Home Choice Loans = Subprime, therefore ...

Right, just thinking about this Home Choice Loan scheme.

In order to qualify for the Home Choice Loan, a potential borrower must earn over €40k per year and have been refused by a bank (here) The refusal alone, would suggest some problem with the credit rating, or ability to repay of the requesting individual/couple. In essence, they are refused because they are “sub-prime”.

Now, my question is this;

If said sub-prime borrower is lent the States money by the Government’s Home Choice Loan "agency"and the sub-prime borrower lives up to their billing (and the demonstrable traits of sub-prime borrowers in the UK, US and here) resulting in a default or significant arrears on their loan, will the government, on behalf of the State and “in the National interest” move to evict them and repossess the house? If not, why not?

Personally, if this is a de facto guaranteed non-repossession home loan regardless of your repayments then I want one and I want one now!

Blue Horseshoe

No

Because this will become another local politician slush fund which will be given to their favoured constituents and supporters. TDs will be having delegations of Irish mammies coming to their clinics wondering if Fintan the no-hoper son could just get a little loan to buy a house because renting is dead money and he can’t scrape together tuppence for a deposit because he’s a waster. It will be administered by civil servants who will come under direct political interference if needs be to prevent foreclosures. The taxpayer is being asked to create an Irish version of Fannie Mae except it will be completely out of sight of regulators and the media. We (the taxpayer) are going to lose a fortune and your tax money will pay for it.

I think it’ll be a great deal for FTBs who want to buy, you’d be stupid to go to a bank when you could get one of these yokes.

The maxmium loan is 285k so with 10% down the max purchase power is approx 310k. A salary of 40k is gross 3,333 per month I’m not an accountant so I’m “guesstimating” here but after tax, prsi etc I’d imagine that the net disposable income would be around 2700 (feel free to correct me) A mortgage of 285k at 5% over 30 years is 1500 approx. that’s my first issue and concern that over 50% of disposable income for rent/mortgage to be even considered is completely off the wall. The second issue I have is that if a FTB, armed with bank refusal but homechoice approval is looking at new homes then the developer will “cap” his properties UP to this price. Homechoice is not sub prime - it’s sub mortgage. With sub prime the buyer’s ability is questionable therefore they have to pay higher premium/interest rates - with sub mortgage the house on which the mortgage is based is not suitable because it is overvalued and is NOT affordable to the mortgage holder.

The maximum loan possible is 285k.
The minimum income required is 40k.

Is it reasonable to assume (as has been done above) that someone on just over 40k will get the full 285k loan?

The stated policy is that the income multiple is a Max 5x and the Max proportion is 35% of take home pay.

It’s standard [current in Ireland] Prime lending except for the LTV. The Government will make up the difference between 80% and 92% LTV up to a Max of €285k.

A €40k gross would only be eligible for €200k, not the full €285k.

I am assuming that if a bank has rejected an applicant for a mortgage with this income (40k) then that is for a reason. This reason seems to be that they are not eligible in some way for a mainstream mortgage, whether this is because of history or property price - I don’t know BECAUSE it doesn’t clarify, armed with this refusal then the person is then automatically eligible for a homechoice loan. On 40k you will be approved in this environment for approx 180k. So - what is available for the FTB at 180k a one or two bed apartment for 1k a month mortgage which for the first 7 years or so pays back mostly interest and very little capital or rent for the same and save and buy the house that you want to buy. If you are eligible for the scheme then you are eligible for the max loan… IMO

Home Choice Loan is a mortgage provided through a number of local authorities for First Time Buyers who can not get sufficient finance from a bank or building society

Home Choice Loan will provide up to 92% of the market value of a property purchased. The maximum loan amount will be €285,000. The loan is a normal Capital and interest bearing mortgage which is repaid on a monthly basis.

The mortgage term will be for a maximum of 30 years.

Home Choice Loan will only be available for newly built homes.

Register Your Interest

“Stated Policy” ?? When did that come into play when applying for a mortgage :angry:

those may be the rules as stated but this gubberment has shown a reluctance to stick to the rules when they’re inconvenient. I’d say with some (very) gentle pressure on your local TD you’ll get the maximum no matter what your situation is.

rte.ie/business/2008/morning … 029ncb.pdf

Bottom of page 2. Even stockbrokers think it’s a crap idea.

I hear ya …

But I don’t think it’ll be administered in the easy credit manner of lending - we’ll see.

From the Captain’s find:

Very difficult to argue with that.

That’s pretty much what I was thinking … another ill thought out socio-economic experiment by our FF administration.

Perhaps a citizens bad debt collection service is required to keep these potential defaulters on the straight and narrow and protect the States (i.e. our) money (after all, successive FF lead administrations over the last decade have shown no aptitude for protecting it!!)

Blue Horseshoe

Whatever about the banks, the Government can’t be seen to vigorously pursue defaulters on these sub prime mortgages.
Imagine the uproar if the Government is perceived to be turfing people out on the streets in a couple of years?
And many people will stop paying if they realise they have gotten a house at 30% or 40% above what it is worth.

If local authorities are letting people in council houses go months and years into arrears in their nominal payments, then I can’t see how a heavy hand can be taken to people on this new Sub Prime scheme.

This scheme would only make sense if what they are saying is correct, ie the availability of mortgages is limited due to the credit crunch. The banks are on their knees looking at massive impairments. For the next 3/4 years it is almost impossible to envisage a return to looser lending.

The scheme is going to operate for a “limited time” no doubt a fantastic wheeze to scare people into availing of it. What happens when there is no more Home Choice? Guaranteed negative equity since the prospective purchasers of the places wont have access to the same level of funding.

home choice loan.

the word choice has me wondering. what’s there to choose about the loan? If you’re getting a HCl, then you’re one of those whom no one will touch and you dont have much choice in the matter.

The sub prime , as in sub prime-rib, we aint talking talkin chocie cuts of meat here, and one could sayt hat sub prime is to loans as feces is to proper food. In a real economy, anyone earning Eur40k per year should not be a subprime borrower.

From the Minsiter for Housing;

In relation to your query regarding the rollout of the Home Choice Loan
website, I would point out that the objective of the Scheme is to
address a very particular set of circumstances which currently exist in
the housing market; namely lack of availability of sufficient credit for
first time buyers. This is an issue which has been affecting the
housing market for a number of months and preparations by the Government
to respond to this issue – by endeavouring to facilitate home
ownership for as many households as possible – have, therefore, been
underway for some time in advance of Budget 2009.

The target market is those households who can afford to purchase
without assistance in the current market, and can afford to service a
mortgage, but who are currently unable to do so because of circumstances
beyond their control – the credit crunch. These are households who
would, until recently, have had no difficulty in obtaining a mortgage.
Lack of availability of credit is the only thing which has changed for
these households in terms of entering the housing market now. The
initiative provides no incentive to enter the housing market; it will
merely facilitate certain first-time buyers who have themselves decided
to purchase a home at this time.

Yours sincerely

How stupid do they think people are?

There are likely several thousand punters out there who want to buy a PPR, are on modest incomes and can afford a mortgage but have been unable to get a mortgage because of LTV 80% rules.

Now you or I think it’s a shit idea to avail of this or any other scheme - but people who just want to own their own home and start or continue a family in their own area near schools etc think it’s a really good idea. No amount of persuading them is going to change their minds.

This is a Political scheme, aimed at pleasing potential new FF voters - and that’s the name of the game for all politicos. So from that perspective it’s a good thing. It’s social housing, and I’ve no problem with social housing - particularly if the people own their homes.

This and all Governments have been involved in a myriad of social housing schemes since the year dot - this is just a new variation on an old theme.

It aint a bailout either - though it has some characteristics which could be so interpreted.

The only thing wrong with it is that in the current market everything is way over valued. Personally I’d like to see the banks valuations used as they are conservative and this used by the buyer to negotiate as low a price as possible. Doubt it’ll happen though.

His quote was that it provides no incentive. Of course it provides an incentive, these people cannot get loans.

On the substantive point, I don’t consider it outrageous to ask someone taking on several hundred thousand euros of debt to prove they have the ability to repay it by saving a deposit.