Mortgage Arrears. €30bn-40bn Worth Affected Now. Megathread!

The Irish Property Bubble (2006) The Republic of Property
37

Since you have posted 800+ times let me try and explain the perspective using if I may your mortgage as an example:

Let me assume that you bought your house at Jan 1 2006 and paid €1m for it, with a tracker 100% mortgage, over 30 years
and that you have kept your repayments up (you might be a lawyer for instance - and AIB gave you the loan). I’m going to do this quickly, so its rough.

Lets say the value of your house is now €0.5M if you sold it which you won’t

Right now the following is the approximate position of your mortgage:

assuming the average interest rate you paid is 3%, you pay around €4K per month

the oustanding prinicipal is €850K or there abouts
the interest you have paid is approx. €166K

The funding cost of your interest up to now (diff between what the Irish bank could fund at and the ECB rate it tied itself into):
€150K or thereabouts

The future funding loss to the Irish bank, and eurosystem of your tracker interest until the loan matures approx. €400K

The mark to market loss that you have decided to continue to fund: €350K (but if you said you couldn’t pay somebody else would take the loss and you could stay in the house)
The interest you will pay as you repay that (notional negative equity): €150K or so.

So even if you don’t sell your house:

the banking system funding loss on your loan is €550K in total over the life of the loan
you will pay a further €150K of interest on the negative equity portion of your loan (unless it increases in value)
You have kindly (but given the enforced forebearance, entirely unneccessarily) volunteered to repay the €350K of negative equity.

So total losses in your loan without restructuring: €1m (over life, but not discounted)

If you tried to get the bank to reset the loan to €500K, over 20 years, they could fund it at 6%, you would repay only €3,5K per month, and you would be mortgage free 3 years earlier than expected.

Oh and all the bank has to do is mark the loan to market, and take the €500K loss now, which is what it was given the money to do by the Eurosystem

38

Where to start? Let’s ignore the notion that a €1m 100% 30 year tracker is in any way a representative example and move straight to the assumption that the difference between the tracker rate and the bank’s funding rate is going to remain static for the next 24 years. I haven’t heard even the most pessimistic commentator suggest that it is going to take that long before we see some increased stability. Then there is the fact that the bank are not getting long term financing at 7%. They are currently relying on shorter term financing like the LTRO funding at much lower marginal rates so the difference between the tracker rate and their funding rate has narrowed significantly.

The suggestion that paying negative equity is voluntary, and if you don’t pay it someone else will take the hit and you can stay in your house, is also speculation. The best that can actually be said is that if you try to stop paying your negative equity component you will get to stay in your house for now. Those who are taking this course of action are taking a gamble that they will be gifted a debt write off sometime down the line. They may be completely right and they may get away scot free, or they may be completely wrong and it will come back to bite them badly, but more likely it will be somewhere in between and they will get some sort of accommodation but they won’t be able to just pocket the difference as you suggest.

39

This getting ridiculous. The CB states that c.20% of mortgages are in arrears ( by value) today in the Q1 report ( €22bn ish of €110bn ) but what about the Arrears on securitised mortgages which haven’t gone away …and amount to a €40bn book…20% of which securitised book is €8bn.

Just because your mortgage is securitised doesn’t make you any less in arrears. Remember this other piece we covered last week.

Emerald = EBS and Celtic = Ulster(First Active too?) while Fastnet = IL&P …yes there are others, eg KBC and the BoI ones names afte rivers…

EG this lot

businessweek.com/news/2012-0 … by-moody-s

and this lot

irishtimes.com/newspaper/fin … 29090.html

and this lot

businessweek.com/news/2012-0 … r-s-celtic

are just as bad.

40

Arent the losses in the structured vehicles borne by the capital in the vehicle (the Notes). there is no lookback into the bank (and hence the state).

41

That depends on whether any protection has been written on them and by whom…

…long ago, there was a bank near the Liffeyo,
Had many swaps in their bookeyo,
Derivatives all, they were bound to go…

42

why would an issuing bank write protection on a structure theyve already take off balance sheet.?

43

In your example what intrest rate is AIB borrowing at from the eurosystem to fund the mortgage?

Can Irish banks not borrow at ECB rate +1% if they have sufficient collateral for the loan. I know a negative equity loan would not be sufficient to borrow the full amount, but in your example could they borrow €500,000 ( current value of the house) at 2% from the
eurosystems using the charge on the current house value as colatrol?

44

So in round figures.

“At end-March 2012, there were 764,138 private residential mortgage accounts for principal dwellings”
Private households in the state, 1,654,208 (CSO 2011 Census).
“accounts that were in arrears of more than 180 days was 59,437 at end-March 2012, equivalent to 7.8 per cent”

So 0.078 x (764,138 / 1,654,208) = 0.036 = A factor for a rough estimate of mortgages in any area gone past 180 days.

E.g.
South Dublin - Private Households (Number) 90,019 x 0.036 = 3,240
Dún Laoghaire-Rathdown - Private Households (Number) 75,819 x 0.036 = 2,729
For reference Daft has 4,841 properties listed for sale today in Co.Dublin.

That’s a lot of possible repossessions, trade downs, firesales etc.
I.e. Until this mortgage crisis is sorted, however it happens, it’s a bit early to be talking about any bottom.

45

Why would you assume it was the issuing bank? How about a bank with a massive IRS book looking for easy money?

46

it could be any bank I know but I was only concerned with the any risk that might ultimately fall back on the state. so in the scenario you outlined here that would mean an irish bank writing protection on these structures. (which is the kind wrong way risk that any half-witted credit department would redline)

47

Brendan Burgess was just on Drive Time talking about today’s arrears figures. Now, I’m not as harsh on Brendan as others here. I think his pronouncements since he made a balls of his calls on the bubble and banks have actually been quite sensible. So I’m not mad on bashing him any more.

But he’s just said something contradictory. He said, on the one hand, that he’s surprised arrears are only running at 10% given the size of our bubble and general economic malaise. I’d agree with him on that. But he went on to say that he thinks we should face up that some of these mortgages are hopeless cases and will never be repaid. Fair enough again…except the figure he mentioned was 10,000.

We have over 100k in 90+ days arrears or restructured and again in arrears, and yet only 1 in 10 of those are unsustainable? That sounds like pie-in-the-sky to me. My guess would be that a majority of those in 90+ days arrears are hopeless cases. At best a small majority, at worst a large majority. 10k seems hugely optimistic.

48

According to the Central Bank report for December 2009 (PDF). There were already 19,185 mortgages in 180 days or more of arrears at that time. The number in arrears has been increasing since. I think it is fair to assume that a significant portion of of the mortgages that were in arrears in December 2009 are still in arrears. So that’s possibly just under 20,000 mortgages that are in arrears for 3.5 years. Have I missed something? Is it possible that just under 20,000 people haven’t paid a penny towards their mortages in 3.5 years and there is no movement on repossesions?

49

:laughing: :laughing: :laughing:

There was a country who had a dog,
And Anglo was his name-o.
A-N-G-L-O
A-N-G-L-O
A-N-G-L-O
And Anglo was his name-o.

50

The thing that still has me intruiged is how €17bn of Mortgages simply disappeared from the aggregate between Sept 2011 and October 2011 despite their not being redeemed as normal…ie monthly payments.

centralbank.ie/polstats/stat … turity.xls

Compare Table A 5 1 Outstanding and Table A 5 1 Transactions for 09/11 and 10/11

51

The Central Bank mortgage arrears data includes details on restructred mortgages only since Q4 2010.

The following shows details on mortgages in arrears and restructured.

Some mortgages are restructured without being in arrears. Some mortgages are in arrears without being restructured.


                                               Number  Balance (000s)  Arrears (000s)   Avg Balance    Av Arrears
Q1 2012
Total In Arrears                                77,630      15,385,576       1,296,752       198,191        16,704
Total Residential Mortgages Restructured        79,712      14,211,793         358,364       178,289         4,496
Restructured And Not In Arrears                 38,658       6,330,206                       163,749
Restructured And In Arrears                     41,054       7,881,587         358,364       191,981         8,729
In Arrears And Not Restructured                 36,576       7,503,989         938,388       205,162        25,656
Restructured And/Or In Arrears                 116,288      21,715,782       1,296,752       186,741        11,151
Q4 2011
Total In Arrears                                70,945      13,988,803       1,163,448       197,178        16,399
Total Residential Mortgages Restructured        74,381      13,291,715         317,008       178,698         4,262
Restructured And Not In Arrears                 36,797       6,100,786                       165,796
Restructured And In Arrears                     37,584       7,190,929         317,008       191,330         8,435
In Arrears And Not Restructured                 33,361       6,797,874         846,440       203,767        25,372
Restructured And/Or In Arrears                 107,742      20,089,589       1,163,448       186,460        10,798
Q3 2011
Total In Arrears                                62,970      12,369,954       1,074,941       196,442        17,071
Total Residential Mortgages Restructured        69,735      12,228,308         240,428       175,354         3,448
Restructured And Not In Arrears                 36,376       5,926,189                       162,915
Restructured And In Arrears                     33,359       6,302,119         240,428       188,918         7,207
In Arrears And Not Restructured                 29,611       6,067,835         834,513       204,918        28,183
Restructured And/Or In Arrears                  99,346      18,296,143       1,074,941       184,166        10,820
Q2 2011
Total In Arrears                                55,763      10,837,726         947,365       194,353        16,989
Total Residential Mortgages Restructured        66,732      11,659,116         213,861       174,716         3,205
Restructured And Not In Arrears                 36,855       6,041,961                       163,939
Restructured And In Arrears                     29,877       5,617,155         213,861       188,009         7,158
In Arrears And Not Restructured                 25,886       5,220,571         733,504       201,675        28,336
Restructured And/Or In Arrears                  92,618      16,879,687         947,365       182,251        10,229
Q1 2011
Total In Arrears                                49,609       9,599,223         827,174       193,498        16,674
Total Residential Mortgages Restructured        62,936      11,076,088         169,812       175,990         2,698
Restructured And Not In Arrears                 36,662       6,175,036                       168,432
Restructured And In Arrears                     26,274       4,901,052         169,812       186,536         6,463
In Arrears And Not Restructured                 23,335       4,698,171         657,362       201,336        28,171
Restructured And/Or In Arrears                  86,271      15,774,259         827,174       182,845         9,588
Q4 2010
Total In Arrears                                44,508       8,625,826         709,074       193,804        15,931
Total Residential Mortgages Restructured        59,229      10,368,710         146,277       175,061         2,470l
Restructured And Not In Arrears                 35,205       5,899,168                       167,566
Restructured And In Arrears                     24,024       4,469,542         146,277       186,045         6,089
In Arrears And Not Restructured                 20,484       4,156,284         562,797       202,904        27,475
Restructured And/Or In Arrears                  79,713      14,524,994         709,074       182,216         8,895

In summary the increases in these categories and amounts over these six quarters are:

Total In Arrears                                 74.4%           78.4%           82.9%          2.3%          4.9%
Total Residential Mortgages Restructured         34.6%           37.1%          145.0%          1.8%         82.0%
Restructured And Not In Arrears                   9.8%            7.3%                         -2.3%
Restructured And In Arrears                      70.9%           76.3%          145.0%          3.2%         43.4%
In Arrears And Not Restructured                  78.6%           80.5%           66.7%          1.1%         -6.6%
Restructured And/Or In Arrears                   45.9%           49.5%           82.9%          2.5%         25.4%

Over the six quarters, the number of mortgages that were restructured but not in arrears (so people proactively addressing potential problems) only increased by 9.8% from 35,205 to 38,658. This seems very low, especially in the context of numbers in arrears increasing by 74.4% over the same interval.

Even the number of restructured mortgages has only increased by 34.6% from 59,229 to 79,712.

Either people are not engaging pre-emptively or lending institutions are not being proactive in seeking to engage with people who have the potential to get into trouble in the future or both.

So who is to blame here? Are lending institutions scared to engage with the problem? Or are people not engaging? Even if people are not engaging, why are banks not forcing the issue? Are they hoping it will go away? Why is the Central Bank not providing the necessary leadership to compel lending institutions to proactively address the problem rather than waiting passively for the problem to become real and actual?

What is that idiot Honahan doing?

The numbers who are in arrears and who have not been restructured increased by 78.6% from 20,484 to 36,576. So in the six quarters, nearly 16,000 people got into arrears without looking for or agreeing to restructuring. Given that the lending policy allows repossession if a person has not engaged for 12 months, there is substantial scope for additional restructuring without action being taken.

52

independent.ie/business/pers … 23728.html

hardy harr harr harr

53

I smell a rat here. Trackers we might recall, were only available from 2004-2008. They accounted for half of all mortgages I thought…anyone remember that??

The sum of all mortgages outstanding is over €100bn so €39bn seems low unless you look at securitisations which got them off the primary books.

independent.ie/business/iris … 39961.html

**Lenders holding tracker mortgages worth €39bn **

€130bn looks more like it. Moodys hinted that there may be more problems in the lightly managed €50bn of securitised produced than in the more tightly managed €80bn on book but the €50bn of allegedly “securitised” product also includes non securitised loans from IIB Ulster/FA and some sub prime scumbags.

Of the €130bn at least half dates to 2005 2006 and 2007 alone!

54

Posted this in another forum, may be of some use to this thread:

55

Sounds very reasonable.

56

The bit I am following is that some €20bn of securitisations were gotten off with state guarantees not unlike the €10bn of bank finance gotten off with a state guarantee some time back.

In other words we are possibly liable for any defeasances if the things end up on the secondary markets… Possibly structure wide: :frowning:

So I want to know if we are backstopping these securitisations and on what terms.

And I suspect we are not doing ‘our best’ to enforce colection on mortgages in these structures as compared to the €80bn still ‘on the books’ .