Revealed: how lenders are really handling the housing crash

The last line of the article is most interesting:

“The borrower is now the main security, not the property.”

And tell me again where unemployment rates are heading for??? Would that be not far off 2 in 10 working people in the country?

Banks will rarely offer voluntary possession to people, they will need to be approached by the borrowers and asked if they will accept it. So perhaps this article will get a lot of people out of the holes that they have dug for themselves.

Also, they more often than not will not write off the excess debt, they will just convert it into a personal loan.

What is quite sad about this is that last year people who clearly couldn’t afford their mortgage, which was maybe in 20k’s worth of negative equity, refused to even think about this, whereas now they are looking at negative equity of maybe 100k.

The article doesn’t mention the banks policy regarding the arrears does it?So what happens to the shortfall arising from the mortgage, the arrears and the new depressed valuation?Sounds to me like there is a huge behind the scenes set of measures being implemented to hide these losses and keep them from the public eye or bank balance sheets.Is the government soaking these up on behalf of the taxpayer?

The riskiest lender has only repossessed 18 houses!

This is convinces me even more that there is not going to be any kind of real panic sales and hence no further big falls in prices from here.The banks and the government have obviously got their heads together on this one and foreseen where most of the problems are going to come from and developed a series of measures to minimise the number of repossessions and forced sales.

This is very bad news for people waiting for further big falls in prices in order to buy.More likely is a slow grind lower,but with the lack of visibility in prices it is anyone’s guess where the exact bottom will be.I think it would not be too outrageous to expect a + sign on the year on year % figure for house prices nationally within three years.

You can also try to get them to agree a short sale

If they do not agree and take a greater hit later after a forced repossession then the bank can sometimes be forced to write the difference off between what it coul have got and what it did get . Always try ( in writing) to get permssion for a short sale for a reasonable amount .

That’s excellent advise.

Make certain it’s in writing, and time and date stamped on the relevant Bank letterhead.

If you buy a gaff with a mortgage for €300k ( plus whatever you paid too but only the mortgage matters) and then lose your job you will be clocking up €20k a year worth of ‘arrears’ on it ( minimum i would say )

If it is ACTUALLLY worth €240k then you say to bank , I want to organise a short sale for its true value which is €240. Write to the MD of the bank , eg Eugene Sheehy in AIB and nobody else. Local banks managers and mortgage centre sales people have no authority on short sales , only head office can agree it .

If things get worse and the bank eventually repossesses the gaff and sells it for it €190k then the bank refused the short sale ( in writing ) and ar not in a great position to recover the €50k difference between €240k and €190k or their sale costs . The bank will try to ring you and bully you so it is important that the letter further states that you are not prepared to discuss any aspect of this save in writing and that telephoning you will result in a reduction of the offer by €2000 euros each time because of the time wasting involved at the banks end .

Therefore you look forward to a written proposal to you or else to your Mabs contact on your behalf .

You are still liable for the difference between €300k mortgage and €240k + arrears before you asked for the short sale. Say €80k if you have €20k of arrears .

Big difference between €80k and €130k all the same …in that example . The €80k can be negotiated later .

Interesting idea, but how do you subsequently prove that it was worth 240k when you requested the short sale?

If the bank refuses the request, you never get to test the actual market value, which is very difficult to determine at the moment with no transactions.

The lack of sales price transparency obviously adds to the difficulty

Comparative valuations at the time , you would be best advised to use 2 members of YOUR banks Valuers panel and average their estimates . 2 estimates , one from each of two valuers ( auctioneers) will cost you about €250 in writing.

Make sure that they are on that banks own valuers panel before you ask for a valuation.

Have you ever come across this happening in the jurisdiction? I’d be very interested to find out.

Apart from your last line, I am very sadly coming to the same conclusion and think this article backs it up.

The article tells me everything is being done to make sure the maximum amount of people pay the maximum amount for their mortgages. If that means they pay a few shekels below the actual agreed mortgage, so be it. As long as a large amount is being paid, they’ll find a way. Net effect: prices/valuations of Irish property are being propped up not at market-clearing prices (which forced sales would reveal) but rather at a level the existing mortgage holders can afford by hook or by crook.

So we could end up with some kind of farcical situation like: A house that would have an asking price on Daft of €300k, but which would only clear at €200k, has an outstanding mortgage on it of €400k, which the mortgage holders are paying off as though it were a €325k mortgage, the rest being rolled over, or otherwise massaged. So the house is “worth” €200k, €300k, €325k and €400k all at the same time.

I’m not an economist, so I’m sure the nuance of this analysis doesn’t hold up, but it’s this kind of bullshit muddle I have a horrible feeling we’ll have for 20 years. It does leave the question of what happens to the jingle mail houses, but I suspect they will be smallish in number (people preferring to hold onto “their” houses at any cost) and will be sold to AH or otherwise propped up.

Most of the info for that piece was sourced unattributable or on background, so there’s not as much detail as I would like. One thing I was told that didn’t make it in (b/c I couldn’t find supporting evidence for the claim) was that banks are forcing sales - but at unrealistically high prices. In other words, they see the neg equity coming, but insist on a high asking price. I presume they are desperate to clear the loans at face value rather than start taking writedowns on mortgage lending.

Forced sales at high values… only one problem they cant force buyers … when they have the power to make forced buys, I’ll start to worry

i did a guide for people in trouble, it covers short sales too. … omeowners/

It is a logical fallacy to attempt to force a sale at a value greater than the market price. Only a banker would see that as a runner :frowning:

In certain cases people have tried to sell and have been prevented by the bank from so doing because the offers were too low.

HOWEVER they never got these valuations done themselves before they approached the bank and no local bank staff would ever advise them to do so becuase their necks would be on the block over it .

Professori said

I think the level of employment in this country will have a direct effect on this along with the current crop of empties, I dont think that we will return to anywhere near full employment over a three year period and viewing how long its taken us to get to this point with no one knowing where the bottom is I think three years may be optimistic. We need to add to that equation what effect B Obama’s Tax policy will have on our employment levels.