NoRegretsCoyote
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Because they have regulatory obligations to hold a lot of expensive capital for this kind of asset. There is risk of re-default, and they have to hold it for an indefinite period before being able to realise the principal. 1% or whatever he is on is far below what it costs the bank to maintain the loan.Why is it so bad for the bank?
Because you can afford to pay it back to themAnd if it is, why aren't they offering me a hefty discount to buy out my 1% interest only tracker taken out in 2005?
Me and the guy from the case are both paying 1%. Presumably, he can afford that! If the 1% really is far below what it costs the bank to maintain the loan, they should be offering me a deal. They're not, so I suspect the loan is still profitable, even at that interest rate.Because they have regulatory obligations to hold a lot of expensive capital for this kind of asset. There is risk of re-default, and they have to hold it for an indefinite period before being able to realise the principal. 1% or whatever he is on is far below what it costs the bank to maintain the loan.
Because you can afford to pay it back to them
Yeah, I get that. But, again, if regulatory capital is so onerous for the bank, wouldn't they be offering to buy me out? Then they could lend out that capital to another borrower at current (semi-monopolistic) market rates.@Baby boomer
Do you have a tracker for life like this guy? I suspect not!
Something can be "profitable" in the sense that interest payments exceed the bank's funding costs. The issue is the regulatory capital associated with this kind of loan (which is not cheap).
Because they have regulatory obligations to hold a lot of expensive capital for this kind of asset. There is risk of re-default, and they have to hold it for an indefinite period before being able to realise the principal. 1% or whatever he is on is far below what it costs the bank to maintain the loan.
The people managing the Regulatory capital are operating at a portfolio level and not an individual mortgage account level. It is cheaper in their eyes to do a bulk credit risk mitigation deal (link posted earlier) than solve at the individual account level.Yeah, I get that. But, again, if regulatory capital is so onerous for the bank, wouldn't they be offering to buy me out? Then they could lend out that capital to another borrower at current (semi-monopolistic) market rates.
I get the conceptThe link I posted to the RTE article addresses how BOI of Ireland are working around the expensive capital requirements.
This is an important point. Individual deals are very labour intensive for the bank.The people managing the Regulatory capital are operating at a portfolio level and not an individual mortgage account level.
To be a bit picky, you probably mean the Eurozone, and even then I believe Greece and Malta are higher.This is absolutely crazy and explains why other borrowers are paying the highest mortgage rates in the EU.
Am aware that most EU banks can charge one-off origination fees (usually loaned upfront) and ongoing fees on mortgage accounts.When you factor in cashbacks and the extra fee income that most European banks generate through set-up and administration fees, Irish mortgage rates on new home loans, although still high, are much closer to the Eurozone average than the headline figures suggest.
That would be so fun....I say that having spent the day talking to the bank about a hack on our account. They couldn't care less, as " the fraud department controlled the situation ".Hypothetical Q. Put aside the wrongs(and silliness) of it for a minute ..
If everybody in the country decided to stop paying their mortgage from today onwards. What would happen?
He's illiquid but not insolvent. There is equity of €100k in his property. The bank could argue that based on average rents in Waterford that could cover close to a decade of renting.The person in question doesn't have means the property is valued more than the outstanding loan , where is the issue here.
Except it does cost the bank. The bank expected €100k plus interest over the next 5 years instead it's been offered €33k spread over 30 years.The bank isn't going to lose a dime on this, the taxpayer will however save a considerable amount of money.
His net wealth is €100k if he sold the house, no more income than a state pension, and has nowhere to live.He's illiquid but not insolvent. There is equity of €100k in his property. The bank could argue that based on average rents in Waterford that could cover close to a decade of renting.
But you nor anyone has an idea of his capabilities or otherwise, perhaps his present home is fitted out specifically for him, or it has been a significant part of his life.The bank is not a substitute for social housing. Regardless I'm not sure he'd qualify €100k is a sizable some of money. A quick look on daft and there are places available in Waterford for €100k.
He gets a mortgage free home and the bank gets it's collateral.
There can of course be mitigating circumstances but like you say no one knows. In saying all that emotional attachment is a stretch. Just because I love my wallpaper doesn't mean I shouldn't have foreclosure on a contract I willingly entered into.But you nor anyone has an idea of his capabilities or otherwise, perhaps his present home is fitted out specifically for him, or it has been a significant part of his life.
Banks make plenty of money on loans to housing Associations with one large one securing €350m in development loans from AIB, so when you say banks aren't substitutes for social housing isn't as black and white as you say.
The bank will get its money back plus lower interest and one less person will be either homeless or getting Rent subsidies which already cost the state €1bn a year.
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