Debt Forgiveness.

Most of the proposals for restructing, forgiveness etc on this thread all cost money - at least in the short term. However, nobody has said where this money will come from. If the question is 'what can we do'? Then the answer is 'nothing' if there is a cost involved. We dont have the money full stop.

Just thinking about my circle of friends, relatives, acquitances - while many are struggling, it appears that those who were less extravagant during the boom years are the ones knuckling down and paying off their negative equity mortgages, whereas the ones who lives the high life - holidays, 4x4s, new kitchens etc. are the ones who are missing payments (because they deserve their holiday in the sun) and moaning about debt forgiveness.

The most galling example I've come across is one individual I know who ran a small business. Lived the good life. In recent months, as the business was going south, she stopped paying her bills and started asset stripping the company. Walked out with a considerable sum in her pocket while leaving suppliers unpaid - some of whom had to lay off staff as a result. Justification for doing this - she's just decided to get married and needs to pay for a 40k wedding and 10k honeymoon. Doesnt matter about the carnage left behind - her lifestyle must be funded. Also looking for a bailout on the mortgage - by the time she's paid for the wedding, there'll be no money left to pay the bank. But sure, that's not her problem - they can have the keys if they want, property in negative equity.
 
Kate10 said:
If he can't afford the house then he should give it up - he would have no argument with that - but then he would be in state housing. Wouldn't it be better though to reduce the mortgage, give him something realistic to work for and give him some pride back?
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This is another very good point.

There's a cohort of people with mortgages who, in any other generation, most probably would have availed of council housing.

There's a strong case for means testing people in such a situation, let them stay in their current accommodation (provided it's not extravagant) and have them pay what they can - more akin to council rent.

Any such debt forgiveness should state driven (not bank driven) and be subject to this type of means testing with a view to keeping people in their own modest homes rather than throwing them out and having no use for the vacant house.
 
DerKaiser said:
This is another very good point.

There's a cohort of people with mortgages who, in any other generation, most probably would have availed of council housing.

There's a strong case for means testing people in such a situation, let them stay in their current accommodation (provided it's not extravagant) and have them pay what they can - more akin to council rent.

Any such debt forgiveness should state driven (not bank driven) and be subject to this type of means testing with a view to keeping people in their own modest homes rather than throwing them out and having no use for the vacant house.
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I see where this argument makes some sense, but there is a moral hazard involved, and we would be making the state officials judges of subjective terms like "modest" and "deserving" and "extravagant" and so on. Officials would have to review all spending and previous/current behaviour to ascertain if fault and poor money management were to blame for debt predicaments.

To allow proper supervison we would need oversight. A kind of IMF for distressed homeowners such that their freedom would be sacrificed to allow it. Better to allow them to come to arrangements with lenders for longer payments and avoid debt forgiveness.
 
horusd said:
Better to allow them to come to arrangements with lenders for longer payments and avoid debt forgiveness.
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I'd agree with this for those who might eventually work their way out of trouble, but we will probably have long term unemployment rates of at least 10% for the best part of a decade, it is these people who should effectively be taken into the broader social welfare system on a more structured basis including how home ownership & debt is dealt with.
 
We've been raising a family of 3 (all under 8) in rented accommodation for the last 8 years because we believed the market was overheated and had no interest in long commutes at the expense of family life. We've saved anything extra in the meantime and have been cautious with our money - only one car, imagine! I do feel sorry for some people that bought into it, but there were people that didn't (and lived in not so nice houses) and we shouldn't bear their costs.
 
I dont think theres a massive amount of people who splurged as much as people here seem to be making out. The problem was people who were willing to borrow more then they could afford for homes that they put too high a value on.

Im heading to my mid thirthies and like bemmi I looked around at the property market and decided it didnt represent any sort of value for money.

Why should people there be any sort of debt forgiveness for people who invested poorly?

If property values had weirdly continued to rise then in 20 years how many of you would advocate property profit sharing with the likes of bemmi and I ?

Properties are still overvalued in most areas of the country and wont return to realistic values until people get their heads around the fact that they have something called personal responsibility. A false economy is preventing those that waited from being able to purchase a home.

I have no problem with a debth for equity but only at a level thats fair to the tax payer and to the market. It has to be at such a punitive leisure that it will only attract those in very desperate situations.
 
Re liaconn's point on strict criteria, surely some sort of formula could be fairly easily worked out. For instance, to be eligible for any sort of debt write down or restructuring, you would need to

a) have bought a house between say 2002 - 2008
b) LTV ratio must have been less than 100% (cuts out people who borrowed to furnish house/buy car and had saved nothing towards deposit)
b) be in negative equity of a minimum of 30% (this could be set higher)
c) one or both parties must have either lost their jobs or suffered a gross pay cut of over 20%
d) those who borrowed against the nominal value of their home - equity release - subsequent to taking out the mortgage are not eligible (again, this cuts out those who drew down debt for 'lifestyle' expenditure)
e) those with savings and investments above, say, 10 grand, are ineligible (this cuts out those who can in fact pay their debt, but don't want to)

My preference would in general be that the deal is a sort of bankruptcy-lite; you have to hand back the house to the bank but the mortage debt in written off so you are starting from scratch again.
 
Integrity doesn't feed my children. and where is the integrity at the top, why is it the worst off that are supposed to be the moral defenders?

I'm in massive NE for a tiny house, 3 children in 2 bedrooms, and I've lost my job. I'm on reduced payments and if OH loses the job too, which is quite likely, we won't even be able to pay that. What do you want from me? I can't pay it. I can't sell it, and couldn't pay the huge difference even if I could.

Tell me what I should do? I bought a small house, within my means, on a 92% mortgage after saving for years for the deposit. No loans, no credit cards, no fancy holidays, no nice car. We're crammed into this tiny house and no prospects, no money, no nothing.

Tell me what you want me to do, I'm all out of ideas.
 
csirl said:
The most galling example I've come across is one individual I know who ran a small business. Lived the good life. In recent months, as the business was going south, she stopped paying her bills and started asset stripping the company. Walked out with a considerable sum in her pocket while leaving suppliers unpaid - some of whom had to lay off staff as a result. Justification for doing this - she's just decided to get married and needs to pay for a 40k wedding and 10k honeymoon. Doesnt matter about the carnage left behind - her lifestyle must be funded. Also looking for a bailout on the mortgage - by the time she's paid for the wedding, there'll be no money left to pay the bank. But sure, that's not her problem - they can have the keys if they want, property in negative equity.
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That is really shameless behaviour, truly shocking.
 
possible workable solution

on newstalk this morning this lady rang in to say herself and her partner bought a house for 440K in 2007 they both lost jobs in 2008 - their combined income was 80K - they havent paid anything since and are still in the house.

The situation for this couple is that they are now in stalemate - there is no value for the bank or no value for the individuals.

The house should be repossed and then this house sold at auction - the debt stays on the property and if there is an up turn in the value of property the orginal debt is liable against the property and its either cleared or the place is sold to clear the orginal debt.

The original mortgage holder can only get another mortgage when the original debt has been cleared by the other party. This at least moves property prices towards a bottom and allows people out of the debt trap and at least gives a solution where all parties are carrying a burden.

It could also only be put in place where both mortgage holders are unemployed. It would also invigorate the rental market and move us towards a european ratio of rental to ownership.
 
Magpie said:
Integrity doesn't feed my children. and where is the integrity at the top, why is it the worst off that are supposed to be the moral defenders?

I'm in massive NE for a tiny house, 3 children in 2 bedrooms, and I've lost my job. I'm on reduced payments and if OH loses the job too, which is quite likely, we won't even be able to pay that. What do you want from me? I can't pay it. I can't sell it, and couldn't pay the huge difference even if I could.

Tell me what I should do? I bought a small house, within my means, on a 92% mortgage after saving for years for the deposit. No loans, no credit cards, no fancy holidays, no nice car. We're crammed into this tiny house and no prospects, no money, no nothing.

Tell me what you want me to do, I'm all out of ideas.
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Waste of time Magpie, most of the up on their high horses types on here who are most likely the ones who made the huge killings from selling inflated property and land wll tell you that you were reckless and that you fully deserve your current position.
It's all about self interest on here, and that's just the reflection of today's selfish society.
 
There are many different suggestions as to how to pay off mortgage arrears and debt forgivness etc etc. There are problems with the budget deficits and public spending etc etc. What I hear anytime these things are mentioned are pension contributions, changing bands, changes to mortgage interest allowances etc etc. It's about time that a spade was called a spade and there was a universal charge applied to all citizens on an equal basis regardless of social standing, employed unemployed, mortgage holder or non mortgage holder. The money to be divided up to get the people with inflated, unworkable mortgages back on track and public spending cuts back to within 1.5% of GDP.

Unless the broken generation are helped then this society is going to struggle to make it out the other side. We are borrowing money to pay for the public service and to refinance the banks when there is money in this country. When I've money in my account I don't borrow money from the bank, I put my own money to use.

This problem is our problem, all of our problem. We are a nation and unless we help ourselves we cannot expect anyone to come in here from outside to help us for nothing. A society is only as strong as the people it is made up of.
 
amh said:
a universal charge applied to all citizens on an equal basis regardless of social standing, employed unemployed, mortgage holder or non mortgage holder. The money to be divided up to get the people with inflated, unworkable mortgages back on track and public spending cuts back to within 1.5% of GDP.
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How are the unemployed with no savings supposed to pay this charge? Why should everyone? I can understand all those who bought and sold land or property being expected to pay and pragmatially so do the rest of us but surely it should not be to the same extent.

How does this debt forgiveness that make any sense. So Barry and Aine with their dream 4 bedroomed house recieve debt forgiveness while Sean and Mary who have rented a hovel pay for it?

We need to allow those in negative equity to transfer it to a new mortgage, ie they can sell a house if they need to and put the outstanding balance to their new mortgage.

We need to examine the possibility of the banks taking equity (and rent) fro those unable to pay.

We need to examine the possibility of allowing a freeze on payments for those who have lost all earnings and have no savings.

However all these measures should only be done with punitive sanctions so that thay are only taken up by those with no choice.

Its important to bring house prices down to normal levels and thats not going to happen if theres lots of people hoping to chance their arm on a bit of debt relief.
 
csirl said:
The most galling example I've come across is one individual I know who ran a small business. Lived the good life. In recent months, as the business was going south, she stopped paying her bills and started asset stripping the company. Walked out with a considerable sum in her pocket while leaving suppliers unpaid - some of whom had to lay off staff as a result. Justification for doing this - she's just decided to get married and needs to pay for a 40k wedding and 10k honeymoon. Doesnt matter about the carnage left behind - her lifestyle must be funded. Also looking for a bailout on the mortgage - by the time she's paid for the wedding, there'll be no money left to pay the bank. But sure, that's not her problem - they can have the keys if they want, property in negative equity.
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This is galling but it's an extreme case and should not be used when developing policy. The Code of Conduct on Mortgage Arrears and any Debt Settlement System will make it a condition of participation that you act in good faith.

Brendan
 
bemmi said:
We've been raising a family of 3 (all under 8) in rented accommodation for the last 8 years because we believed the market was overheated and had no interest in long commutes at the expense of family life. We've saved anything extra in the meantime and have been cautious with our money - only one car, imagine! I do feel sorry for some people that bought into it, but there were people that didn't (and lived in not so nice houses) and we shouldn't bear their costs.
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That's great for you bemmi, I did the same for 10 years, rented, then bought after realising a mortgage could be cheaper than rented accommodation (way back pre-boom time). There are many who have been cautious with their money, not all have had the three holidays a year, the two cars, etc. It make me appreciate the fact I'm not surrounded by the type of people csirl knows.

Some of us bought a family home with two jobs and factored one job loss into the mortgage repayments. However, nobody saw what was coming down the road. As you state "we shouldn't bear their costs" but if those people are forced to move, where do you think they will end up?

You will still be "bearing their costs" by way of social housing or rent relief after their home has been repossessed.
 
Rather than being given a period of interest only could it be an option for the banks to give a period of capital only? ie. the interest is side stepped for a period of time say 5/10 years and then repaid at the end of the mortgage through an extension of the lifetime of the mortgage. Of course the extra interest accrued would be paid but at the end of the mortgage lifetime and at a higher rate say at the rate at which the capital was being paid at.
 
davebrien said:
on newstalk this morning this lady rang in to say herself and her partner bought a house for 440K in 2007 they both lost jobs in 2008 - their combined income was 80K - they havent paid anything since and are still in the house.

The situation for this couple is that they are now in stalemate - there is no value for the bank or no value for the individuals.
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Then it would be better for them to hand back the keys and let the bank give them a bad credit rating and when that has ceased they can start again. The couple are only delaying things themselves and the only people to benefit is the bank.

Is the state not paying the interest only on the mortgage?
 
Bronte said:
don't get this, is it a 2 bed house or are the 3 children in 2 bedrooms and the parents in another bedroom?
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I noticed that too.. I was brought up in a 3 bed house. There was 9 of us total. 4 of us boys in one room, 3 sisters in another room and the parents had the box room. 3 children with 2 rooms between them. I think that's more than adequate.
 
PaddyW said:
I noticed that too.. I was brought up in a 3 bed house. There was 9 of us total. 4 of us boys in one room, 3 sisters in another room and the parents had the box room. 3 children with 2 rooms between them. I think that's more than adequate.
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No its 2 bedrooms total, 2 adults and 3 children across 2 bedrooms (2 adults plus baby in master, 2 children in second). It's really a very small house, but we didn't expect to be in it forever. (Yeah I know, we were meant to be financial geniuses and/or have a crystal ball, all our own fault, yada yada yada).
 
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