How to handle serious negative equity?

canicemcavoy said:
That's the problem with mortgages; it involves people who are for the most part, financially illiterate, and in some case, intellectually deficient, making a decision to spend 10 times or more their annual salary on a single item. Some people need to be protected from themselves, since society ends up paying for their mistakes.
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I got to know a guy who was renting an apartment as opposed to buying a house and who was putting some of what he had left over into financing his studies for a masters degree.

He didn't understand other peoples' preoccupation with owning a house.

I couldn't understand then why he didn't see the security in owning his own home.

I can't say I'm feeling too secure now, I know a lot of people who are definitely feeling insecure and I know some who are downright panicky.

Meanwhile, my man in the apartment has a secure job, a steady income [not huge] and a maturing pension fund.

His example may be a life changing example for some of us to consider so I pass it on.

ONQ.
 
Howitzer said:
I would say it's poor regulation rather than mis-selling. If it wasn't within the confines of the regulations it would be mis-selling - the issue is that is was, and was widely available.
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I don't understand the term mis-selling and I note your discrimination between whatever it is and something "poorly" regulated, although again the term means very little to me.
I am wary of any assertion which others could use to set the stage for the fig leaf of regulation as a means of denying liability.

The risk of 100% mortagages during periods of low interest cannot be adequately assessed by lay people.
It is manifestly the duty of the lender to uphold their fiduciary responsibility to the borrower or face charges of negligence.

Financial Institutions had been acting as professional guardians of "your best interest" for years prior to the noughties.
This oversight was something they invoked when assessing loan applications for the benefit of the applicant.
It allowed them to make a fair assessment of the applicant's ability to re-pay the sum borrowed.

I have no problem with financial institutions being professional and setting limits on what people can obtain in terms of personal finance or loans.
But this precedent of good practice for years highlights the shortcoming of recent practices.
The financial institutions cannot now disavow responsibility for the current crisis.

All the advertisements finishing with "XXXX is a company regulated by the financial regulator" were particularly misleading.
It gave a sense that all of the lending activity was being overseen by people who knew what was going on.
It put a gloss of competence on the activity of unrestrained, unqualified lending by financial institutions.

One official I know confirmed the problem to me succinctly: "We went from lending money to selling money".
I'd add "in a manner which was largely unregulated and failed to protect the consumer."

Now the blue chip investments that were our banks have failed us, just like the other pillars of society - the government and the church.
As a people and a nation we are thrown back on our resources of intelligence, creativity and good humour.
Perhaps the best is yet to come, if only we can spend a few quid to get our economy moving again.
And in that our financial institutions will have to have their duty spelt out to them in clear terms.

Chin up, everyone.

ONQ.
 
Shawady said:
Some people are in negative equity, but because interest rates have been slashed are actually better off financially in regards disposable income.
The big problem is whether people will be able to move or not in the coming years. This will mean a reduction in stamp duty but the government may move to an annual property tax soon anyway.

I have friends that bought 1-bed apartments at the height of the boom as starter homes. Now they are in a position where they might want to start a family but cannot move and may not want to raise a family in a small apartment. So the long term consequences may be more social than financial for some people.
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Shawady, I agree. And even people who are not in negative equity might find it difficult to move. We are not in negative equity and hope to trade up sometime in the next 5 years. However I am looking around at the houses in my estate which have been on the market for a couple of years and wondering if we will be able to sell the house at all.
 
annR said:
Shawady, I agree. And even people who are not in negative equity might find it difficult to move. We are not in negative equity and hope to trade up sometime in the next 5 years. However I am looking around at the houses in my estate which have been on the market for a couple of years and wondering if we will be able to sell the house at all.
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We sold two houses to buy one in 2001-2002.

The market slumped as 2001 wore on.

Eventually the lady whose "tough love" advice had helped sell one house advised us to drop our price from 180K to 164.5K on the second because that was .5K lower than a house that wasn't in as good condition which had been on the market for eight weeks.
I went mental at the thought of "losing" so much money, but Margaret laughed and reminded me that it wasn't "my" money - it was money I hoped to get.
We followed her advice and had a firm offer in two weeks.
Assuming there is ANY market, there is always a price point at which a good - or a house - may be sold.

HTH

ONQ.
 
Howitzer said:
I don't understand how it's mis-selling. They applied for a 100% loan and that's what they got. In reality all it did was normalise the situation where people previously got their deposits from the credit union.

.
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You're forgetting that they then got a credit union loan to buy a state of the art kitchen, manicured lawn and brand new 4X4, not forgetting the holiday of a lifetime in Dubai.
 
Re: Change the law on bankruptcy for those in serious negative equity?

Afuera said:
Your suggestion is not possible in Ireland. Should a bank take bankruptcy proceedings against someone who defaults, they can have recourse to future income. I think that maybe after 12 years the slate can be cleaned, but it is likely that going through such a procedure would greatly limit a person's ability to ever borrow again.

The sad fact is that the quickest way for someone in Magpie's situation to become financially solvent is to emigrate and default on everything here.
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It's interesting that nobody has given a concrete solution to Magpie's situation.

If you have a low salary, one income, kids, house too small, massive negative equity, on interest only, 40 year mortgage are you better off to stay and keep paying, how long before you would ever get to the end of it before you could sell. Never.

Would you not be better off to hand back the keys and let the banks do what they will, what exactly can they do to you if you have one low income and a wife and 2 or 3 kids. People say they can go after your salary for 12 years, so what, they can only go after what is left after you provide for your family and you'd be better off renting a proper decent family home on your income than staying put and ending up paying the bank for the rest of your life and getting nowhere while living in a house too small for your needs and living with the thought that you can never get out of the financial mess. I'd rather have the 12 years of pain and knowing it will end than have the thought that it will never come to an end.

Everybody is making great big assumptions that one of these years property is going to come back and that will sort out the property mess. Well I don't think it's going to happen, the banks are massaging the figures of the amount of people in a financial mess and the builders are hiding property, waiting for NAMA and when this all comes out, well we're not allowed to discuss property prices so I won't say what I think will happen then.

We'll see soon who are the fools in the current situation, those who try and pay their way out of the mess or those who were on Paddy O' Gorman last week handing back the keys.
 
Re: Change the law on bankruptcy for those in serious negative equity?

Bronte said:
It's interesting that nobody has given a concrete solution to Magpie's situation.

If you have a low salary, one income, kids, house too small, massive negative equity, on interest only, 40 year mortgage are you better off to stay and keep paying, how long before you would ever get to the end of it before you could sell. Never.

Would you not be better off to hand back the keys and let the banks do what they will, what exactly can they do to you if you have one low income and a wife and 2 or 3 kids. People say they can go after your salary for 12 years, so what, they can only go after what is left after you provide for your family and you'd be better off renting a proper decent family home on your income than staying put and ending up paying the bank for the rest of your life and getting nowhere while living in a house too small for your needs and living with the thought that you can never get out of the financial mess. I'd rather have the 12 years of pain and knowing it will end than have the thought that it will never come to an end.
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Under the current system in Ireland, you would never get a credit card, personal loan, overdraft or any other sort of credit again even after the 12 years are up. The whole point is that at the moment, there is no end to the consequences of personal bankruptcy so handing back the keys and getting on with your life is not possible.
 
Re: Change the law on bankruptcy for those in serious negative equity?

Sunny said:
Under the current system in Ireland, you would never get a credit card, personal loan, overdraft or any other sort of credit again even after the 12 years are up. The whole point is that at the moment, there is no end to the consequences of personal bankruptcy so handing back the keys and getting on with your life is not possible.
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How does that work? You are put on a blacklist for life?
 
Maybe this is not obvious but an effective bankruptcy reform will go along way toward solving the negative equity problem to the extent it needs to be solved. If banks know they have to deal sensibly with a borrower who cannot afford the mortgage that will be a big step forward. A scheme to allow people to roll over and carry forward their negative equity to a new home would also be a big plus.
 
carpin taxt said:
It's been stated before, and this is a fundamental issue here, but mortgage affordability and negative equity are two separate issues! Negative equity simply means your house is now worth less than the price you paid for it. It does not impact on the amount of your existing mortgage payments in any way shape or form.
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They are not seperated if you can no longer afford to pay your mortgage, as being in negative equity means you cannot sell the house and clear your mortgage!
 
carpin taxt said:
true, but the solutions being suggested do not apply to individual situations. What has been discussed is a blanket solution for everyone in negative equity, as if negative equity itself was the problem.

If someone has lost their job and can no longer afford their mortgage, i have every sympathy, but their are a number of protections already in place, not least a moratorium on repossessions, directed by the government. Plus banks, provided the mortgage holder is engaging with them, are sure to be sympathetic to situations such as the one you describe.

However, if someone has a house that is now worth less than the outstanding mortgage but can continue to pay their mortgage, there is no reason for them to be bailed out, which is what is being mooted under a nama for homeowners.
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+100
 
Just curious if this would work of if banks/developers would even consider it.

You have an apartment that is in negative equity with no problems covering the repayments and both of the couple have stable jobs. You now would like to buy a house but can not move because you are in negative equity.

Would a developer consider taking your current apartment as part payment? i.e. you give your apartment + cash for the new house, and would the bank allow you top up your current mortgage to make up the difference?

Probably a stupid question but I was just curious.
 
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