clarifying what "debt forgiveness" means

[mark12]

What's the point in starting this ancient discussion again? There are millions of threads on this issue some are in favour of it, others are against it.

Fact of the matter is, Debt Forgiveness is already happening every single day of the week, some examples:

1 People on interest only = Debt Forgiveness

2 Bankrupt builders returing Home from the UK = Debt Forgiveness

3 Won't pays = Debt Forgiveness

 

[itsallwrong]

Moved from another thread by mods.

1 People on interest only = (Debt has not been forgiven, it has been extended and paused)

2 Bankrupt builders returing Home from the UK = (Debt has not been forgiven, they legally washed their hands of it)

3 Won't pays = (Still have not been forgiven, and even further from it as they are willingly not paying).

The crux of the issue is wiping peoples debt.

 

[itsallwrong]

Pretty much Bronte.
Sticky territory this one.
Imagine though what the bill to the taxpayer would be if debt forgiveness became a reality?
A damned if you do damned if you don't scenario.

 

[Kerrigan]

The tax payer is already picking up the tab.

A property some doors away from me sold for approx 200k less than what the mortgage value on the property was. Guess who's going to pick up the bill?

I am a firm believer that people should be allowed stay in their properties, a total halt on repossessions and an agreement made with their lenders to rent the property back from them; whilst giving the lender full control of the building.

I cannot understand why tax payers have not grasped this concept.

 

[oldnick]

"it'sallwrong" - You're right about "damned if you do and damned if you don't."

Therefore asking a straight "D.F. good or bad?" question is far too simplistic . Actually ,it's IMO, a silly question.

Debt forgiveness = greatly annoys hundreds of thousands who pay their debts, and encourages many of them to stop paying. We all know that.

No debt forgiveness= maybe an equal number will throw back the keys , many possibly quitting these shores. Tens of thousands of empty houses, complete crash - thus affecting everyone on the country. We all know that as well.

Which is worse ? Neither. Both.

Anyone who speaks against DF without proposing an alternative comprehensive solution is just venting spleen. Enough already of that.
Anyone who proposes DF without considering and costing the consequences is an idiot.


Actually, come to think of it, is anyone actually proposing complete D.F. ? No? Then question is even sillier than I thought.

 

[itsallwrong]

I suppose the basic answer is who will pay?
If you turf someone out of their home, they will be down to the Social looking for rent allowance, which is the taxpayer money.
If you give them MIS, it's taxpayer money.
If you write off the debt, the taxpayer pays.

No matter how its done, the taxpayer will pay most or all of the bill.
Forgiving is the easy part of the problem. Who gets the bill and are we willing to pay it by suffering
many more years of hard times is the hard part.

 

[oldnick]

The more I read Kerrigan recent post the more it makes sense to me as the least worst solution. Better than a simple make-them-pay or forgive-their-debt solution.

 

[Shivvers]

Pretty much Bronte.
Sticky territory this one.
Imagine though what the bill to the taxpayer would be if debt forgiveness became a reality?
A damned if you do damned if you don't scenario.

Imagine what the long-term bill to the economy and wider society will be - in terms of lost output and productivity, damaged retail sales because of a drain in consumer confidence, further lost jobs, - if it doesn't become a reality?

There has been "debt forgiveness" (a really dumb and misleading phrase) in this country for years, in business. It's called liquidation.... or another example is examinership. It's there because it makes sense, and it helps bring about a faster recovery when things go wrong.

By the way, the taxpayers have already paid for a good chunk of what some people call "debt forgiveness". I simply call it the recognition of losses that have already occurred, allowing some people to move on with their life and become productive again. The cash to begin dealing with it is already sitting on the banks' balance sheets.

It's not about debt "forgiveness". It's about properly identifying - and then finally dealing with - some legacy debts that can never be paid off, no matter how much people want to cod themselves into thinking that the problem will go away if we continually kick a can down the road.

It's not just about morals. It's basic economics.

 

[PiedPiper]

in answer

The tax payer is picking up the tab, Because of bad government thats not the fault of the mortgage holders.

The tax payer is picking up the debt of bond holders all over europe.

The taxpayer is pouring money into AIB so it can be sold, there is no Bank of Ireland it foreign owned.

It's grossly unfair to blame people for bad goverment other than for being stupid enought to vote for them and being sold a pup in the first place.

 

[GDUFFY]

The tax payer is picking up the tab, Because of bad government thats not the fault of the mortgage holders.

The tax payer is picking up the debt of bond holders all over europe.

The taxpayer is pouring money into AIB so it can be sold, there is no Bank of Ireland it foreign owned.

It's grossly unfair to blame people for bad goverment other than for being stupid enought to vote for them and being sold a pup in the first place.

Couldn't agree more !

All of these debts would have been suffered by German & French banks and any other lenders/ Bondholders (who were getting an interest rate by the way to reflect their gamble) on lending to these Banks. The real villains are the morons who bought a pig in a poke on your behalf. The banks have already received the money to sort this out but greedy pigs have been allowed to hoard it by the present government .There has been a coup d'etat in this country right under our noses , we don't have a government anymore. Rant over.

 

[itsallwrong]

Water will always be wet and the public will always be the lambs to the slaughter.
Where is Elliot Ness when you need him....

 

[Kerrigan]

The more I read Kerrigan recent post the more it makes sense to me as the least worst solution. Better than a simple make-them-pay or forgive-their-debt solution.

I shudder to think what will become of this already depressed economy if we see mass evictions next year.

 

[Kerrigan]

Couldn't agree more !

All of these debts would have been suffered by German & French banks and any other lenders/ Bondholders (who were getting an interest rate by the way to reflect their gamble) on lending to these Banks. The real villains are the morons who bought a pig in a poke on your behalf. The banks have already received the money to sort this out but greedy pigs have been allowed to hoard it by the present government .There has been a coup d'etat in this country right under our noses , we don't have a government anymore. Rant over.

+1

Well said.

 

[Bronte]

I shudder to think what will become of this already depressed economy if we see mass evictions next year.

That's not going to happen, it would only make things worse for everybody, the banks, people trying to sell, taxpayers and those actually living in the properties.

We need a solution that is to the greatest benefit of all of society.

 

[shigllgetcha]

I think pausing/putting on hold debt is a better option in most cases. Allow the house holder to pay what they can afford and dont charge interest on the paused amount and in 5/10 years time review what the can afford. It would give people breathing space and they would have more money to stimulate the economy not to mention the benefit on a personal level for these people

Let inflation bring down the cost of the mortgage and let the housing market recover over time to take them out of NE and use some kind of bond (from the ECB at 0%) to make up the difference.

Alot of peoples problems are from decreases in pay and unemployment. Over time these problems should be solved and these people will be able to pay again. Some peoples problems are only going to be temporary, debt forgiveness shouldnt be offered to anyone. Offering debt forgiveness to large numbers means when the economy picks up and their income goes up they will have gained compared to someone who kept paying

*There are some people though that are way over their heads and will never be able to pay back what the bank lent them. Debt forgiveness should only go to people with no prospect of repaying, not just people who are in temporary trouble, someother mechanism should be used for thses people

** for my arguement ive assumed the economy will improve, if it doesnt all bets are off, everyones in trouble

If the banks hadnt been guaranteed and the irish banks folded and our mortgages became property of the german/french banks that bought the bonds, would there have been mass debt forgiveness or the iron fist with huge interest rates to compensate for those who could pay?

 

[commonsense]

Moved from another thread by mods.

1 People on interest only = (Debt has not been forgiven, it has been extended and paused)

2 Bankrupt builders returing Home from the UK = (Debt has not been forgiven, they legally washed their hands of it)

3 Won't pays = (Still have not been forgiven, and even further from it as they are willingly not paying).

The crux of the issue is wiping peoples debt.

Mark12 is actually correct. Any alteration of the original terms of a mortgage to the benefit of the mortgagee is a form of debt relief. Whether it's restructured, extended or partially written off.

Debt forgiveness is defined as:

• " the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations."

When we talk of debt forgiveness, those for it should realise that it's not a get out of jail free card, and those against it should realise that those who can avail of it won't do so without some price being paid, usually in the form of being blacklisted from lending, paying something off the original debt and maybe having a lien on the property that is collectable upon sale or death.


What banks won't do however, is relieve someone of a mortgage if the clients have other non secured debt. This is because the money will be diverted to these loans, not back into the economy.


Mortgage debt is only one part of the problem, a big part I acknowledge, but we have a very high level of personal debt (non mortgage) in this country and that also has to be addressed, by those in trouble first of all.

 

[shigllgetcha]

Mark12 is actually correct. Any alteration of the original terms of a mortgage to the benefit of the mortgagee is a form of debt relief. Whether it's restructured, extended or partially written off.

Debt forgiveness is defined as:

• " the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations."

But just extending the loan isnt adding to your debt. You owe the same just over a longer period.

My only point with extending a mortgage amounting to debt forgiveness is that if you and I earn the same and borrowed the same, you decided you want 15 years and I want 25 years at the start, if you later realise that you cant pay back at the speed and extend to 25 years, we are the exact same but in your eyes you are getting debt fogiveness and I am not.

If you are extending to a lenght that you could have taken when you took out the mortgage in the first place I wouldnt call it debt forgiveness. Others might see it a different way though.

 

[commonsense]

But just extending the loan isnt adding to your debt. You owe the same just over a longer period.

Extending the loan is a form of debt relief. You highlighted the relevant part.

My only point with extending a mortgage amounting to debt forgiveness is that if you and I earn the same and borrowed the same, you decided you want 15 years and I want 25 years at the start, if you later realise that you cant pay back at the speed and extend to 25 years, we are the exact same but in your eyes you are getting debt fogiveness and I am not.

If you are extending to a lenght that you could have taken when you took out the mortgage in the first place I wouldnt call it debt forgiveness. Others might see it a different way though.

That is the definition, you may not see it that way, but that is a form of debt relief. If you ask me for a loan of 5k and I take it off my credit card (for example) and you promise to pay me back in 12 months, if you don't pay me and I can't repay it then I incur extra interest charges, I don't pass these too you, hence debt relief.

 

[shigllgetcha]

or the slowing or stopping of debt growth

Your debt isnt growing if you extend the lenght of your mortgage

That is the definition, you may not see it that way, but that is a form of debt relief. If you ask me for a loan of 5k and I take it off my credit card (for example) and you promise to pay me back in 12 months, if you don't pay me and I can't repay it then I incur extra interest charges, I don't pass these too you, hence debt relief.

You lent me money at a higher rate than you borrowed it for. If we agree that I pay it back over 24 months instead of 12 I pay you interest for an extra 12 months, you make more money by me paying money back over longer.

I pay more back to you because ive taken longer, thats how you pass it on to me. but my debt doesnt increase which is the definition you gave.

Were arent talking about not paying anything or paying nothing until the end of the mortgage term we are talking about agreeing to repay slower which is very different

In modern times, the most common alternatives to debt relief in cases where debt cannot be paid are forbearance and debt restructuring.

from wikipedia, your own source

It calls restructuring an alternative, hences it is not a form of debt forgiveness

 

[commonsense]

Your debt isnt growing if you extend the lenght of your mortgage

Yes it is.

Let's say I took out a FTB mortgage of 185k over 25 years, total repayable inc interest is 277k.

If I extend that to 30 years the repayment is 298k.

So if the bank extend your loan and don't charge you more/higher interest rates, meaning you are repaying what you would have repaid in the first place, then you are getting debt relief.