Why do we begrudge giving debt forgiveness to borrowers?

F

Firefly

Registered User
Messages
3,492
We have had massive write-offs/bailouts/whatever you want to call them, for developers. Our senior bankers are being investigated as what appears to be a snail's pace. We have a solicitor being investigated for north of 80m living somewhere foreign. We have already pumped 62.9 billion (http://www.askaboutmoney.com/showthread.php?t=151115) into the banks to help pay off faceless bondholders, with surely more to come.
We have put up with increased taxes, pay cuts and job losses. Social Welfare looks set to be cut. All of these have been done without a whimper compared to what happended in Greece for example.

It has been estimated that resolving negative equity would cost 14bn and this would directly benefit more "real" people amongst us than the 62.9bn already put into the banks has.

The thread relating to the Frontline program, since Monday, already has the highest number of views & posts in this forum.

So why so much debate? Are we really a nation of begrudgers?
 
+1

Also, the 62.9bn was pumped into the banks for the very purpose of absorbing defaults on mortgages.
 
Firefly said:
It has been estimated that resolving negative equity would cost 14bn and this would directly benefit more "real" people amongst us than the 62.9bn already put into the banks has.
Click to expand...

Is the 14 billion figure the value of wiping all negative equity or just those that are in trouble?
 
With the arguments against debt forgiveness mainly focusing on the "why should I pay my neighbour's mortgage" point, its made me think about the whole concept of the welfare state, and whether something so ambitious, and costly, could ever get off the ground now, if it wasn't in place already?


Internet forums, TV & radio would be overflowing with outrage at the very thought that society would voluntarily transfer over €20bn per year to people....just because they have no money for food, heat, or accommodation! Imagine!

But as the welfare state is in place already, and society already does this for its less well off, is it really such a stretch of this concept that we would transfer - on a once off basis - a lesser amount (€14bn) to that section of society which is struggling the most in this regard. Given the likely knock-on benefits to the rest of society through economic impact, maybe we need to re-consider.
 
Booter said:
But as the welfare state is in place already, and society already does this for its less well off, is it really such a stretch of this concept that we would transfer - on a once off basis - a lesser amount (€14bn) to that section of society which is struggling the most in this regard. Given the likely knock-on benefits to the rest of society through economic impact, maybe we need to re-consider.
Click to expand...

1) The existing welfare state is unaffordable, so we need to pull back rather add more cost.

2) The fact that there are people who advocate cancelling negative equity even where people are doing reasonably well for themselves out of taxation paid by people who may not be in negative equity but are hard pressed unfortunately undermines any argument for genuine debt forgiveness.

3) As for the begrudgery argument, would I begrudge paying for a debt forgiveness scheme where it's not clear that the reallocation of wealth is from those on higher living standards to those on lower living standards? Yes!
 
Firefly said:
It has been estimated that resolving negative equity would cost 14bn and this would directly benefit more "real" people amongst us than the 62.9bn already put into the banks has.
Click to expand...

But it needs to also come out of the pockets of other "real" people.
 
Firefly said:
All negative equity apparently (http://www.independent.ie/business/...ge-debt-plan-would-cost-euro14bn-2903148.html) which means for those only in trouble it would presumably cost less
Click to expand...

I think this is the crux of the problem. There are probably many people that are in negative equity but are well able to make their repayments.(I think the figure is 300,000 in NE but only 35,000 in arrears).

I know plenty of people like that are in negative equity but are happy where they live and can easily make their repayments. In some situations, people on trackers actually have lower payments than they did 3 years ago. I don't see why they should have half their debt paid by taxpayers money.

The real problem is with those that cannot make their repayments. Negative equity is only an added problem here is that they cannot sell their house and move on.
 
Booter said:
With the arguments against debt forgiveness mainly focusing on the "why should I pay my neighbour's mortgage" point, its made me think about the whole concept of the welfare state, and whether something so ambitious, and costly, could ever get off the ground now, if it wasn't in place already?


Internet forums, TV & radio would be overflowing with outrage at the very thought that society would voluntarily transfer over €20bn per year to people....just because they have no money for food, heat, or accommodation! Imagine!

But as the welfare state is in place already, and society already does this for its less well off, is it really such a stretch of this concept that we would transfer - on a once off basis - a lesser amount (€14bn) to that section of society which is struggling the most in this regard. Given the likely knock-on benefits to the rest of society through economic impact, maybe we need to re-consider.
Click to expand...
It's not an 'either/or' choice. The welfare state is already in place for everybody. If those in mortgage difficulties find themselves in dire straits, the State welfare supports will kick in. If those supports aren't kicking in, then maybe the straits aren't so dire after all.
 
Shawady said:
I know plenty of people like that are in negative equity but are happy where they live and can easily make their repayments. In some situations, people on trackers actually have lower payments than they did 3 years ago. I don't see why they should have half their debt paid by taxpayers money.
Click to expand...

I think most people agree with this

Shawady said:
The real problem is with those that cannot make their repayments. Negative equity is only an added problem here is that they cannot sell their house and move on.
Click to expand...

This is the group I am referring to. If the cost of bailing out these people was 6bn, 14bn or 20bn, would the reaction be any different? I'm not so sure. It seems that even if bailing out these people had an overall positive net effect on the country, the thought of seeing your neighbour getting a "handy one" from the bank would upset most people....even though we are already paying more tax from less wages to pay for faceless bondholders...
 
I find it very depressing the lack of sympathy, empathy or compassion with regards to mortgage holders in trouble. The assumption that the people in the situation were just reckless is just plain wrong.

I am in negative equity. I didnt buy because I was 'speculating on the market' and expected to 'flip' for a profit in a few years time. I bought it because I wanted a home of my own. Sorry if thats not what the acceptable description of events is anymore - but thats it.

There seems to be an assumption nowadays that anyone in trouble overextended themselves - I certainly didnt, I was single when I bought and the repayments were easily managed on my own salary only. I had a good deposit, I had no other debt - I still have no other debt.

I didnt buy a mansion I couldnt afford - its a small apartment - very modest by anyones standards.

I have been made redundant, my husband was made redundant. Neither of us could have foreseen that.

I would imagine the situation is similar for many people. I dont know what the answer is, but being branded speculators, overextenders, foolish, selfish etc... really doesnt help.
 
I'm also in negative equity. To what extent? Who knows, but i like many many more simply bought a home for my family, first time buyer late 2007, I clearly remember asking anybody I came accross during the purchase what way they thought the market was going to go and they all sang from the same hymn sheet "soft landing" was the buzz word. Everyone from broker, estate agent, surveyor, insurance & solicitor all said the same thing so we felt secure enough to go through with the purchase. Luckily enough we are both still in employment and can afford our mortgage but I still can't help to feel duped by all the aforementioned "professionals" who assured us we were doing the right thing.
 
truthseeker said:
I have been made redundant, my husband was made redundant. Neither of us could have foreseen that.
Click to expand...

You are in a clear cut case. You can't afford to pay a mortgage whether you overextended or got the bargain of the century.

I'd like to think that most people agree debt forgiveness applies if people have no income. In fact, I wouldn't even call it debt forgiveness in such a situation. Forgiveness implies a choice on the part of the lender, in such situations there is no choice. You simply can't service the debt.

On the other hand there are less clear cut cases where people still have an income. Some people have a romantic notion of "debt forgiveness" being writing down debt that they can service. Isn't that wrong?
 
Complainer said:
It's not an 'either/or' choice. The welfare state is already in place for everybody. If those in mortgage difficulties find themselves in dire straits, the State welfare supports will kick in. If those supports aren't kicking in, then maybe the straits aren't so dire after all.
Click to expand...

Best post of these whole discussions. The state will ensure everyone ultimately has the safety net of social welfare. That ensures a minimum standard of living.

Those who are worse off than people on social welfare need not be. There are existing mechanisms to ensure this.

Those better off than people on social welfare should count themselves as fortunate and not expect handouts to sustain a standard of living in excess of everybody else who relies on the state.
 
The welfare system provides an income for people who don’t have one. It’s function is to provide a societal safety net, a minimum standard of living for individuals and families. There is already a mechanism in place to pay the interest on the mortgages of people who are unemployed.
There is a world of a difference between that and paying off the a loan on an asset for an individual so that they can retain that asset.
I agree that something should be done but it’s such a complex area that a blanket scheme will inevitably be open to abuse or will at least help some people and not others who need that help more. I would like to see a reform in the personal bankruptcy laws, much like the American model.
I’m in negative equity. I think it would be outrageous if the state spent my neighbours money paying off a portion of my mortgage.
In the case of people who simply cannot pay there should be a mechanism for debt write-off with their bank. I don’t see why they should use other people’s money to retain ownership of their home. This was never suggested before even though many thousands of people have had to sell their home due to changed financial circumstances over the last 40 etc years. The only justification being offered for it now is that there are more people in that position.
 
DerKaiser said:
Best post of these whole discussions. The state will ensure everyone ultimately has the safety net of social welfare. That ensures a minimum standard of living.

Those who are worse off than people on social welfare need not be. There are existing mechanisms to ensure this.

Those better off than people on social welfare should count themselves as fortunate and not expect handouts to sustain a standard of living in excess of everybody else who relies on the state.
Click to expand...

+1 excellent point from Complainer.
 
Purple said:
There is already a mechanism in place to pay the interest on the mortgages of people who are unemployed.

There is a world of a difference between that are paying off the a loan on an asset for an individual so that they can retain that asset.

I would like to see a reform in the personal bankruptcy laws, much like the American model.

In the case of people who simply cannot pay there should be a mechanism for debt write-off with their bank. I don’t see why they should use other people’s money to retain ownership of their home.
Click to expand...

Also a great summary.

1) You can fall back on the state to guarantee a minimum standar of living

2) But don't expect for someone to also give you an asset you haven't paid for

3) If you fall back on the state, lose ownership of your home and can't fully pay down your debt you should not be subject to the full rigours of existing bankruptcy laws
 
truthseeker said:
I find it very depressing the lack of sympathy, empathy or compassion with regards to mortgage holders in trouble.
Click to expand...

The problem is that distressed mortgage holders are making unacceptable demands of their fellow citizens - you pay my loan and I get to keep the house! The average joe might be willing to accept the idea of a reset button, but not the idea of him footing your bill.

By reset button I mean you hand back the keys the outstanding debt is written off and you start again from zero.

Jim2007
 
I'm not sure it is begrudgery. I think it more a case of people realizing how big a mistake it was to blanket bail out bank creditors, and they simply do not want to see another blanket bail out for others. Two wrongs don't make a right.

truthseeker said:
I have been made redundant, my husband was made redundant. Neither of us could have foreseen that.
Click to expand...
But it can be said that you were "foolish" to not plan for a worst case scenario by having a big enough rainy day fund to see you through troubled times.

Purple said:
I agree that something should be done but it’s such a complex area that a blanket scheme will inevitably be open to abuse or will at least help some people and not others who need that help more. I would like to see a reform in the personal bankruptcy laws, much like the American model.
Click to expand...
Absolutely agree, if the bankruptcy process was less complicated and faster to organize, problems could be solved on an individual basis.

Complainer said:
It's not an 'either/or' choice. The welfare state is already in place for everybody. If those in mortgage difficulties find themselves in dire straits, the State welfare supports will kick in. If those supports aren't kicking in, then maybe the straits aren't so dire after all.
Click to expand...
Well said, doesn't happen often that we agree ;-)
 
You must log in or register to reply here.
Back
Top