgages rates despite you 'investigating' and proving it to them. And they were pretty much useless during the boom.

The only source I'd believe is the banks, they must have figures. Maybe the PIP's on here would also have an idea.
 
Delboy said:
Where do you think the CB got their figures from!
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They also get the mortgage interest rate figures from the banks, but by miraculous mathematical calculation they change in the CB reports to something else.
 

Hi Bronte

When a borrower is offered a split mortgage, they have a choice between accepting it and going bankrupt. I have argued that in many cases of deep negative equity, they would be better off voluntarily surrendering their home and going bankrupt or trying for a PIA.

My compromise was that if the borrower maintained the repayments on a split mortgage for 5 years, then they should have the right to sell the property and that the shortfall would be written off.

Brendan
 

Agreed that in many cases of deep NE the property should be sold. Is this what is happening?

As for your second point, it's not the law so banks don't have to do it, so borrowers who enter split mortgages really really need to know what they are getting into.

(Jerry Beades - we'd need a whole thread on him, other than 1 year bankruptcy, what is his solution to the mortgage crisis?)
 
There seems to be a number of posters here referencing the houses value & negative equity when calculating a write down.

These reference points have nothing to do with "unsustainable" home loans.

If a home loan is to be written down, it needs to be written down to an amount based on the Borrowers ability to pay, not an amount based on the property value. If the Bank believes they can get more back through a sale of the property on the open market then the Bank should be facilitated in doing so. If someone can't service a market rate then they do not "deserve" or have a "right" to live in that locality. I grew up in a nice part of Dublin yet I've no subsidized right to live there now.

If I had my way, I'd allow the Banks retain a profit participating interest in the property for the remainder of the mortgage - e.g. if in 15 years time the property's value is back above a threshold set at 50% of the discount in value of the original loan, (e.g. if in 15 years the house value increased to $250k securing a $300k loan which was written down to $200k), then the Bank should have the right to foreclose and retain 50% of the profit (ideally I'd like them to get 100% of the profit but that's not PC). The Bank's ability to do so should be set at 18mths valuation intervals to provide tenure security (which is 50% more certainty a renter gets!) and prior to a sale going through an independent valuation is required with the sale & valuation costs for the Bank's account - i.e. they're unlikely to do it unless they're sure values are higher.

Not a fully developed idea and unlikely to get political traction LOL
 
Hi Andy836

I could just see the wailing from the Indo when the Bank tries to realise their interest and a scared old couple appear in a story saying how they now have no funds to pay for quality nursing home care thanks to the big bad banks
 
How many long term arrears cases would we have if we had non recourse mortgages for the last twenty years ?
 
Delboy said:
Hi Andy836

I could just see the wailing from the Indo when the Bank tries to realise their interest and a scared old couple appear in a story saying how they now have no funds to pay for quality nursing home care thanks to the big bad banks
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Almost every hard-luck story in the papers is riddled with holes. I think this says a lot about new media (churnalism & click bait) and the Irish public who lap it up.

However, my idea actually suggests the "put upon victims" would take 50% of the "profit" - drinks on them!!!!
 
demoivre said:
How many long term arrears cases would we have if we had non recourse mortgages for the last twenty years ?
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Are you referencing the US mortgage market?

i.e. the market that is classed by all the Irish "experts" in the media as "non-recourse"?

This being in spite of only 11 states in the US being classed by most academics as "non-recourse" and within that group there being variations on the technical details - i.e. (i) some either allow a bank to short sell or pursue deficiencies but not both, (ii) regulatory costs are so prohibitive that banks don't pursue, (iii) purchase mortgages only (i.e. the original loan used to buy the house is classed as non-recourse however any subsequent refinancing of that loan is full-recourse (US mortgages are refinanced regularly as rates change)
I note that a 12th state, Nevada, has now brought through legislation stopping Bank's pursuing deficiencies on home loans taken out since 2009 (but not those beforehand).

the article below outlines the differences in state laws

[broken link removed]

Interesting tit bits
The IRS also views debt write-off in some cases as a taxable gain.
For Feb 2014, approx 21% of all US home sales were distressed.
Total US delinquency rates at Feb 2014 were 2.8% with Connecticut, the only "non-recourse" state having a higher delinquency rate higher than the national average. http://www.newyorkfed.org/outreach-and-education/community-credit-profiles/#map/hpi
Non-recourse mortgages are typically capped at much lower LTV or LTC rates - some cite 50-60% although there are instances where you'll see 70% rates. In contrast to the "torture" people are suffering in ireland having to scrape together a 20% deposit.
 
Banks shouldn't be allowed veto a PIA, under the 65% rule, where the borrower going bankrupt to deal with a shortfall after the house is repossessed and sold, results in a greater loss to the bank.
 
From the threads.

1. One year Bankruptcy , will galvanise everyone and speed things up = a Plus.
2. Why should someone stay in a Large house in a good area rather than sell and move to a smaller home in different area . (they will still have a home and no debt) = a Plus.
3. Split Mortgages appear, if they are well worked, to give people and banks a sporting chance of resolution = a Plus.
4. Loan needs to written down to what person can afford.(rest is dealt with by Splits/retention of future profits etc) = a Plus.

We ,rightly, have a serious mistrust of Banks.
We, rightly , have a nagging doubt that there are too many leg lifters in arrears.
We, rightly , do not want people to live in palatial surroundings if they don't pay their bills.
We , rightly , see the Golden Circle managing to stay in their homes ,yet they don,t have to get out and trade down.

I do not see any of us wishing people to be thrown out but if people continue to believe they can stay (not-paying) without sanction ,or without accepting fair resolution, we are going nowhere.

We need a referee, not an extended negotiator, on offers, and I don't mean another Quango!
 
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