Defaulters "cost other mortgage holders €250 a month"

Discussion in 'Housing and mortgage arrears - policy issues' started by Brendan Burgess, 19 Dec 2018.

  1. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,529
    so-crates and mugsymugsy like this.
  2. RETIRED2017

    RETIRED2017 Frequent Poster

    Posts:
    640
    Last edited: 19 Dec 2018
    Should you not have said lending practices by banks in the past cost mortgage holders 250 euro a month

    I know back around the time most of these Defaulters Mortgage were given out both my wife and myself were approved for loans totaling over 80000 euro in the post most of it was for home Improvement loans which we did not need or apply for,

    Back around 1996 we moved into a new house and we took out a loan of 40000 euro, WE had no need to borrow or take out loans since then,

    We did not need or take the banks up on the offers I suspect a lot of the people taking up these offers are the defaulters of today,

    I also remember being in the banks taking money out of my account and being asked if I wanted a loan at the time I had money invested in a five year fixed account ,

    I remember thinking at the time They are being reckless with the money I have in deposit ,

    Most People already know reckless lending practices has pushed up the rates on mortgages holders who did not fix when rates were low along with people who have or are about to take out new Mortgages,
     
    Last edited: 19 Dec 2018
  3. Leo

    Leo Moderator

    Posts:
    9,497
    Walk into a Mercedes or BMW garage, then or now, and they'll ask you if you want a new car, they'll even try and convince you you need or deserve one and work the numbers so you can 'afford' it. Most people are wise enough to realise they don't need the top of the range model, or can't afford it. But no one blames the car dealer for trying to sell the car, that's their business after all.

    So you were wise enough to know you didn't need the money on offer, you can't blame the banks for giving people what they wanted. You remember all the talk here and elsewhere at the same time with some people complaining that the banks wouldn't give them even more?
     
  4. odyssey06

    odyssey06 Frequent Poster

    Posts:
    1,465
    I thought one of the skills of banking and giving out loans is knowing who can or can't pay back... Bankers seem to have lost this ability entirely.

    If the car dealership was giving out finance to people who had very little chance of paying it back, but very great ability to damage \ put the car out of their reach \ significantly reduce value of the car, then they'd be culpable in thier own costs & possible downfall.

    So its the default not just the defaulters that produced the cost.
     
  5. The Horseman

    The Horseman Frequent Poster

    Posts:
    227
    The dealership could recover the car and sell it on to minimize its loss. Try doing that on a property in Ireland.
     
    tommyryan55 likes this.
  6. odyssey06

    odyssey06 Frequent Poster

    Posts:
    1,465
    Last edited: 19 Dec 2018
    I wasn't trying to minimize the difficulties in Ireland of recovering the debt from the property. We've seen the nonsense in Roscommon from a total chancer who should have been turfed out long ago.

    Just I'd still expect a car dealership to take a hit on their bad loans for cars that are no longer in the state or were driven into the ground. If it was one careful owner of fixed abode then the dealership would be ok :)

    Even when the banks got their hands on investment and commercial properties they did not cover the loan amount. Sime still dont even after years of growth.
     
    Last edited: 19 Dec 2018
    Dermot and galway_blow_in like this.
  7. Leo

    Leo Moderator

    Posts:
    9,497
    Bank staff, like the car dealers and most others involved in sales roles, were solely incentivised on sales, no consideration was ever made the long term success of the transaction.

    The dealer faces no costs when someone fails to uphold their commitment. There will be some costs for the finance provider, but cars are very easy and inexpensive to reposes, and any shortfall can be sold on to debt collection agencies. As with mortgages, those costs are reflected in the interest rates offered and borne by all consumers.
     
  8. RETIRED2017

    RETIRED2017 Frequent Poster

    Posts:
    640
    The easiest way to get a loan for a top of the range Mercedes was to take out a Mortgage back then ,
    Have you forgotten seeing people moving into new houses and having a new car or two parked in the driveway at the same time all thrown in along with the mortgage,o_O
     
  9. Leo

    Leo Moderator

    Posts:
    9,497
    They were throwing car loans at anyone who wanted them too, even with significant portions of previous loans outstanding. Anyone spreading car repayments over 20+ years really shouldn't be allowed outside on their own....
     
  10. odyssey06

    odyssey06 Frequent Poster

    Posts:
    1,465
    Thats the equivalent of the 100% mortgage...
     
  11. SPC100

    SPC100 Frequent Poster

    Posts:
    355
    Brendan, thank you for continuing to try and get this message across in the media.

    Unless our citizens and politicians understand that eviction is necessary for a healthy credit environment, evictions will remain a taboo, and people can continue to take advantage of the rest of us.

    I think your proposal of 'fast eviction' only for the people that do not engage or strategic defaulters is a very good starting point, and one that is hard to argue with.

    The problem is that the media, and others dumb it down to, 'Evictions are bad', 'The Irish should never ever be evicted again'.

    FWIW, I have seen a tide of understanding growing over the last year or two, where online threads about evictions have more voices (than they did in the past), pointing out that eviction should be done in cases where people are playing games, or not engaging, and that evictions are required for a functioning banking system, and that in Ireland eviction only happens after a long long time and many chances etc.,

    Have we reached a solution for unsustainable mortgages, (i.e. the borrower can't afford to re-pay, and can't afford to rent in the area) but where the borrower continues to engage in good faith and is making regular payments. I think these are the more difficult cases, especially if young children or old people are involved.
     
  12. RETIRED2017

    RETIRED2017 Frequent Poster

    Posts:
    640
    Last edited: 19 Dec 2018
    They can be allowed outside on there qwn but should not be allowed to mix with reckless Bankers who loaned them the money they are now defaulting on, The don't have to pay back the reckless loans over 20% years The 250 euro a month put on new and where possible existing Mortgages will cover the cost of reckless lending ,


    Going off reports from people who attend Court and the advice given They will be sitting pretty inside there homes once they can show they are making an effort to pay what the can including repayments on there present car ,

    There appears to be no problem getting a car and offsetting the cost once they can show they have a reason for needing one before making repayments on there reckless Mortgage ,
     
    Last edited: 19 Dec 2018
  13. qwerty5

    qwerty5 Frequent Poster

    Posts:
    241
    Its an uphill battle. Look at the recent eviction in Strokestown. I read that the bank had initiated proceedings in 2009. 9 years later and the house is still in the possession of the guys not paying for it and certain TDs are on their side How much do these cases cost and why can we not sort this out in Ireland?
     
  14. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    1,292
    I have to admit I look in despair on those events. However, it does highlight the need for a more sensible approach to business lending in particular - especially when it comes to farm lending. I will add that I am from a farming background, although now based in Dublin.

    I think at this stage, there needs to be clear separation between a business asset (e.g. agricultural land) and the private residence. If someone wants to borrow money for business purposes, they should be forced to split the house from the farm with different folio numbers, and the business asset only should be used as the security against the loan. This should apply for any business loan/business asset relationship.

    It should also mean that the only loans secured against PPR's are the purchase of that PPR. So if the loan does bad, it should be possible to secure the loan against the other assets easier and without the toxicity of evictions. But the downside would be the bank have less security on the loan and therefore may not be willing to borrow less or at a higher interest rate.

    It may also be necessary for banks to put a cap on the lending for agricultural purposes to x times their annual grant payments (aligning to affordability)

    Evictions should then only happen due to PPR in serious arrears or the person goes bankrupt.
     
    Purple and odyssey06 like this.
  15. Mrs Vimes

    Mrs Vimes Frequent Poster

    Posts:
    903
    What you're essentially suggesting is that all lending except for ppr mortgage lending would be non-recourse.

    Under the current situation regardless of what asset a loan is secured on any assets owned by the borrower can conceivably be in play where default occurs. It is unlikely that a judge will grant an order to repossess a ppr on a loan which wasn't even secured on it initally, but not unheard of.

    https://www.irishtimes.com/news/guarantor-of-friend-s-loan-loses-her-home-1.1254149
     
  16. RichInSpirit

    RichInSpirit Frequent Poster

    Posts:
    769
    My totally monthly mortgage interest is much less than €250
     
  17. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    1,292
    I am not sure if that comment was directed towards what I said, but I am guessing it was.
    I am not suggesting this. I am saying that the banks would not be able to accept a PPR as security against a business loan. They would have to either accept other assets as security (e.g. farmland) or they will have to treat it as an unsecured loan with an associated higher interest rate.
    At the moment, it is exceptionally difficult to enforce the security anyway, so why not just call a spade a spade and exclude it from the equation. That way banks and the borrowers understand up front what the security is actually based on.

    Again, this is an extremely rare scenario, and I do feel sorry for that woman. However, under my suggestion she would not have given a guarantee on her PPR. If she had no other assets, or no other significant income, the guarantee would be worth very little and the bank would have to determine if it was sufficient to issue the loan.

    Let's say Joe has a equity portfolio worth 200k and a PPR worth 800k. He applies for a loan for his business and the bank seeks some security. I am proposing that only the 200k portfolio can be used as a security, and not the PPR. If the bank are not happy with this cover, they can decide not to issue the loan etc or charge a higher interest rate due to the associated risk.
     
  18. RedOnion

    RedOnion Frequent Poster

    Posts:
    2,317
    @gnf_ireland it's either with recourse or it isn't. Currently, even without the PPR being put up as security, the bank could get a judgement charged against the PPR on default of a full recourse loan.
    If you remove recourse, business lending would all but stop (except for areas like asset finance).
     
  19. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    1,292
    But why does it have to be binary - why can it not be secured on specific assets (or asset classes only) and exclude other asset classes. Why can the bank not get a judgement on all assets except PPR? I accept this is not what is done today, but who says that what is done today is the right way of doing things. Its not like its terribly successful in a lot of cases.

    I fully accept that if PPR was to be removed as security, the amount of lending would potentially drop and the interest rate be higher to offset the associated risk. BUT if the bank struggle to enforce the security on the PPR, what is it worth anyway.

    Take the Strokestown incident - its not like the house was worth a massive amount of money, the asset value was in the land. That farce had been going on for a decade.
     
  20. qwerty5

    qwerty5 Frequent Poster

    Posts:
    241
    Congratulations. You know how averages work I presume ?
     
    deansmith27 likes this.