Amendments to Finance Bill Outlawing Exotic Mortgage On PPRs

In around 2004 the banks in Ireland ran out of fools to whom they could give an normal mortgage . House prices were so high that a normal mortgage could not be given as it was impossible to pay it back in a reasonable timescale.

A Normal Mortgage is a repayment mortgage over max 25 years. the banks therefore introduced 3 exotic product groups to the market , sometimes a combination of the 3 .

  1. 30 , 35 and 40 year mortgages
  2. INTEREST Only Mortgages on PPRs
    3 100% mortgages on PPRs

*In extremis you could even get an Interest Only 100% + Mortgage over 40 years on a PPR .
Property prices are now back to 2004 or even 2003 levels . We do not want another insane bubble. Therefore I am proposing 3 URGENT amendments to the Finance Bill going through the Dáil and am commending them to the readership to be actioned.

The Amendments

  1. A mortgage on a Principal Primary residence may not be granted for longer than 25 years and then only on an Amortising Repayment basis .

  2. A mortgage on a Principal Primary residence may not be granted for more than 90% of the value of a Principal Primary residence

a) 90% LTV at the time of the First Mortage
b) 80% LTV at the time of any subsequent remortgage and thereafter .

  1. Over the lifetime fo a 25 year repayment Mortgage on a Principal Primary residence it shall be permissible to temporarily convert to Interest Only but

a) For no longer than 3 year in total over the course of the 25 years taken as full single years or as multiples of single years at a time.
b) Only if the outstanding principal is less than 75% of the Value of the property at time of conversion to Interest only .
c) The 3 year quota is to apply collectively to all remortgages as well as the original mortgage and must be fully disclosed upon all or any remortgages over the course of the 25 years.

Get on to your local TD and press them to propose and second and unreservedly back these measures which are in the long term interests of their constituents .

Get Busy People . Email Addresses Here (MS Word)

one of the silliest ideas i have seen on the pin so far - well done sir

Is there any possibility you could elaborate rather than shitting over every thread you can find?

Edit: These rules seems extremely sensible to me. I think in general 20 years should be the max with the average mortgage being in the 10-15 years range. It’s practically impossible to ensure someone stays in stable employment for longer periods than and there’s no way someone should have to buy at aged 30 in order to have the damn thing paid off before they retire.

That is an excellent idea. It would go along way to preventing housing bubbles and the inevitable busts.

Care to explain why you think it is silly 2gaffs?

Furthermore I urge everybody here who is in any way active on any other Irish Discussion Forum to copy and paste the original post onto those discussion forums where others can see them and act . We have very little time to get these proposals into the Finance Bill and ito law by teh summer .

2gaffs. You are a self disclosed investor in property . I am making no proposals whatsoever as to how much money an investor can get from a bank and nor do I think I should . Business is Business sunshine 8)

I am proposing that where the state effectively has a long term societal liability to house a family unit by any means possible including , inter alia :

  1. Mortgage subsidies like stamp duty and tax relief for FTBs
  2. The dole paying the mortgage if you lose your job
  3. Social Housing where you cannot get a mortgage as many cannot and wil not

Then the state has a duty to the taxpayer to mitigate these potential losses and to ensure that risky lending does not occur which can expose the state/taypayer to contingent losses .

The proposed amendment above mitigates many of the risks ex ante rather than wiping arses *ex post * , you are a taxpayer too are you not 2gaffs ???

Some things are too important to be left to the market as we now know :frowning:

Um, 2Gaffs, this will increase the number of people renting long-term…

any chance we can hold off until I have my PPR sold? :wink:

A very sensible suggestion Mr. 2Pack.

On a related point what is the likelihood of banks (Irish or otherwise) arriving at similar lending criteria all on their own?

When we eventually emerge from this mess there will be continue to be a great deal of scrutiny of bank balance sheets, funding requirements lending policies and general risk management. Admittedly, this should have been done before the bubble but how likely is it that the markets, investors, regulators and the banks themselves will gravitate towards old-style lending policies without the need for legislation?

Will depositors or the wholesale markets ever again trust a bank that has a large lending exposure to a single business sector (i.e. property) or appears to at the forefront of speculative lending?

I think it is a bad idea, this rule is very complicated and requires a lot of oversight. If you look at other threads you would see that much simpler concept of TRS is already causing headaches with administration. Who would enforce those rules? Who would control the banks? What punishments do you propose? Laws should be simple and enforceable I can’t see now 26 year mortage would cause a property bubble and it is enough to use balloon payment on the end to effectively make mortage longer. But then you would say, let’s make the rule that payments should be equal for whole duration. This would although ban overpayments so again extra clause has to be created, this would be very complicated rule and certainly some loopholes would be found. Let’s make the rules simpler and say that all secured loans can be retrieved only from their security, I think it is called non recourse in case of mortages. Let’s change personal bankrupcy law, it is far more important than loan parameters. Too bad I can’t vote but I urge those who vote to influence their TD towards more important issues.

They already have Johnboy ( and Peepingtom) , the amendments merely regularise what they have been doing since about mid 2008 and provide certainty to investors in certain Irish Mortgage Securities going forward .

You make bank directors personally liable September :slight_smile: It actually encourages overpayments and does not outlaw them .

The problem with this is that the banks are playing both sides and they’ve already lent too much money to the developers. Now they need to loan too much money to consumers to get it all paid off.

Regulating the consumer loan market is not **that **complex. The revenue is making a balls of TRS for their own reasons but tax is always much more difficult to regulate and enforce than what products can be sold.

It doesn’t really matter if the odd 30 year mortgage slips through, what’s important is that mortgages longer than 25 years are eliminated in general.

It will not work, non-Irish banks cannot be enforced to do this so they will have a advantage over locals. Second I do not think directors would accept such risk, they would probably pass it either by insurance (which means local banks having higher costs) or contract. Yes yes… you can make rules even more complicated and ban it. Because Ireland is diffrent and everything must be regulated, it has worked for planning permissons or pubs so well.

First of all TRS is much simpler concept then such rule, and too make this rule reasonably work it will have to grow significantly. This will offset fact that it is not a tax. I know that you would say that even it was complicated to enforce such civil servants as Patrick Neary would ensure 100% compliance. It may require extra tax to cover cost of enforcement, but I guess Irish are ready to pay extra for such excellent services. No free lunch.

I must also agree on second point, as semi-laws are tradition here and planning for an universal law is pointless, even dangerous. Such law would deprave knowledge economy out of canniest investors, who keep this country moving. Clear and enforceable laws would bring corruption to very high levels, as instead of taking murky shorcuts people would have to break rules.

Non Irish banks are sort of guaranteed rubbish risks by your logic September .

You may also legislate to define over 25 years as an “Unfair Contract” within the meaning of the Unfair Contract Directive which would decollateralise the loan and make it too risky for any lender . Naturally it cannot be retroactive .

I refer to Article 6 in particular .

  1. Cap the maximum mortgage size at the cost of building an average 3 bed semi-d (excluding site costs).

There you go - simple. If people want to purchase at higher prices, then use accumulated wealth.

TRS is a simple enough **concept ** but it’s difficult to enforce for a number of reasons. One is that it’s difficult to identify who is a FTB and who isn’t, another is that people are highly incentivised to game the system for their own benefit.

Mortgage product regulation applies to lenders and not borrowers. This makes it much easier to enforce since you’re dealing with a small number of organisations each of which is generally aiming to be compliant will regulation.

There are all kinds of harmful products you simply cannot sell, harmful financial products are no different.

Foreign banks are much riskier and harder to regulate, but changing law regarding contracts or collaterals is better way, as it may be enforced by consumers, who would just stop paying after 25 years. Or would they? You suggest that mortgage after 25years becomes unsecured, but default on such loan could also lead to repossession. Again we would be having artificial boundary, and banks could plan load to be paid in 95% after 25 years, as they could probably assume low risk on 5% as personal loan. Or maybe 5.25%. Let’s even say 5.5% or even 5.75% providing that property always goes up. Of course small modification to law here and there would prevent this happening. However again we finish again with something complicated.

Another point is that this applies to mortgages, while idea of limiting secured consumer loans to their respective collaterals would go across more asset classes. This could be introduced as Unfair Contract Clause and may be easier to push through legislation on one hand and this rule would be self-enforceable. Why not have a simpler, low-cost and more universal rule?

If I were to push our dear lenders I would make them always offer 25year or even 30year fixed mortgage. I would even suggest to make it compulsory, that anyone on SVR or tracker would be able to switch to such mortgage. But I guess that is offtopic.

Disagree. Simple but locks a lot of people out of property. Who decides on the cost? What if wage inflation murders the equation? What’s average? That money buys more in rural areas than in Dublin, for example, and averageness means 3 bedroomed semi D in Dublin will cost more than elsewhere.

Keep borrowings as a function of earnings but limit the multiples. Shouldn’t be so hard and is not complicated.

This is a great idea but I would include site costs **if applicable **but also cap that, so if you want a higher cost site overlooking the Howth coast you have to save the difference between that and a normal site

Would this not be a good means of deflating the Dublin market. More jobs in Dublin and usually at a higher wage. It would encourage saving more

A loan term of over 25 years would be legally void from the start not once it went over 25 years .

This is more difficult . It means that all loans must be 'registered ’ in some way like a mortgage is nowadays . I believe that would be too ‘big brother’ .

Not every loan is collateralised either , the difference between a Car Loan and Car Finance if you will.

That is also messy . The US could do it because they set up Fannie and Freddie after the depression to offer …30 year fixed mortgages of all things . Look how that ended up :slight_smile:

Yo Bulls, a universal 25 year rule takes higher Dublin wages into account leading to higher prices in Dublin underpinned by prudent lending . The same rule would lead to lower prices where wages are lower .