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Central Bank say that Irish banks handling of mortgage arrears "simply isn't good enough". A suggested solution.


Sync

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Central Bank say that Irish banks handling of mortgage arrears "simply isn't good enough". A suggested solution.

Honohan tells banks: 'act on home loan arrears' - Independent.ie

Patrick Honohan said he was not satisfied with the pace of loan restructuring and said that senior management at the Central Bank were "tearing their hair out" at the lack of action from banks to get people "back on target".

He said addressing the slow rate of progress on the mortgage crisis would be the Central Bank's priority following the securing of a deal on the nation's debt problems.

And he warned that the Central Bank was so concerned about the lack of progress on mortgages that it was close to issuing directions to the banks on how to deal with the matter.
Good, strong statement from Honohan on this. With 1/6 homes (Seriously Independent editors, you guys can't even get basic ****ing fractions right) in arrears, a format for restructuring the loans of those who can't address their mortgages needs to take place.

That doesn't have to mean a write down (I'd certainly argue that it shouldn't), but extending the terms of the mortgage, taking part ownership of the property, payment holidays etc need to be considered.

The crucial compromise to be on this would seem to be that if you go for a formal writedown of the debt (i.e 200k to 150k) the bank forgoes the interest on the extended mortgage. So if for instance (picking numbers out of the air) a €200k mortgage is due in 20 years and is going to garner €88k interest for the bank and cost the customer €1200 a month. The bank keep that interest amount when extending it out to 25 years (i.e, giving up the additional 5 years interest you're due).

This does involve a hit to the bank, as they lose 5 years interest, but it still makes sure you'll get the principle back with enough to pay off what you've borrowed the money back (in most cases. Tracker mortgages are a nightmare that won't go away for banks).

So the banks gets it's money, it just gets it later than they agreed initially and without the corrosponding interest. In real terms for the customer, using my example, puts your monthly repayment at €960 (a 20% saving).

This seems pretty simple to me. But there's been no united front from the banks, no effort from govt to put a policy together, no effort to define what's a genuine effort from a customer to repay and who's just looking for a debt holiday. There needs to be more focus on this in order to provide mortgage payers with a stable way out of their debts.
 

seanmoylantd

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I was listening to the journalist that's on after Ronan on Radio 1 last week. The bank's [as in Central] spokesman was discussing a scheme where non -secured debt like car and credit car loans would be parked for five years, for the sake of keeping the mortgage up to date.
 

seanmoylantd

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I thought there would be follow-up in the print media last week, but no takers. Basically , the Credit Unions were to be encouraged to 'participate' for the sake of keeping borrowers in their homes ,which was an angle worth exploring I would have thought.
 

controller

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That doesn't have to mean a write down (I'd certainly argue that it shouldn't)
Why not.....just because it would be of no benefit to you???
 

Sync

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Why not.....just because it would be of no benefit to you???
On a personal level: Because I believe that if I knowingly enter a contract for 100k principle and 40k interest then I owe €140k and it's my responsibility to repay that. If I can't repay then I need to declare bankruptcy or return the asset and repay the balance (if indeed that asset is worth less than I bought it for).

On a wider level: Because the taxpayer can't afford to be hit any more to cover these writedowns. Because we need a functioning banking system. Because the idea that Person A who didn't borrow beyond their means should have to help Person B who did isn't something I'm on board with.

My mortgage is my mortgage. It's my responsibility to pay it back. Not me neighbour's.
 

Astral Peaks

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Taxpayers will have to pick up the tab if there is a general policy of write-downs.
Yup, and the New Beginning lot really seem to just want debt forgiveness.

Middle class whinging now that their greed has been exposed and their refusal to face the consequences of their actions.
 

statsman

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56,230
Honohan tells banks: 'act on home loan arrears' - Independent.ie



Good, strong statement from Honohan on this. With 1/6 homes (Seriously Independent editors, you guys can't even get basic ****ing fractions right) in arrears, a format for restructuring the loans of those who can't address their mortgages needs to take place.

That doesn't have to mean a write down (I'd certainly argue that it shouldn't), but extending the terms of the mortgage, taking part ownership of the property, payment holidays etc need to be considered.

The crucial compromise to be on this would seem to be that if you go for a formal writedown of the debt (i.e 200k to 150k) the bank forgoes the interest on the extended mortgage. So if for instance (picking numbers out of the air) a €200k mortgage is due in 20 years and is going to garner €88k interest for the bank and cost the customer €1200 a month. The bank keep that interest amount when extending it out to 25 years (i.e, giving up the additional 5 years interest you're due).

This does involve a hit to the bank, as they lose 5 years interest, but it still makes sure you'll get the principle back with enough to pay off what you've borrowed the money back (in most cases. Tracker mortgages are a nightmare that won't go away for banks).

So the banks gets it's money, it just gets it later than they agreed initially and without the corrosponding interest. In real terms for the customer, using my example, puts your monthly repayment at €960 (a 20% saving).

This seems pretty simple to me. But there's been no united front from the banks, no effort from govt to put a policy together, no effort to define what's a genuine effort from a customer to repay and who's just looking for a debt holiday. There needs to be more focus on this in order to provide mortgage payers with a stable way out of their debts.
Not a bad plan at all. I like it.
 

controller

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Joined
Feb 25, 2009
Messages
3,176
On a personal level: Because I believe that if I knowingly enter a contract for 100k principle and 40k interest then I owe €140k and it's my responsibility to repay that. If I can't repay then I need to declare bankruptcy or return the asset and repay the balance (if indeed that asset is worth less than I bought it for).
On a wider level: Because the taxpayer can't afford to be hit any more to cover these writedowns. Because we need a functioning banking system. Because the idea that Person A who didn't borrow beyond their means should have to help Person B who did isn't something I'm on board with.My mortgage is my mortgage. It's my responsibility to pay it back. Not me neighbour's.
People get all kinds of financial breaks all the time. I take it you don't mind subsidising

• Television and film industry
• Public sector pensions
• Cycle to Work Scheme
• Nursing home fees
• Trade Union Membership
• Service charges
• The list goes on

People got mortgages in a badly (some would say corruptly) run economy, the mortgage holders got screwed by the banks and the government and your response is "to hell with them". Typically gutless response
 

statsman

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Feb 25, 2011
Messages
56,230
Have you got a point to make?
There's a difference between rescuing the banking system and giving handouts to individual mortgage holders. The solution you apply to a structural problem is unlikely to be the same as the one you apply to an individual problem

And what point did 'Yawn' make?
 
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