The reality of sub-prime: in Ireland

scary

270k mortgage

40 year duration :open_mouth:

2100 p/m

that’s over €1 million in repayments :open_mouth:

WHY in Gods name would someone pay 9% on a Mortgage taken out when the market they bought in was in decline and they could rent (over to you for the maths Daltonr) for considerably less while they wait 5 years to disappear off the Irish Credit Bureau listings. Unless they had to refinance to clear other loans I really cant see the logic. ANd even then they could have come to an agreement with the creditors.

A good mate of mine drives a BMW 5-series and he’s not even 30.

Reason: as soon as he got his qualification, he sold mortgages at €1,500 commission a pop. Granted, he’s not doing this any more and now he’s actually using his accountancy qualification for something more worthwhile.

Do you think he cared if the client could pay or not? Completely clueless clients walk into the office and declare “I want a mortgage” and believe everything you tell them. What else are you going to do?

I posted this in another thread but I think people missed it

Looks like some are selling for less. This would appear to be at on the market at a loss of Eur 800,000 (incl 9%+1% Stamp/legal) if it hasn’t been sold since July 20, 2006 which I believe is the case.

ireland.com/newspaper/proper … 68144.html

Thursday, July 20, 2006
PRIVATE TREATY
10 Eglinton Pk, Donnybrook, D4
Three-bed semi. Sold: region €2.1m. Agent: Douglas Newman Good

Withdrawn Yesterday 29-May-08 quoting 1.5 m.

ireland.com/newspaper/proper … 12215.html
secure.billyosullivan.ie/pro … .php?id=46

JA1

Let’s look at why this person ended up needing a SubPrime loan.

Now that is some expensive consumer electronics right there. That handheld computer and camera are going to easily cost about quarter of a million (probably more) in terms of interest payments over and above a normal mortgage.

And if his record with handhelds is anything like mine, the damn thing won’t even get used.

I learned an interesting thing about credit history yesterday that I didn’t know before.

Loans stay on your credit history for 5 years (knew that).
Only the most recent 18 months or so of payments remain.

What this means is that if you miss a payment today, but catch up and make all your payments from next month onwards, the blip will drop off your record in 18 months (roughly).

BUT (here’s the bit I didn’t realise)

If you miss a payment today, and within the next 18 months you clear the debt, the blip won’t drop off your record until the whole loan does (in 5 years).

So, if you fall behind, catch up as quickly as possible and DO NOT refinance or clear the loan until the blip has fallen off the record in 18 months (could be a few months longer depending on the bank). Even if you have the cash, wait until the payment history is clean before clearing the loan.

Now, our friend above could have avoided life in SubPrime hell, by renting almost anywhere, and getting back on track with his loan on the camera and handheld.

I don’t know what you can do to help people in this situation, or stop them getting into it. It might have helped if our glorious leaders had shown a bit of leadership and assured First Time Buyers that they didn’t need to sell themselves into 40 years of Debt slavery.

A few well chosen words could have saved a lot of people from a lot of hardship. Instead we had Bertie talking about Booms getting Boomier and everyone should buy a house.

I guess the medical maxim of First Do No Harm doesn’t apply in politics.

It’s depressing. It really is terribly terribly sad.

Needless to say the people involved should Sell Up Immediately for whatever they can get and rent. It won’t solve their problem but they’ll be paying 9% on a much smaller number.

-Rd

Its beyond sad. It’s tragic. Reality is FTBs were totally consumed with panic that they HAD to get on the property ladder at no matter what cost. Plenty of commentators (apart from the pinnsters) were pointing out the unsustainability of prices but people chose to ignore them. Think of John Beggs, David McWilliams and Rossa White.

En masse, a large proportion of the population completely lost it. Charles Kindleberger “There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich”. Tommy Lee Jones, Men in Black “A person is smart, people are stupid”.

You can’t blame the politicians, EAs developers or any of the VIs - they did not control the money supply. It’s all the central banks fault for not regulating lending a la Spanish central bank. Sure, they raised concerns but didnt do much.

I got to know an employee of a client of mine who I have acted for for about 15 years. Cleaner, bought local authority house and got a facility for an equity release from GE money for 12 times her annual earnings. Asked her how she was going to repay it. “Sure, I’ll keep some of the loan back and repay it from that” (she wanted to buy a place abroad and give some to her kids). Horrified, I managed to convice her that she WOULD lose her house. Took a while, but very satisfying free advice. No one in the lending chain would consider this as they were all making money. Lender didnt care as LTV was about 50%.

If protecting these type of people is not the role of the financial regulatory bodies, I dont know what is.

I’ve seen that particular property on the market for a long time. Amazingly they’re still selling it based on its “potential” - such as telling you what the square footage could be and how your garden could be designed (i.e. assuming you spend a few hundred grand on top of the ludicrous asking price). EAs often talk about potential, but you don’t often see it taken as far as this.

A large portion of the population just dont know how finance works and how to manage when they fall behind in payments.

And to add further blame to the banks, the letters they sent out to joe public about late payments, etc are like something out of The Sopranos. They are complex and threathing in nature. And this makes the receiver very reluctant to pick up the phone and see what the options are.

NOW is definately the time for a rapid education of the masses wrt managing difficult debts. A broad advertising campaign is needed to prevent people ending in foreclosure, repossession and bailiff territory.

People need to know when and how to talk to their lenders before the crap hits the fan, when they know things are going to be too tight.

Could save an awful lot of angst

isn’t that what MABS is there for?

exactly what its there for…but lets make sure everyone knows…and it can take weeks to get a meeting with MABS and I’m sure the list will grow

I blame Bertie!

Commonsense would have told people that houses weren’t worth what they were selling for but Bertie, the Boss, time and time again showed that he was unwilling to control prices and was looking to support increases in house prices via various policies and lack of rental market regulation.

Like the ECB send signals to the markets, he sent signals to the public that he was unconcerned about how things were developing. Instinctively any one who wanted to own a place of their own or just simply wanted security of tenure jumped in to an irrational market because our glorious leader had no intention of making it rational and it was a case of everyone for themselves.

I wonder if BErtie will be issuing a posthumous apology to any poor souls who killed themselves because they quite correctly called the prpoerty market crash and/or the recession.

Don’t be daft. Bertie doesn’t do apologies. He just hops in his imaginary DeLorean and goes back and changes the past so he didn’t do or say the thing he’s supposed to have said or done.

Sadly, Bertie doesn’t realise that time travel only works in movies. That’s why he’s so bewildered. He’s gone back 7 or 8 times to change the past, but every time he shows up at Dublin Castle, it’s like nothing has changed.

-Rd

Blaming the government for current market woes is pretty much OK. Blaming them for the suffering of recent FTBs who are now in negative equity is also OK.
They gave developers a free hand and ignored the signs of the bubble and its pop!

But I dont blame them for the unashamed greed people displayed getting on board as amateur property kings. There is a good reason its one of the seven deadly sins (and my personal favourate after lust)

Investors should know what goes up must…altogether now…drop like a stone.

:laughing:

Yeah it looks like hes had a freudian slip getting out of the delorean and given himself ahernia.

okok I’ll get me coat

I agree about the greed.
I put my apartment up for sale last year by placing an advert on Daft.ie
I took it off the market as it just didn’t really suit me to move.

Normally sellers are insulated from the buyer and don’t see what they are like. I observed in prospective buyers a lot of greed, fear and ignorance.
It’s no surprise that estate agents show such contempt for buyers.

For the greedy the feeling I got off them was “this time next year we’ll be millionaires”. They made my skin crawl.

What woes would they be?

In 2006 you could have sat in the public gallery of the Dail and listened to Joe Higgins berate the government for their lack of action in bringing down house prices to a level that ordinary workers could afford.

You would have heard Bertie Ahearn talk about longer mortgages as a means of affording houses, and you would have heard him say that he didn’t believe house prices would fall.

Now, as it happens house prices did fall, and are continuing to fall. Which should make Joe Higgins very happy, and should make anyone who didn’t buy into the hype reasonably happy. And happier still when the prices drop enough that they can buy for a massive saving on what they would have paid.

So, for the 10’s of thousands of people that Joe Higgins spoke of, there are no market woes. Certainly nothing like the woes we would have had if prices kept going up.

FF can’t take any credit for “bringing down house prices” because they nailed their colours firmly to the mast in saying that prices wouldn’t fall. They clearly weren’t working to make prices fall.

The Market woes that we hear about, the Credit Crunch, the falling house prices, problems on the ISEQ. All these things are both necessary and welcome. They mark the end of a manic period. If manic periods never ended we’d all be rightly screwed.

Here I partly agree. FF certainly did encourage the public to buy houses at the peak of the boom, and kept encouraging them beyond the peak of the boom. So yes, they must take some blame for landing FTB’s in negative equity. Not for causing the drop, but for encouraging people to get in before the drop.

The FTB’s themselves have to take at least 50% of the blame however. At the end of the day when you spend your money, it’s your responsibility. People can’t complain about a Nanny State, and then complain when they aren’t protected from themselves.

Greed is a fact of life, there’s nothing you can really do about it. The government arguably contributed to it by created tax schemes that promoted property even at the height of a property boom. They undoubtedly worked hard to create both Supply And Demand. That’s a recipe for disaster.

In the case of the original post that started this thread. The government should shoulder some blame for deliberately feeding a hysteria that you could be forever priced out of owning a house.

The people who borrowed that huge sum of money at the obscene rate of 9% over 40 years deserve a lot of the blame, and should take their medicine and get out now with whatever they can salvage.

-Rd