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Bank regulation and slow house repossessions on mortgage defaults threaten to make zombies of banks


patslatt

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Have the banks become zombies that are incapable of lending to even viable businesses?The bank regulator Matthew Elderfield demanded that banks meet capital and liquidity standards that are higher than in other countries and at a faster pace. That is a desirable long run goal but in the short term it could stifle lending as banks constrain their business loans both to increase their cash and reduce their ratios of loans to shareholder capital. Hopefully, the regulator will relent on target standards if he sees that business loans are drying up.

An even greater risk to business lending is that banks could be prevented by the government from taking prompt action to repossess houses on mortgage defaults and arrears,now running at 11% of mortgages. If the banks can't sell off those houses,that means they have less money to lend and their potential to lend is further reduced by the writedown of mortgage assets.

Folk memories of heartless 19th century evictions in Famine and post Famine Ireland still have some sway in Irish thinking and the numerically large number of families threatened with eviction are a potent political lobby.

The seemingly reasonable solution talked up by the media is for the banks to give writeoffs on mortgages,reducing them to levels families can afford. The banks could also retain an interest in potential future capital gains above the level of the written down amount in the event of a sale.However,going by US experience most bank restructurings of mortgages in default resulted in repeated defaults in a relatively short time,suggesting that those debtors are hopeless cases.

If the government makes it easy for debtors to declare bankruptcy,a new wave of defaults on mortgages under water (ie house worth less than the mortgage) is likely.
 
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Kev408

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Pat, still out phishing?
 

True Republican

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the banks should repossess hopeless cases where the mortgage holders have no hope of paying the mortgage back.
 

Flimflam

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They've been Zombie Banks for the past five years! Where have you been :D ?
 

storybud1

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Developers spend 12 months in the UK going bankrupt and come back laughing.

Joe Bloggs goes hungry so he can pay the crazy mortgage sold to him by the politicians/bankers and developers.

Conclusion, Politicians and banks may end up at the wrong end of a Pike soon, the despair will eventually turn to anger as Irish people don't do protests very well, they get pent up and then blow!
 

richie268

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It is not about banks anymore but about Countries and the so called Capitalist system that has failed so miserably.
 

patslatt

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Developers spend 12 months in the UK going bankrupt and come back laughing.

Joe Bloggs goes hungry so he can pay the crazy mortgage sold to him by the politicians/bankers and developers.

Conclusion, Politicians and banks may end up at the wrong end of a Pike soon, the despair will eventually turn to anger as Irish people don't do protests very well, they get pent up and then blow!
The last time that happened was 99 years ago in the 1913 General Strike and before that in 1798. The odds of still relatively prosperous Irish people rioting on a large scale are almost nil.
 

ObsessiveMathsFreak

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Conclusion, Politicians and banks may end up at the wrong end of a Pike soon, the despair will eventually turn to anger as Irish people don't do protests very well, they get pent up and then blow!
The problem with the Irish people,” Ian says, as we drive away from the black hole that ruined Joe McNamara, “is that you can push them and push them and push them. But when they break they go wacko.”
When Irish Eyes Are Crying
 

cabledude

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Pat, if the banks go into top gear on repo's it will bust them more than they already are. Imagine 40 or 50 thousand homes and flats coming on the market, a market that is already on the floor, it would create a firesale. The banks are not lending as it is. Imagine what having that amount of houses on their books would do to them, houses that would most likely not even sell. It would be a disaster.....
 

Howya

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Have the banks become zombies that are incapable of lending to even viable businesses?
The answer is a resounding yes - they have been zombies for years and the residential loan crisis is making them more so.


If the government makes it easy for debtors to declare bankruptcy,a new wave of defaults on mortgages under water (ie house worth less than the mortgage) is likely.
The new Insolvency bill will not make it "easy" for debtors to declare bankruptcy. The banks are still in control of the process and a debtor is still facing many years to exit bankruptcy.
 

jman0war

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Pat, if the banks go into top gear on repo's it will bust them more than they already are. Imagine 40 or 50 thousand homes and flats coming on the market, a market that is already on the floor, it would create a firesale. The banks are not lending as it is. Imagine what having that amount of houses on their books would do to them, houses that would most likely not even sell. It would be a disaster.....
Those houses are already on their books, and either underperforming or not performing at all.
The point of repossession and "firesales" would be to get these bad loans and assets off their books.
It would bring property values down til the real floor was actually found.
That is a good thing.
 

Mad as Fish

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Those houses are already on their books, and either underperforming or not performing at all.
The point of repossession and "firesales" would be to get these bad loans and assets off their books.
It would bring property values down til the real floor was actually found.
That is a good thing.
Not such a good thing if you you are trying to raise tax based on the value of properties. I can see the government being very 'understanding' when it comes to the banks not wanting to flood the market.
 

potholedogger

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Pat, if the banks go into top gear on repo's it will bust them more than they already are. Imagine 40 or 50 thousand homes and flats coming on the market, a market that is already on the floor, it would create a firesale. The banks are not lending as it is. Imagine what having that amount of houses on their books would do to them, houses that would most likely not even sell. It would be a disaster.....
The banks could rent them through a subsidiary!
 

Partizan

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The banks could rent them through a subsidiary!
I dont think that we will see mass evictions. I think that in 90% of cases, the banks will take full ownership of the properties and rent them back to the now tenants.
 

Partizan

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Those houses are already on their books, and either underperforming or not performing at all.
The point of repossession and "firesales" would be to get these bad loans and assets off their books.
It would bring property values down til the real floor was actually found.
That is a good thing.
Yes but not good for NAMA or the banks. Remember there are vested interests at play here to keep the artificial floor of the market going. The whole thing was one big scam and when it does come crashing the floor it will make the 2008 crash look like Pee Wee's Playhouse.
 

Mad as Fish

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Yes but not good for NAMA or the banks. Remember there are vested interests at play here to keep the artificial floor of the market going. The whole thing was one big scam and when it does come crashing the floor it will make the 2008 crash look like Pee Wee's Playhouse.
True, at a base level the value of anything is purely what somebody is willing to pay for it and if nobody is buying houses (for whatever reason) then in fact they are worth nothing.
 

jman0war

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True, at a base level the value of anything is purely what somebody is willing to pay for it and if nobody is buying houses (for whatever reason) then in fact they are worth nothing.
It's not true that nobody is buying houses.
Fewer people are buying this is true, for a variety of reasons, access to credit being one.
However, lower the price of those houses and they will sell.
It's just that selling houses at real valuation in today's market is unpalatable.
They would rather use tax payer money to bulldoze ghost estates in order to preserve the inflated price of other houses.
 
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