Making sure I can get debt forgiveness.

[Gervan]

As someone who drives a 17 year old car because I chose NOT to get a loan for a new car, who has an old kitchen and unfashionable bathroom because I did NOT get a loan for "doing up the house" I am furious that people who did not plan for the future should be rewarded by debt forgiveness.
I do not wish to see anyone thrown out of their house for being unable to afford the mortgage, but believe the debt should be held on file, and not "forgiven". I know of people who received windfalls and spent it on luxury holidays etc who are now in trouble with mortgage repayments. Why should I pay for their luxuries when I chose to live within my means?
I can quite understand those who are thinking of manoeuvering to take advantage of any debt forgiveness that might be available.

 

[Slaphead]

Same as above poster, i could have gotten a mortgage for nearly double what i eventually took, and me and the missus could drive better cars than our 99 & 00 1.4 engines.
Ill be damn annoyed if ppl are getting amounts wiped off their mortgage, I would however be all for allowing ppl to go interest only etc and have the deeds changed accordingly. Just dont want to see the madness that went on rewarded.

 

[Sunny]

I took a much smaller mortgage and paid 20% deposit when they were offering me a much larger 100% one. Doesn't mean I am somehow superior to people who fell for all the sales guff from politicians, bankers, economists, commentators, media outlets, estate agents etc etc.

There seems to be an almost 'they are getting what they deserve' attitude floating around. There is a real problem out there and trying to solve it will not only help those individuals but will also help the economy and therefore everyone else.

I have already said that I am not in favour of debt forgiveness but we are still talking and nowhere near restructuring our bankruptcy laws which are completely unfair on individuals. All this talk about debt write off's for the masses, debt for equity swaps, renting from the Government and all the other mad schemes won't solve the problem. People need a way out and that means, they should be allowed to enter bankruptcy but be allowed a fresh start after a resonable period. If this means, we have to pour more capital into the banks to deal with losses on personal debt, then so be it.

 

[truthseeker]

As someone who drives a 17 year old car because I chose NOT to get a loan for a new car, who has an old kitchen and unfashionable bathroom because I did NOT get a loan for "doing up the house" I am furious that people who did not plan for the future should be rewarded by debt forgiveness.
I do not wish to see anyone thrown out of their house for being unable to afford the mortgage, but believe the debt should be held on file, and not "forgiven". I know of people who received windfalls and spent it on luxury holidays etc who are now in trouble with mortgage repayments. Why should I pay for their luxuries when I chose to live within my means?
I can quite understand those who are thinking of manoeuvering to take advantage of any debt forgiveness that might be available.

Youre talking as though debt forgiveness is going to be aimed at the '4 bed semi d, investment apartment to rent, 2 disgustingly large petrol guzzling jeep type vehicles' only.

What about the people just like you, who chose to live within their means, but are still in trouble?

Are you saying we just condemn people who have no hope of paying off their debt, and just have them living a life of servicing debt and struggling?

I know its irritating, I lived within my means, but both myself and my partner are out of work - and despite best efforts, the savings wont last forever, every job advertised in his field is a government sponsored slave labour internship (funny how internships want 5 years professional experience eh?). Neither of us has any loans bar mortgage but social welfare wouldnt cover that, so if the savings run out and no jobs in sight, we WILL stop paying - itll be that or stop eating - which would you have people do?

 

[orka]

I think the debt forgiveness that would gall most people is a debt forgiveness that allows people to retain ownership of assets that, in hindsight, they can't afford. There will, of course, have to be the debt forgiveness that has always existed - when houses are repossessed and the banks accept that the bad debt will never be repaid. I personally think the only officially-structured debt forgiveness that will work is where the asset is given up and the borrower retains some level of debt - maybe a % of the amount outstanding after the house is sold, capped at some level and repayable on mortgage-type terms (low interest rate, long duration). Allowing someone to walk away with a completely clean slate is unfair to those who are managing to meet their negative equity commitments - and would encourage more people to somehow not be able to meet their commitments.

 

[monagt]

There seems to be an almost 'they are getting what they deserve' attitude floating around.

Sunny.

+ 1

A bit of Schadenfreude going on here.

Nobody can be complacent about the figures that show 55,000 mortgages are in arrears for more than three months. And nobody can be unaware of the ocean of pain and anxiety of which the figure only indicates the surface.

http://www.independent.ie/opinion/editorial/price-of-holding-on-to-your-home-2860720.html

And I like this quote:

But none of this comes anywhere near justifying the hysteria among the "chattering classes".

 

[Firefly]

I think the debt forgiveness that would gall most people is a debt forgiveness that allows people to retain ownership of assets that, in hindsight, they can't afford. There will, of course, have to be the debt forgiveness that has always existed - when houses are repossessed and the banks accept that the bad debt will never be repaid. I personally think the only officially-structured debt forgiveness that will work is where the asset is given up and the borrower retains some level of debt - maybe a % of the amount outstanding after the house is sold, capped at some level and repayable on mortgage-type terms (low interest rate, long duration). Allowing someone to walk away with a completely clean slate is unfair to those who are managing to meet their negative equity commitments - and would encourage more people to somehow not be able to meet their commitments.

+1 orka

 

[Sunny]

This isn't about negative equity. This is about people unable to meet their mortgate repayments.

Why should someone lose the asset and then have debt follow them? The banks took as much risk in the transaction as the mortgage holder but this isn't reflected when things go bad. There is nothing unfair about the mortgage holder giving the bank the asset as settlement for the outstanding mortgage.

This doesn't mean that everyone in negative equity gets to hand back their keys. You can't just into court and declare yourself bankrupt and it is easy enough to put steps in place to ensure that only genuine 'unable' to pay cases are allowed to declare themselves bankrupt. These people should then spend a reaosnable amount of time paying back whatever debt they can (if any) and then be allowed to start again.

 

[Firefly]

Why should someone lose the asset and then have debt follow them? The banks took as much risk in the transaction as the mortgage holder but this isn't reflected when things go bad. There is nothing unfair about the mortgage holder giving the bank the asset as settlement for the outstanding mortgage.

Hi Sunny,

I agree with this in principle, but the fact here is that the government (ie the taxpayer) now owns the banks. If there is a shortfall after the bank actually sell the house (not merely accepting the house back) then this is a loss payable by the taxpayer. Perhaps it would be fairer to all if a large portion of this remaining debt (such as 50%) followed the mortgage owner and payable over a long period of time at a low interest? That way they are clear of the mortgage but still pay something which the taxpayer isn't on the hook for.

 

[Sunny]

Hi Sunny,

I agree with this in principle, but the fact here is that the government (ie the taxpayer) now owns the banks. If there is a shortfall after the bank actually sell the house (not merely accepting the house back) then this is a loss payable by the taxpayer. Perhaps it would be fairer to all if a large portion of this remaining debt (such as 50%) followed the mortgage owner and payable over a long period of time at a low interest? That way they are clear of the mortgage but still pay something which the taxpayer isn't on the hook for.

The fact that the Banks are owned by the State isn't the fault of the struggling mortgage holder. The same mortgage holders are (were once) also taxpayers. Also, not all banks are owned by the State. There is going to be a cost to the State in all of this one way or another. We can either spend the next 5 years coming up with mad schemes to try and put off the inevitable or we can bite the bullet, realise that some people cannot afford their mortgages and deal with it. And the only way to deal this is through insolvency legislation. I am not saying this should be a get out of jail debt free card but bankruptcy shouldn't be a life sentance for people either.

I don't like paying for wealthy pensioners to have medical cards. I don't like paying for child benefit. I don't like paying for numerous things that our tax dollars get spent on. Adding more capital into banks to deal with genuine hardship cases if needs be is just one other thing on the long list.

 

[Firefly]

The fact that the Banks are owned by the State isn't the fault of the struggling mortgage holder. The same mortgage holders are (were once) also taxpayers. Also, not all banks are owned by the State. There is going to be a cost to the State in all of this one way or another. We can either spend the next 5 years coming up with mad schemes to try and put off the inevitable or we can bite the bullet, realise that some people cannot afford their mortgages and deal with it. And the only way to deal this is through insolvency legislation. I am not saying this should be a get out of jail debt free card but bankruptcy shouldn't be a life sentance for people either.

I don't like paying for wealthy pensioners to have medical cards. I don't like paying for child benefit. I don't like paying for numerous things that our tax dollars get spent on. Adding more capital into banks to deal with genuine hardship cases if needs be is just one other thing on the long list.

I agree with all of that, but I think it should be a case for case basis. Someone who borrowed recklessly IMO shouldn't be able to walk away scott-free with the rest of us picking up the tab. Consider someone who got a 95% plus mortgage for property for 800k that they now can't afford. All they'll lose is the 5% deposit (40k). This house is probably now worth somewhere around 450k. Do we pay for the other 400k? If so, then the phrase "Sure you can't lose with property" springs to mind

 

[orka]

This isn't about negative equity. This is about people unable to meet their mortgate repayments.

This is very much about negative equity. We have always had people unable to pay their mortgage but people in negative equity don’t have the out that non-negative equity people have – sell the property, pocket the positive equity and start again. The big difference now is that people in NE are trapped.

Why should someone lose the asset and then have debt follow them?

Mad concept like ‘they still owe the money’?

There is nothing unfair about the mortgage holder giving the bank the asset as settlement for the outstanding mortgage.

There’s everything unfair about it. This would be allowing people a one-way bet – house prices go up, I win; house prices go down, I hand the property back to the bank. Irish mortgage lending is not generally set up on this non-recourse basis so it can’t be changed in hindsight (well not without retrospectively changing all the contracts). I think there’s a lot to be said for structuring mortgage-lending this way (I think most US mortgages are done this way) – but it would mean that people would need much larger % deposits and the banks would be extremely picky about who they lend to – not a bad thing, but home ownership would become a lot less common than it is now.

This doesn't mean that everyone in negative equity gets to hand back their keys. You can't just into court and declare yourself bankrupt and it is easy enough to put steps in place to ensure that only genuine 'unable' to pay cases are allowed to declare themselves bankrupt. These people should then spend a reaosnable amount of time paying back whatever debt they can (if any) and then be allowed to start again.

How is this different to what I suggested? – hand back asset, pay back what you can over time.

 

[Shawady]

This is very much about negative equity. We have always had people unable to pay their mortgage but people in negative equity don’t have the out that non-negative equity people have – sell the property, pocket the positive equity and start again.

I would be aware of a couple of people in arrears that are not in negative equity. In one case I suggested that they sell there house but was greeted with "We want to keep our home". I imagine most people, particularly with young families would be reluctant to move from their home.
These types of examples make the whole Debt Forgiveness issue difficult to understand. It would be interesting to know how many of the 50,000 mortgages in arrears are actually in negative equity so that the problem can be assesed accurately.

 

[Sunny]

This is very much about negative equity. We have always had people unable to pay their mortgage but people in negative equity don’t have the out that non-negative equity people have – sell the property, pocket the positive equity and start again. The big difference now is that people in NE are trapped.
Mad concept like ‘they still owe the money’?There’s everything unfair about it. This would be allowing people a one-way bet – house prices go up, I win; house prices go down, I hand the property back to the bank. Irish mortgage lending is not generally set up on this non-recourse basis so it can’t be changed in hindsight (well not without retrospectively changing all the contracts). I think there’s a lot to be said for structuring mortgage-lending this way (I think most US mortgages are done this way) – but it would mean that people would need much larger % deposits and the banks would be extremely picky about who they lend to – not a bad thing, but home ownership would become a lot less common than it is now.
How is this different to what I suggested? – hand back asset, pay back what you can over time.

The problem is not negative equity. That only takes away the option of selling the property to pay back the debt. Negative equity doesn't cause mortgage arrears which is what we are talking about. It removes an option for struggling mortgage holders and causes a problem for banks when the repocess properties.

It's not a one way bet. There are still consequences. BANKRUPTCY. I am not talking about people going into Court, declaring themselves bankrupt and then walking out the door with a big smile on their face and drinking champagne.

Recourse or non-recourse isn't really the issue. Contracts don't need to be changed. The bankruptcy laws need to be changed. That way it doesn't matter if the mortgage is recourse or not.

Yes, because the US with their non-recourse mortgages were very picky who they lent to and required stringent underwriting.

Being in debt is not a criminal offence. Being genuinely unable to pay is not a criminal offence and yet we seem to think that we should make people carry the burden on their shoulders of unsustainable debt for the rest of their lives as some sort of lesson.

 

[Sunny]

I agree with all of that, but I think it should be a case for case basis. Someone who borrowed recklessly IMO shouldn't be able to walk away scott-free with the rest of us picking up the tab. Consider someone who got a 95% plus mortgage for property for 800k that they now can't afford. All they'll lose is the 5% deposit (40k). This house is probably now worth somewhere around 450k. Do we pay for the other 400k? If so, then the phrase "Sure you can't lose with property" springs to mind

Again, people need to stop thinking that going bankrupt is just waving goodbye to debts and getting away scott free.

Rapists and murderers are allowed out of jail after a period of time. Why should bankrupt people not be allowed the same opportunity?

 

[orka]

The problem is not negative equity. That only takes away the option of selling the property to pay back the debt. Negative equity doesn't cause mortgage arrears which is what we are talking about. It removes an option for struggling mortgage holders and causes a problem for banks when the repocess properties.

We have always had people unable to pay their mortgage - even in boom times people lost their jobs, separated, divorced, had failed businesses etc. - why does the problem need different solutions just because it's a more extensive problem now?

It's not a one way bet. There are still consequences. BANKRUPTCY. I am not talking about people going into Court, declaring themselves bankrupt and then walking out the door with a big smile on their face and drinking champagne.

And yet we have people on AAM looking for advice on going abroad for an easier bankruptcy. Making bankruptcy easier will undoubtedly encourage more people into the process. I know if I was facing having to pay a 400K mortgage that I couldn't afford on a property worth 200K, I would be quite happy to go the bankruptcy route to get my life back. And if I could just about afford the mortgage but had a poor quality of life, I would go down that route too. And if I could afford the mortgage but wanted to start getting some luxuries back into my life (because I'm worth it), I might go down that route too. Clean slate looks so much more appealing than a personal balance sheet of negative 200K...

 

[Firefly]

Again, people need to stop thinking that going bankrupt is just waving goodbye to debts and getting away scott free.

But in my example above they would be getting away without paying for an obligation of 450k that taxpayers will have to pay. There may be some inconvenience in going bankrupt, but it's relatively scott free compared to paying back the 450k owed if you ask me

 

[grackal]

We have always had people unable to pay their mortgage - even in boom times people lost their jobs, separated, divorced, had failed businesses etc. - why does the problem need different solutions just because it's a more extensive problem now?
And yet we have people on AAM looking for advice on going abroad for an easier bankruptcy. Making bankruptcy easier will undoubtedly encourage more people into the process. I know if I was facing having to pay a 400K mortgage that I couldn't afford on a property worth 200K, I would be quite happy to go the bankruptcy route to get my life back. And if I could just about afford the mortgage but had a poor quality of life, I would go down that route too. And if I could afford the mortgage but wanted to start getting some luxuries back into my life (because I'm worth it), I might go down that route too. Clean slate looks so much more appealing than a personal balance sheet of negative 200K...

The trick will be to make bankruptcy unpalatable enough so that the people that can pay, continue to pay, but make it a viable option for those that are hopelessly trapped and will never be able to pay off their debts. 3 years or so of the present regime (i.e. your income is managed by a 3rd party) followed by... maybe 15 years suspension from being able to apply for a mortgage or loan over 5000 euro?

People who made a terrible mistake and just want to get back to life and are prepared to accept that they have shown themselves of being incapable of paying back a mortgage, will not have the opportunity to own another home for 15 years.

People who would think of pulling a sly one and dumping their negative equity on others will think twice when they cannot get another mortgage for an extended period.

 

[grackal]

We have always had people unable to pay their mortgage - even in boom times people lost their jobs, separated, divorced, had failed businesses etc. - why does the problem need different solutions just because it's a more extensive problem now?

And yet we have people on AAM looking for advice on going abroad for an easier bankruptcy.

During boom times, property was appreciating in double figures most years, negative equity was unheard of, people generally did well any time they sold, so property was rarely the cause of a bankruptcy.

Going abroad is simply the smart thing to do. Why make yourself a martyr for 12 years in Ireland, when you can go across the border and get it over with in 3 years? Even so, bankruptcy is much, much more than "a minor inconvenience".

 

[Firefly]

The trick will be to make bankruptcy unpalatable enough so that the people that can pay, continue to pay, but make it a viable option for those that are hopelessly trapped and will never be able to pay off their debts.

I agree with this bit.

3 years or so of the present regime (i.e. your income is managed by a 3rd party) followed by... maybe 15 years suspension from being able to apply for a mortgage or loan over 5000 euro?

I think this is way too harsh. And anyway, whether it's 2 weeks or 15 years before they can get another mortgage, the result is still the same for the taxpayer...they are left with the debt of the original mortgage.