Defaulters "cost other mortgage holders €250 a month"

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

  1. seamus m

    seamus m Registered User

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    It is very unfair to say defaulters are costing mortgage holders 250 euro a month. They might be costing the banks and their bottom line and the staff and their bonus .
     
  2. jpd

    jpd Frequent Poster

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    It is not unfair - it is exactly correct. The high level of mortgage default and inability to swiftly re-possess the property means that all mortgage have a higher interest than would otherwise be the case.

    It is a sort of social contract here in Ireland - we all pay more for our mortgage but if we stop paying, you can't throw us out. Luckily, most people don't stop paying unless they fall on hard times but some who can pay, have stopped and continue to have a roof over their head free gratis
     
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  3. NoRegretsCoyote

    NoRegretsCoyote Frequent Poster

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    This is fine in principle but has some big upfront costs for farmers .

    Farmland with a house in close proximity is not very good collateral. In many cases access to land would be near the PPR, farm buildings would be close to the PPR, you would have to put boundaries in place too. Things like water and power would be shared between the PPR and the farm operations.

    You would not find very many willing buyers in the event of repossession, never mind the difficulty of farming land with a deeply resentful neighbour nearby.
     
  4. RETIRED2017

    RETIRED2017 Frequent Poster

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    Last edited: 22 Dec 2018
    Why Banks lend such huge amounts of money to people when the know the collateral is not very good known people can devalue the asset to the level the can pay back ,
    I suspect nothing is going to change seeing the can offset loans the should not have giving out in the first place onto responsible borrowers in higher interest rates,

    Back in 1996 one side of where I built my house one was sold for 68000 pounds it is one 14 houses off houses in a row ,
    The same people still own that house to this day

    At the height of the boom one of the other houses was sold for 300000 euro
    I was surprised to find out the house sold for 68000 pounds had a mortgage of 420000 on it
    I was not surprised to find out the were Defaulting on there loan,

    Four new houses were built just before the down turn up the road from where we both live the were on the market at 450000 euro it turns out this was the valuation used to remortgage,

    Turns out the were remortgaging there home as its value went up for lifestyle purposes ,
    We should not be surprised at defaulters not paying back there loans seen they were given out on the value of there home rather than an ability to pay back loan,
     
    Last edited: 22 Dec 2018
  5. NoRegretsCoyote

    NoRegretsCoyote Frequent Poster

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    Outstanding credit to the entire agriculture sector fell from €4.3bn at end-2010 to just over €3.0bn at end-16.

    It has crept back up to €3.3bn in the meantime.

    Interest rates charged are consistently the highest for lending to SMEs by sector. Presumably this reflects the riskiness of the lending.
     
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  6. RETIRED2017

    RETIRED2017 Frequent Poster

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    Last edited: 22 Dec 2018
    Do you know if any of the 4.3bn got written off between 2110 and 2016,
    I know of very large write down between 2011 and 2017 and the people who got the write down now own the same assets now worth a lot more than the write down on the loans,
     
    Last edited: 22 Dec 2018
  7. RETIRED2017

    RETIRED2017 Frequent Poster

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    I agree with you on Interest rates are consistently the highest for lending to SMEs by sector , We are seeing the same thing happening in the house mortgage market in Ireland most of it can be traced back to our Education system which has resulted in the people at the top of the banking system in Ireland during the boom resisting change expecting things to work out without changing course,
    To be fair the central bank are trying to change how Banks lend which will lower rates long term ,
     
  8. NoRegretsCoyote

    NoRegretsCoyote Frequent Poster

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    I presume so. The Central Bank numbers only provide stocks and flows of lending, not write-offs or loans being paid off.
     
  9. gnf_ireland

    gnf_ireland Frequent Poster

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    Its fine to say that, but then you are stating that a very valuable asset cannot be used as collateral at all - so the farmer will need to either come up with a large deposit elsewhere or pay the cost of unsecured debt.

    I am not disagreeing with you that it would not be difficult, but the reality is that if banks are going to continue to lend to farmers at reasonable rates, something has to be done to avoid the issues like what happened in Roscommon (obviously paying back the money borrowed is the easiest example). The immediately toxic issue is the eviction from the house, which to be fair is probably not worth that much. Remove that, and it becomes a different matter.

    And there are plenty of people to purchase land in the country - repossessed or not. There are no shortage of farmers willing to purchase land another farmer has been renting for years. There is nothing like the opportunity of cheap land to cast aside any local allegiances !

    But taking a step back - either the farm is a business asset or a personal asset. You can argue that if you cannot secure debt on a personal asset, then it cannot be used as collateral - and the farmer should pay the price - which they are by the statements around the highest interest rates per sector. They cannot have it every way !
     
  10. NoRegretsCoyote

    NoRegretsCoyote Frequent Poster

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    Many a farmer could take steps to separate their PPR from their farmland and buildings:
    • Separate folios on the land registry
    • Clear boundaries between PPR and farmland with fencing and gates
    • Separate electricity and water connections
    • No shared entrances
    Some or all of these would help to convince a bank that farm and personal assets were separate and would allow banks to lend on the farm assets only.

    The problem is that this kind of separation costs money up front, and probably on an ongoing basis too! Blurring of the lines between business and personal activity is also quite beneficial for other reasons too.

    Farming in Ireland is in many cases a part-time, hobby activity, and this is exactly the way many farmers want to keep it:D
     
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  11. cremeegg

    cremeegg Frequent Poster

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    Mods, is there any chance this thread could be split into the original "Defaulters "cost other mortgage holders €250 a month" and a farm collateral thread.
     
  12. gnf_ireland

    gnf_ireland Frequent Poster

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    Sorry only seeing this now for some reason !!

    First, I am not talking about <50k loans here, I am talking about the large ones that end up with repossession orders being served.

    Yes I agree with you - on the condition that the farm and PPR have been in their ownership for years or have been inherited via the family/others. There are also the scenarios where farmers are using large loans to purchase new land, which is already on different folio numbers with fully separated utilities.

    I think you have to also look at the reasons why the bank would give a farmer a loan of say 400k. The only two reasons I can think of are
    (a) to buy more land to expand the farm or
    (b) to dramatically modernise the farm to change the way production is done. I see this really only in the area of dairy - or maybe to establish a new line of business such as a piggery. How much does a new milking parlour cost these days ? ~100K (I have no idea other than my father in law recently put one up)?

    Either way, it makes sense to separate business and personal interests in these cases, and not an unreasonable request from the bank in my view.


    Why any bank would consider giving a large loan to a hobby farmer is beyond me, unless their real occupation gave plenty of security to pay back the money - e.g. a vet !!
     
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  13. RETIRED2017

    RETIRED2017 Frequent Poster

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    Last edited: 16 Jan 2019
    We are paying for the people in Banks who gave the loans to people who shouldn't be let out on there own knowing well there was a very good chance of loan default,

    We are well on our way of repeating the mistakes of the past by the look of things,
     
    Last edited: 16 Jan 2019
  14. Leo

    Leo Moderator

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    No, we're not. The vast majority of those loans have been or are being repaid. We're paying for the bank customers who, for a multitude of reasons, have failed to keep up with the repayments they committed to making, and the associated costs to the banks of chasing repossessions in some of those cases.
     
  15. RETIRED2017

    RETIRED2017 Frequent Poster

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    Last edited: 16 Jan 2019
    I don't believe over my life time people who take out loans have changed or are more likely to default, what has changed over my lifetime is Banks now give out loans without checking to see what the loans are really being used for and can the people pay them back

    If you have being following Askaboutmoney over the last week you will see loans being given out/offered 3 to 4 times what people applied for ,

    Taking a view they should not have taken easy loans being offered is fine once you don't mind high default rates and banks loading cost onto the people who make there repayments,
     
    Last edited: 16 Jan 2019
  16. Leo

    Leo Moderator

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    There's evidence of a significant increase in strategic default as it has become more clear that there is very little repercussions for falling behind on home loans. Go along to the repossession courts and see for yourself. There is not the same level of default for motor loans where repossession of the asset is easy and cheap. Even before I had my first job banks were trying to sell me loans and credit facilities, that was well before the tiger and credit was easy come by, so it's not like the banks just swung the doors open for a few years.

    Those were credit limits, not secured loans, a very different animal, and again, it's nothing new. Within ~3 months of getting my first credit card, my bank contacted me with the great news that my fine history of meeting the monthly repayments meant they were upping my credit limit. I was a little surprised they gave me a limit that was more than my net annual salary at the time, and that was the '90s. Around the same time I needed a car to get to work, needed finance and the bank strongly encouraged me to buy a brand new one with a loan multiples what I was looking for.
     
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  17. RedOnion

    RedOnion Frequent Poster

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    Luckily CBI have restricted this practice a lot through CPC. Working in banking, I'm skeptical about people saying they were approved for higher credit limits than they applied for. Especially without their agreement prior to approval.
     
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  18. NoRegretsCoyote

    NoRegretsCoyote Frequent Poster

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    I applied for unsecured personal loans from AIB in 2006 and 2015. High four figures over a year. On both occasions I was moving house&job and had cash flow issues.

    On both occasions I was approved within a few hours over the internet - but at a rate approaching 10%!

    AIB didn't want to know what the loans were for of whether I had other borrowings or commitments. Preumably all they checked was how much funds were going into my account and an ICB credit check.

    From what I can tell Irish banks are comfortable with a high-margin, high-default business model.

    Good customers aren't well served by this approach.
     
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  19. Delboy

    Delboy Frequent Poster

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    https://www.independent.ie/irish-ne...home-as-fund-seeks-repossession-37815361.html
    8.5 yrs rent free in one of Dublin's nicest areas....nice work if you can get it!
     
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  20. Leo

    Leo Moderator

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    Yet they 'played ball' all the way!
     
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