Not Before Time - Bank Federation on Unsustainable Mortgages

Irish Bankers Lobby Sees Move to Resolve Unsustainable Mortgages

businessweek.com/news/2012-0 … gages.html

There was a head guy from AIB I think on Newstalk this morning. I was shuffling around the kitchen so wasn’t fully tuned into it but he was pressed by Chris Donoghue about whether they have written off debt for some mortgage holders already. His reluctance to answer the question when posed to him a number of times suggests to me anyway that it’s happening but they probably don’t want to shout it from the rooftops.

For the life of me I can’t understand why BTL reposessions isn’t the boomiest of business at the moment. PPRs, sure, the optics are woeful for FG, but BTL repo should be going gangbusters.

Because the banks dont want to recognise the losses. They have the deeds of a shitty shoebox with €400k owing on it, now worth €200k optimistically. They have Canny McSavvy paying (nor not paying) interest only on the €400k, the principal will never be repaid, and they have claim over Canny and Mrs McSavvy’s PPR as recourse.

The banks dont want the shoebox, and they dont want the adverse publicity of enforcing the recourse to the PPR - obviously Mrs McSavvy did not understand the complicated forms that she signed, ‘her husband’ looks after all the financial affairs and it never occurred to her in a million years that she might lose ‘the family home’ where she reared her precious litter of tiger cubs in between going to Mass, reading the Sunday Independent, listening to Gerry Ryan and voting for Fianna Fail at every opportunity.

In short, both the borrower and the lender are fucked.

-MOD- Link added to OP, quote tags added to quote and title amended to be more descriptive. OP, please do try keep threads a bit neater with respect to title and post content.-MOD-

Ah, that well known Brenday Bowyer hot, Do the Clusterfuck.

They have to be up so something as the bank, which was so banjaxed it is now 99.8 per cent State owned, has by some miracle according to its residential mortgage head, got one of the lowest 90 days arrears figures of banks with Irish residential loan books.

I can only guess that they are not including restructured mortgages in their figures. And for the life of me I cannot understand why the bank, which has not implemented its much heralded redundancy programme from last spring and has to now being using additional contract staff to manage the loan book, looks like it is about to do a formal tie up with Certus to manage this extraordinarily low arrears total :question:

irishtimes.com/newspaper/bre … ing17.html

Of course, he doesn’t go into it, but a judicious use has been made of the “O’Keeffe Time-Dilation Comparison factor, where 7 normal days=1 AIB day”

+1

Otherwise known as the ‘Basil Strategy’ …

Most buy to let mortgages are interest only and the rent is covering the cost of the mortgage.

From the landlords perspective inflation over 15-20 years will remove most of the negative equity.

Consider the following example

In 2006, a BTL investors purchases a property for 350k with equity of 70k and 280k mortgage.

Assume the current market value is €122k (65% fall), the annual mortgage payment is €5.6k and the net rent is 9k (assumed gross rental yield 9%).

Over the next 15 years the value of the property will increase to

€165k (assuming 2% inflation)
€190k (assuming 3% inflation)
€220k (assuming 4% inflation)

In addition the landlord should make a rental profit of approx €52k (Gross of tax)

A bank is unlikely to foreclose on any landlord that is paying his mortgage.

Article in OP:

Has there? I seem to have missed it. Does anyone know what the speaker is talking about here?

5,600/280,000 = that 2% interest pa? - so you must be assuming they have a Irish Nationalwide ECB +1% Tracker

If they purchased in 2006, and you talk about the next 15 years,
are you saying that Irish Nationwide gave out 20 year+ Tracker mortgages on BTL mortgages? XX
Worse still are you saying the European economy is fucked for the next 15 years,
given by your insinuation that the ECB rate will remain at 1%,
hell,our recession is going to make the Japanese recession look tame!

Assuming your prediction of Europe staying in recession for the next 15 years,
imagine what that will do to the average income in the country?
Especially if we get your assumed 4% house price growth,
the Price - earnings ratio will be back to 2006/07 levels XX