This is very much the business end of the mortgage arrears and/or debt forgiveness debate (which Seamus looked at in an earlier post).
It seems that a number of groups have gotten together to stop the enforcement of eviction orders, and in at least one case, two days ago, they were at least temporarily successful. NamaWineLake has the details. Be sure to watch the video as well.
What’s fascinating from watching the video is how reasonable everyone is, given the obvious tensions in the air. There is a discussion, and a withdrawal from the property of the authorities who came to serve a notice to quit. The circumstances of the borrower in question are also highlighted in a linked piece.
104 replies on “Eviction in Ireland in 2012: I stopped the sheriff”
If this is to be the “poster child” of the defenseless homeowner then it’s open season for all Canny McSavvys to defend to their death their BTL pensions on I/O trackers!
‘Tis mad Ted.
He bought in 2003, topped up along the way, in default since 2006 and subject to proceedings since 2009.
The guy is so far underwater he’s The Man From Atlantis.
Sometimes the adult thing to do is to save someone from themselves.
The economists’ models do not account for this phenomenon, but anyone who hasn’t been living in a dreamworld could see it coming. It’s happening all over the US, too, as well it should. Otherwise you just get this:
which is not only cruel and stupid, but also pointless. The point of diminishing returns has long since been reached. Putting people out of their homes will not save the system – which cannot be saved – will not teach any lessons other than force and cruelty rule the world, which is not a good lesson, and will not make anyone whole or even close to it. It’s completely gratuitous and destructive.
We need a jubilee and an eviction moratorium. By law. As soon as possible. But frankly, though I’d like to remain optimistic, I don’t see that happening.
Thank you for posting it Stephen!
It is this”faked authority” game they are playing with every citizen and do not wish them to be in the knowledge about common law!
This “Shire Reef” is what they tried there and had this man not had support and knowledge, these faked authorities had succeeded evicting him, I bet on that!
This video went from 41 views yesterday to >24,000 already, hopefully steadily growing. We need to show this form solidarity, and grow it, if you know of a daunting eviction in your area, get your friends together, be there, document it. post it.
x x x x
Over 84,000 Mom and Pap businesses, small businesses, one man bands etc., they all are denied access to the financial services ombudsman. Cowen enacted this into the Central Banking Act, Noonan and Shatter have not rectified this to date, and this is way over due!
@Georg, thanks for the kind words, but this post really isn’t in solidarity with, or in opposition to, anybody or any organisation. The arrears problem is a macroeconomic issue that’s getting worse, so we need to be aware of what is going on in the real economy when we talk about these issues.
Stephen: I respect your opinion (btw, do you know Sean Corrigan?) so I thought I’d try re-posting the following from a comment I made over on Naked capitalism. It’s a little long but the point is that we’re witnessing monetary system breakdown in all this, that’s really the nub of the problem, and few people seem to get that:
“Personally, I think the liquidity trap is a real thing and that we’ve been in one since the subprime problems in ’07. And you could see it coming before that, too.
Keynes and MMT are the ones who fundamentally misunderstand the government’s relation to money. The proper role of government wrt to money is to define a monetary unit of account and adminstrate it through bureaus of weights and measures.
The liquidity trap occurs when all that has been disregarded, the unit of account becomes fiat, and the bulk of a nation’s money is created through lending to individuals and businesses. Without a reference point at the bottom of it all, new money issuance is deemed satisfactory so long as loans are being repaid on schedule. In fact this is the only criterion for monetary balance in such a monetary system. When that changes, and loans are no longer being repaid on schedule, lending constricts, and it cannot be otherwise. It doesn’t matter how much liquidity you supply to lenders, they can’t make loans because the borrowing capacity of the populace has dried up. They are debt saturated.
The only answer for this that Keynsians have come up with is for the government to act as borrower of last resort. But in that case government deficits explode and you wind up with Greece and the EU.
In the system that we have, the fact that new money is loaned into existence is not discretionary. There is no other option. Thus if lending isn’t possible, no new money is possible either, and the money supply will stagnate or contract, which of course makes the repayment of existing outstanding loans more and more difficult.
This is why the “helicopter drop” remarks are intended to be funny. New money cannot be distributed that way. All newly created money must be owed back into the system; that is, someone must borrow it into existence and owe it back. It is the only way in a fiat system to regulate money issuance.
The subprime “crisis” signaled that the lending saturation point had been reached in the US. Since the country had largely run out of qualified borrowers, loans were made to UNqualified borrowers. There is no one to blame for this except the people who instituted the monetary system in the first place, and they’re all long since dead. The system will always wind up in this spot after a few generations.
The WaPo article discusses the common MMT inspired idea that taxes are the method for managing the government deficits that occur as the government becomes the borrower of last resort in a liquidity trap, which is just what is happening now. The idea being that the government takes back more and more of the new money that has been issued to ameliorate the deficit issue.
This is a frighteningly stupid assertion. It seems to contemplate a monetary circle jerk where new money is created through a loan to the government, paid out to whomever as salary or pursuant to a contract, and then the recipient is heavily taxed so as to get most of the money back. At that point, the monetary system is not reflecting or facilitating or serving the real economy, rather it’s the reverse: the real economy is serving the monetary system. To say that this is pointless and perverse is an understatement.
No theory of money and credit is worth a largely hungry and homeless populace, yet this is what is happening all over the globe: the theory is more precious than reality to those who get to make the decisions. We have government by so-called “technocrats” who are devoted to an idea rather than their subjects. And the idea is ridiculous.
The answer to all this is redeemable money that can exist and be newly issued apart from being loaned. But to get there from where we are will require a jubilee, because all the debt that has piled up cannot be paid back.
And it will take a constitutional amendment.
But this is a good thing. People need to recover their sense of self-government.”
Watching it now!
It is beautiful!!
Citizens interpreting laws
@Stephen Kinsella @What goes up
Good post and relevant.
The reason this post is relevant is not so much the circumstances. We do not really know what they are.
Ulster bank are testing the water here.
They want an easy win. Cut and dried. They will even be delighted to use this as a test case for the courts.
Notice how the first one in is not a €1,000,000 property bought in early 2007 that now worth €500,000 or less. I’m sure there are plenty of those on their books?
How many home owners with multi million debts unpaid and no mortgage paid have had the sherriff at the door.
@ Joseph Ryan
Eh, Bernard McNamara for one…
Maybe I am reading this too quickly but the repossession figures for residential properties (600?) do not seem to distinguish between owner occupied and residential properties used for other purposes such as holiday homes or “letting out”.
IMHO this is a very responsible site which does not usually indulge in sensationalism or scare mongering. I also have enough repect for you (Stephen Kinsella) to know that he would not allow himself to be a “cipher” for vested interest who either want to “squeeze” distressed mortgage holders or politicians who want to manipulate this fear.
It is important that we recognise that repossession of owner occupied properties are extremely rare in Ireland and usually involve “voluntary surrender” or abandonment.
There are enough sensational type stories in the media without a site feeding into this frenzy. A lot of people are genuinely scared about thier homes when they do not actually have to be.
This kind of fear among people who are genuinely trying to honour commitments can be equated with the unnecessary fear created by the revenue commissioner recent screw up by sending out letters to elderly people and the fear among over 70`s with relatively low incomes who continue to pay private health insurance even though they do not need to.
Please be kind enough to bear in mind that within any society (even mature democracies like Ireland) there is a very thin line between irrational fear and anger which has the potential to turn dangerous.
It also would be good if we bear in mind that this site is read(and often quoted) by very many people within Ireland, thoroughout Europe and around the world.
Good lad, we need more of this. Let’s stop all repos from here to eternity. And why is anyone in negative equity paying their mortgage anyway? Stop that as well – we were all duped by the moneymen. If we all gang together we can wreck the banks and then all their employees will be made redundant and they can join us in not paying their mortgages. There’s not a hope in hell that any mortgage lending will start up any time soon in Ireland if this is what happens when someone doesn’t pay, so the price of all property will keep falling and NAMA will fail as well. Then we can finally get around to defaulting on our sovereign debts and get back to the cosy life we had in the 1930s.
As I said, this isn’t about praising or condemning (or boosting for that matter) any interest group, it’s about a serious issue relevant to the Irish economy and so of interest to the readers of this blog. I’m not attempting to be sensationalist or a cipher in any way.
“I’m not attempting to be sensationalist or a cipher in any way.”
Please rest assured I have absolutely no doubt about that whatsoever as I have too much respect for your professional integrity and the credibility of this excellent site.
Having said that I hope my points resonated with readers and I look forward to reading your excellent threads in the future.
Where is the real production bit in a mortgage contract ? – the underlying good has already been produced.
Where is the value in over paying for a product that is in a extreme glut ?
Therefore what economic value is there in a mortgage or paying that mortgage – I would suggest mortgage paying subtracts from future economic activity and distorts the function of a efficient market.
I.e. resourses are not freed up for future economic activities – they are infact continually destroyed to maintain this artifical equilibrium.
You cannot reinstate nation state like tax levels and yet expect people to continue to pay market state private taxes otherwise known as Mortgages.
You either have a nation or a market state – you cannot have both operating at the same time.
Its impossible as little money will be available for commerce in such a absurd envoirment.
These 20 / 30 year Transactions needs to be declared null and void as they serve no productive function.
Its as simple as that it many ways – THEY SUBTRACT FROM THE PRODUCTIVE CAPACITY OF THE STATE.
Ps why would you want mortgage lending to start again ? – have we not enough houses ?
I’ve spoken about it before, but what we are seeing is that the Government has lost its moral authority to enforce the law. It has lost authority because of its wilful failure to prosecute or punish the crimes of the banks, developers, and other greater miscreants in the state.
You cannot have no-law for the people at the top, and harsh law for the people at the bottom. It’s either one law, or no law. Right now we have no law.
Both Morgan Kelly and Constantin Gurdgiev warned of this when they spoke of “Micheal Davit figures” and “delegitimisation” of the rule of law. If these groups become organised—if they start campaigning, publishing literature, engaging in pickets and demonstrations—it will have serious consequences for mortgage enforcement and beyond, and the Government will have no-one to blame but themselves.
IMHO the hindsight of history has an uncanny way of making what seems “normal” at a certain point in time (e.g. the present) appear absurd.
While I rarely agree (or for that matter understand) you I am gald that you post your opinions on this site. When they irritate or confuse me (which is not often) I just “scroll on by”. Having said that, and with all due respect, I am glad you have eased up on posting links.
It would be interesting to ponder what history will eventually make of the whole concept of “mortgages” and the strange type of “commercial lending” which occurred in the western world in the years immediately prior to 2008.:-)
Most people have more sympathy for the guy being evicted than for the one doing the eviction (nevertheless a thankless job!).But this is a blog for economists not a tabloid. Renegotiating a sizable share of the mortgages (which ones? by how much?) is going to be enormously expensive .Given the share of mortgages into the banks balance sheets, it is enough to bring most banks into negative equity territory .The Irish banks cannot raise any equity on the market, so what we are talking about is a massive transfer from the tax payers to the mortgage holders .Given the present state of the nation’s finances ,this does not seem to be an easy feat to accomplish. How do you propose to do it?
Yeah well the Hills sooth my savage…….. & sometimes repetitive soul.
Anyway how will economists deal with this glut problem ? – maybe many units have a negative or near negative value as they require substantial costs to return to a agricultural nature.
I.E. – even if a property sells for 1 Euro its input costs maybe higher then its potential output for many decades.
Maybe Bankers need to consult with ecologists who may give reasonable accurate timetables for natural topsoil creation.
It’s sad that people are not in a position to service their debts. However I see repossession as a necessary option in order to have a credit system. I think the Irish banks are guilty of not repossessing enough. You should check out the Dutch with regards to time to repossession.
Equally there are many comments that we’ve bailed out the banks. I’d like to see how people define this. If you define banks as the people who own them, well, the shareholders were wiped out.
There is also an odd link to Irish history trying to be forged. This is the Irish tenants being evicted by English landlords. But they seem to be glossing over the ‘tenant’ bit. How have private tenants fared during this crisis? If a tenant can’t pay, are they entitled to a moratorium or sue for more favourable terms? What should we infer- 1. that tenants don’t have ‘homes’ 2. only homeowners are entitled to special treatment. Not that I’m canvassing for better treatment for renters (with regards non-payment of rent, I think their treatment is reasonable). I guess I’m saying that the anti-eviction folk are a bit blinkered.
reading the Laois Nationalist’s take on it, this guy fell into arrears pretty shortly (in relative terms) after topping up his original loan and well before the “crash”. He subsequently offered to pay around 1/5th of the required mortgage. He was then three years later ruled against by the courts, and then three years later again they’re trying to actually evict him. So he’s been in arrears twice as long as meeting his mortgage, and the system has let him remain on the property for six years whilst being in arrears. I’m not sure this guy is the poster child for “dont evict” movement, or even the debt forgiveness movement (he can only service 20% of a relatively small loan).
His example is essentially a green light for anyone and everyone to ignore any personal debts and personal responsibility. Basically this guy should be in a council owned house and be receiving social welfare, as our system has been designed to look after the vulnerable in our society, but instead people are suggesting we give him a free farm. Mildly nuts.
@eoin there is no doubt that there are some people in properties they can’t possibly sustain given their incomes, and maybe this man is one of them. The issue I think this story highlights is that repossessions are taking place, and that there is considerable opposition to this.
Omf’s comment about a loss of legitimacy is interesting but I’d say it is too early to tell whether this is the case, we’ll probably only see that from a distance once this particular period has passed.
You are pretending to have a shopkeeper like view of the State and the money system operating withen it.
When money is no longer payed for dead credit goodies then it frees up that money to be taxed.
I would suggest after a bank credit jubilee appropriate taxes could be used to reduce out energy import dependencey relatively dramatically.
But you can’t tax money that ain’t there.
This farce is distorting whats remaining of the physical economy – preventing people & the country from recognizing the real problem – energy imports & money exports.
@OMF: As I often say, the “financial crisis” is really a “rule of law” crisis:
With regards to the Dork
The Dork is a modern day Bard, He holds up a mirror to our economics and will only be truly appreciated after the fact.
Still do not understand anything he writes but it is poetic!!
“You should check out the Dutch with regards to time to repossession.”
Actually there are two sides to the “Dutch” story of which “time to repossesion” is only one side.
In Holland banks own whole buildings where people “own” (and can sublet, sell or pass on to family members etc) leases with strictly controlled rental agreement and increases. Property ownership (as in Ireland) is not as attractive as it is in Ireland.
Even in the 1990`s it was possible to get a 110% mortgage in Holland and yet there was no massive boom or subsequent bust simply because there was no great demand for property ownership or mortgages.The price of an apartment in DenHague in 2008 was less than twice what it was in 1997.
“The Dork is a modern day Bard, He holds up a mirror to our economics and will only be truly appreciated after the fact.
Still do not understand anything he writes but it is poetic!!”
Thinking of the longer term, if repossession is difficult/impossible is property the Gold Standard security against a loan anymore in Ireland? If not then just what are the assets held by the banks against loans worth?
We can just inject another 30bn into the 2 pillar banks via a PN and fund it by an ELA. Then we can reschedule the lot out to the 22 rd century. In for a penny….
The reality is that about 1,800 borrowers are in the process of defaulting on loans of €74 bn via Nama to the extent of about €40 bn. This €40 bn is roughly equivalent to a 50% default on all outstanding personal mortgages held by several hundred thousand people.
What sort of example does this State-sponsored default convey? Where is the “moral hazard”, the Sheriff, the prosecutions and even, dare I say it, a proper public enquiry.
So Mr A can be bailed out for €100 million lost on a speculative venture while Mr B loses his home because of a €50k shortfall. You cannot run a country on that basis without stirring a hornets nest.
The basic problem with your stance to this issue (and most issues as far as I can see) is that you come to the table with a very closed set of views. In the case of the individual in Laois did it ever occur to you to ask the basic question which I and others have been repeating on this site and elsewhere for years and that basic question is:
Why did a Regulated entity lend money so seemingly carelessly in the first instance?
The property market is not a cash market. Please before you go to your bed tonight remember this basic fact. The property market is a market utterly dependant on credit/leverage and the providers of that key ingredient are the lending banks.
It’s the lending banks day job to say ‘no’ when the time is right in any property deal, I’ll repeat that just so you’re clear, the bank always have the opportunity to say no BEFORE the lending event.
Most comments including Johhny Foreigners above seem blissfully aware of the fact that banks have (or at the very least ought to have) resposibilities to ensure the market which feeds them maintains its long run integrity. This is not a eureka event that strikes banks after they have lent the cash – its something they are paid to analyse before the lending event.
Lending money, as they did, in the billions, at less than 1% net rental yield in many parts of Dublin for instance from late 2005 through to 2008 does not strike me as responsible, particularly when risk free alternatives such as German 10 year bunds were paying investors 350% better returns over the same period. The banks always have the choice to say ‘no’ to any potential customer. The fact that they continued on their merry way and allowed this to continue and were full square complict in a massive mis pricing of the market for a decade IS A BANKING ERROR. Making mistakes in a commercial organisation costs. Our Laois friend is just the fallout of such dire decisions.
Equally, financing the pollution of the country with excess housing product and essentially taking a punt on peoples ongoing property stupidity is not the action of a responsible and well Regulated lender(s).
The vast majority of folk who walk into the property shop with the intention of buying do so on average c2 times in their adult lifetime. I’ve absolutely no doubt the comparison you’d make today in your own job between the first or second time you picked up a phone to buy or sell a security on behalf of one of your clients versus today when you’ve probably completed millions of these deals is, well lets say it kindly, not the same. Don’t expect the novice property buyer to be in any better shape than you were on your first day in the job.
In basic language the normal Joe is completely clueless about what supposedly represents ‘value’ or not in the housing market. This is not the case for the lending banks. They control the prices in the market which their leverage is utterly dependant on.
Its a banks job to recognise that lending money in the manner that they have done over the past decade was dire from top to bottom. Peak to trough price falls when they eventually settle – on my numbers – will see falls of 75% to 80% on average with recovery likely to be L shaped thereafter. Any idiot will tell you that the providers of the key ingredient to any market with that sort of expected correction have made a balls of it, and deserve their lot.
Even aside from the fact that the taxpayer has been forced to recapitalise these institutions, results such as those mentioned above are just a natural consequnce of dire lending decisions in the first instance.
Banks simply have zero authority in trying to enforce recourse loans when by their very actions they have ensured; the economy is screwed up for a generation, the market on which their long histories were built have been completely decimated and by suffocating the market with 150k of excess product thereby ensuring the normal ‘out’ of a stressed cutomer is denied i.e. the ability to sell his/her house.
And to top it all we have the likes of you somehow endorsing their contractual rights under these mortgage contracts which were given to a complete novices in the overwheleming majority of these sad cases, up and down this sorrowful island.
Please wise up and open your eyes and your mind. You know as well as I do that buisnesses which make such fundamentally bad decisions deserve to fail. Allowing them to remain with breath in their lungs does, as the Govt has shamefully done, does not entitle them to assume that all their previous decisions were the correct or the right ones and carry on regardless.
“Why did a Regulated entity lend money so seemingly carelessly in the first instance? ”
Your points make sense from the point of view of personal bankrupcy and a less onerous regime for enforcing it. They make no sense to me from the point of view of reposession or enforcement of security. You’re essentially suggesting a form of squatters rights for any who borrows against an asset, and that the legal enforcement of that security is now a meaningless term. No bank on earth will lend into a market which does not at least protect the right to seize the underlying security.
@Yields or Bust
The pillar banks are now owned by the State .The banks cannot renounce their mortgages ,even a small part of them ,because the State is broke ,whether it is fair or unfair is besides the point.
I’m not suggesting either – I’m simply stating the assumption by all banks covered or otherwise, that 100% of really bad, and I mean really bad lending is due because it says it on the mortgage contract is complete and utterly nonsense. The banks mispriced these deals and regardless of what rights they believe they have they have no rights in trying to enforce contracts which were ‘wrong’ in the first instance. No two parties in any contract would be daft enough to continue with such a regime if it was plainly obvious that the pricing was 75% to 80% ‘wrong’ in the first instance.
This pricing error does and should not require the party who have been at the other side of the mis pricing error to suf
I do not think YoB is taking issue with the principle of lending against security, as such, but rather that the lenders in this debacle should still enjoy the usual standing in the legal process. The objection is to stealth taxation, in the form of inflated property prices/stamp duty etc which only became visible post hoc. In other words, it is held the lending and repayment deal constituted some sort of fraudulent conveyancing. That is a big claim, with big political implications, if I understand YoB’s position correctly.
It is obvious that here has been a hideous failure of governance in Irish banking. The shareholders (principals) were wiped out by the actions of their senior management. These agents, who were a fairly small group, were able to seize control of the business, and set its corporate strategy in a way which suited their personal interests. That required the maximisation of short term profits and the boosting of share prices.
The key to that was to maximise lending, which was achieved by setting lending targets, with bonus incentivisation, at all levels of the business. The resulting credit fiesta led, as intended, to asset inflation in the property market, resulting in a long term sting to the mortgagee and taxpayer. Bank management received the benefits up front, and if they were smart, sold their own bank shares early doors.
What happened, in effect, was that Irish banks (and not just Irish ones) ceased to act as prudent lenders in the traditional ‘ right mind’ sense that you define , and instead adopted the stance of borrowers. They were facilitated in that transition by their bondholders, because the principal agent problem had also taken hold throughout the financial services ‘industry’. The Dork is cryptic, but he is rightly scathing about the processes involved. The ECB is as cynical, and as captured by stakeholder interests, as the Vatican. Adam Bhide’s ‘ AS call for judgement’ is a carefully researched analysis of what has gone wrong in global finance.
You state that no bank in their ‘right mind’ would lend without security. Firstly, unsecured lending has always been part of banking. Secondly, some massive commercial property loans were made here without proper title in place. The bankers were in such a hurry to collect bonuses that couldn’t keep their lending d&**Ks in their pants. One of the purposes of NAMA, of course is to make sure all of that professional negligence and malfeasance is kept from public view. Retrospective documentation is an art form in Ireland.
I have never had a mortgage, but I know a scam when I see it. Banks have brought banking into disrepute, but because our government, self-regulating professions and property interests colluded fully, no one can be held to account. Maybe there is some truth in the saying ‘ we all partied’ but YoB is right to protest that people who simply wanted to buy a home should not have been offered the financial equivalent of cocaine.
..fer the indignity of an insolvency regime of any descreption when they are the party on the other side of the error. Its illogical at the very least to legislate as we’re attempting to do to rectify a banking error with the borrowers suffering the fate of the regime that’s proposed.
@ Paul Q
you state, that i state, “You state that no bank in their ‘right mind’ would lend without security”.
I did not state that. What i stated was as follows: “No bank on earth will lend into a market which does not at least protect the right to seize the underlying security.”
ie the legal right to enforce security (whether assets or a personal guarantee, which recourse lending, even if unsecured, effectively is), where given, must be maintained. Even if the security is close to worthless, you must still be allowed seize it where no other agreement can be reached, and where due legal process has been adhered to. In this case, he offered to pay 20% of actual, and has had 6 years of non-payment.
Much of the criticism about foreclosure and seizing/eviction of property seems to come back to “the lending was mistaken in the first place”, but that seems to me about debt forgiveness rather than the right to retain use of the underlying asset. Evict and clear them from bankruptcy in a fair manner if you want, or let them stay so long as they can pay some sort of “fair” amount to the institution involved. As i said, this guy is not the one you want to be using as your poster child for “dont evict”.
I suspect when it comes to repossessions in Ailesbury, Shrewsbury, Merrion and other leafy groves, opposition-to-evictions groups will be noticeably absent.
You understand my position correctly. With regards however to fraudulent conveyancing sadly its the not the case, its the nature of a leverage driven market where rising prices are a boon to all parties except the end consumer. This is not necessarily fraudulent its more akin to self serving to the leeches that require an ongoing bull run to support their business models. There is no doubt however that as a bull run gets its feet firmly under the table fraud and stupidity may indeed colour common sense – and thats what happened in our case. The common sense loss being the valuation models the banks were using to justify crazy lending practices, which eventually morphed into the same thing.
I never suggested that our Laois friend be the poster boy of the don’t evict movement I’m simply stating that the likes of whats happening in Laois is quietly happening all over the country because of the banking errors made.
A bank which seeks restitution to assets under the terms of a mortgage contract that is in breach of repayment terms normally means seizure of the assets. This much I agree with.
But does it not seem somewhat odd that with c109k owner occupier mortgages effectively in breach (not to mention the buy to let disaster) of agreed terms that the courts would not be full to the brim with such cases as we’re seeing here?
The underlying reason that this is not happending of course is that the banks know there is no market for these properties were they to seize them. They don’t have the ability to relend, there aren’t enough new customers in the first instance to take up the slack and the social problems this could cause would be biblical. The banks through their inaction in this regard are fessing up in many respects to their errors of the past.
In normal times the banks lent with their heads firmly fixed to their shoulders and wouldn’t think twice about enforcement procedures. With their heads firmly up the arses for a decade the daylight that now inflicts their world is suggesting the errors of the past decade cannot be solved by invoking the old seizure solutions. You are correct this will ultimatley involve a massive debt forgiveness program and the scale of the actual pricing error will then be known, its mathematically daft to suggest this problem can be solved by any other means knowing now the scale of all debt in the economy.
The ordinary Joe’s can’t support the loan agreements now or most likely into the future.Whether you or CMcC, as stated on the Sindo believe this to be fair or otherwise is immaterial. Fairness is not a solution nor is hope in another bubble market to get thousands out of their misery. I’m afraid despite all the hoopla it will eventually come down to paying these mortgages off or writing them down to a realitic model valuation based on a long run rental multiple that stands to scrutiny over time. My money is on the latter and let the banks take the pain and the cost – as stated above commercial errors as overseen and initiated by the banks eventually cost.
I am no lawyer but…. is upshot for the banks that their lawyers have fecked up regarding the banks ability to seize the asset relating to home loans under the Irish Constitution and or common law?
Has whole show has been operated on a ‘sure it has always been done this way for hundreds of years’ basis?
Would that make all home loans ‘non-recourse’ ? Ooops 😉
@ John Regan
I would agree with your post re: liquidity trap.
Do you know any good sites for monetary theory? It seems to me that this crisis is systemic rather than cyclical and that ultimately the monetary system is the root cause.
@Yields or Bust
“My money is on the latter and let the banks take the pain and the cost ”
As much as I would love to see it, I just can’t believe it will ever happen in Ireland. Not in a million years. I hope you prove me wrong.
Sorry for the sloppy misquote. I am not challenging the legal notion of securitised lending per se, but rather the way in which the recourse principle has been abused at a systemic level. See below.
Yes. I am no lawyer but I did know that ‘fraudulent conveyancing’ wasn’t a correct categorisation of the individual transactions involved. What is lawful may still be wrong, often because certain things in society have always been taken on trust, and no law to combat the relevant abuses has been seen as necessary. Even laws to correct abuses, such as Glass Stegall, can be overturned by lobbyists. Mancur Olson has it right about the power of small well-heeled groups.
I never held bank shares, but I can see that bank shareholders were gobsdmacked to find that their ‘terrific’ CEOs has actually thrown prudent practice out, in favour of a model which brought in the quick buck. They were even more dumbfounded to see that auditors, and other professionals, had chosen to sing dumb about the glaring balance sheet and related risks.
The root of the Laois problem is the credit bubble, as described by the likes of John Mauldin, and the supposedly brilliant business practices which gave rise to it. The global credit crisis arose in large part from too-clever-by-half valuation models, of which Irish property valuation models are just one small, and rather old fashioned part, but locally lethal, part.
The rot started at the top, which was Wall St, but an awful lot of institutions and individuals were corrupted along the way, and the trail of victims is widening by the day. As a nation, and as a regional grouping of nations, we have simply refused to look at the reality, and are waiting like children for another few waves of Signor Draghi’s Magic Cloak. His can-kicking act serves mostly to confuse the public further, and it will be a very long time before trust in financial ‘advisers’ or the ECB, is restored. That is going to be a massive problem for the real economy.
The valuers were at the heart of the disaster. They were valuing one euro notes as five euro notes. Once one investor paid five euro for a one euro note -all other one euro notes were valued as five euro. Your four year old child could have figered it. These valuations were money in the bank. The Society of Chartered Surveyors and auctioneers were using this valuation model.
I’ve seen the video, but don’t pretend to understand the legal arguments, so I’ll focus on the economics
Let’s say this guy gets his way.
Ulster Bank (foreign owned, so presumably they are more aggressive chasing bad loans). Have something on their balance sheet under “guy in laois” in asset. If the guy gets his way then their asset becomes 0. If this continues it will threaten depositors. Ok an extreme scenario, but that seems to be where people are heading with the argument (“blame the banks”). Should depositors who took no risk pay for this nonsense?
It’s a foreign bank so who cares, the British taxpayer will cover any bank/depositor losses? May not go down well politically….
How about the guy signed a contract (an agreement between TWO parties) with the bank of his own volition, saying he would give over his house, if he couldn’t pay up. Well he can’t pay up. It need not be a question of making him homeless. Ulster Bank allows him to live there and gets the deed, and he pays the bank rent.
I don’t think even the most reckless bank (except maybe anglo!), would sign off on stuff until all the legal paperwork was in order and they had security on the property.
If he really valued his house so much, many he shouldn’t have doubled down. You don’t have to be an expert in banking to think about the risk you’re taking.
I note some pungent , and directly relevant views here from poster OMF on a thread about developer assets on the Namawinelake site. One doesn’t have to accept OMF’s very bleak view to agree that our legal system is pretty skewed.
‘And that about sums it all up really. The Developers are using every manner of trick, con and shell swap in the book to squirrel assets away beyond the reach of their creditors. It’s clear that the menagerie of family transfers, share deals, front companies, and loans seen in the Quinn vs Anglo case is by no means the exception. We see similar behavior in the Vita Cortex scandal.
My own opinion is that Irish businessmen have embraced the Enron corporate model in its entirety. The “business friendly” environment we are lauded to have here in Ireland is little more than a thieves charter for con-men, all acting under the advice of the Irish lawyers and accountants who ultimately architect these labyrinthine schemes. Boards of directors are only the tip of the rotten iceberg’
The CSO said in an analysis of Census 2006, that there were 266,000 vacant dwellings in 2006 representing 15% of the total housing stock.
Of these, 175,000 were houses, 42,000 were flats and 50,000 were classified as holiday homes. County Leitrim had the highest percentage of vacant dwellings (29.3%) while 11.7% of dwellings in Dublin City were vacant at the time of the census.
There were 140,000 vacant housing units according to Census 2002.
The number of vacant units exceeded 300,000 by 2008.
Goodbody Stockbrokers said in Oct 2008 that since April 2006, there had been some 148,000 housing units completed in Ireland, but only 86,500 mortgages were paid out for the purposes of purchasing a new home.
Rory Mc Monagle
February 23rd, 2012 at 1:51 pm
Was it P.J.O’Rourke who wrote something like the difference in wealth between Albania and Alabama can be explained by the fact that you can enforce a contract in Alabama?
Property is only security against a loan if it can be repossessed by the lender in cases of default.
It is alright looking at the moral high ground and going on about the wicked bankers but Ireland needs to look to the future. This is a blip—albeit a painful and long one. If we want to be a prosperous country we need pragmatism.
Mortgage defaulters are not being cast out to starve; we live in a welfare state.
The stats to date…. >104k views, 1721 likes…. 61 dislikes
His example is essentially a green light for anyone and everyone to ignore any personal debts and personal responsibility. Basically this guy should be in a council owned house and be receiving social welfare, as our system has been designed to look after the vulnerable in our society, but instead people are suggesting we give him a free farm. Mildly nuts.
You would have a point if it were not the fact that there is a severe shortage of council houses available. What is the average time time people are on waiting lists for social housing? What would be the effect of adding anther 53,000 to this list (the number of mortgages with more than 6 months arrears)
In the interim I think the best thing is for these people to be made surrender ownership and pay rent.
If they’re not paying their mortgage why is there an expectation that they’d pay rent?
If ownership was surrendered and they’d stay on as tenants, could they then be evicted for not paying rent? If not, can other renters also get away with not paying rent?
If another person wanted to rent the house and would be willing and able to pay a higher rent could/should the house still be reserved for the defaulter?
@ Michael Hennigan
Lots of interesting facts but I am not sure what point you are making.
Are you saying that a lot of Irish people bought properties (61,500) using cash in 2006-2008 and will now have to either hope that the prices go back up or they will have to take big losses?
61,500 properties sold at the top of the market or who listened to people talk up property as it fell.
It certainly explains why so many influential people (vested) are interested in putting a floor on the housing market.
I think we sometimes underestimate how personally involved many policy makes are when it comes to trying to get the property market moving “back in the right direction”
Shouldnt Nama employees have to declare an interest?
I think its only fair. We should get NWL on the case.
sorry, 61,500 properties sold *for cash*
On the 9th of march 2009 I wrote to my then 4 TDs (Barrett, Gilmore Cuffe and Hanafin) to suggest that they give fairly urgent consideration to the very obvious predicament (Yes! I saw this coming!) of Negative Equity, loss of incomes and mortgage repayment problems.
So now, as the predicament gathers momentum, we have the usual drivel.
“Debts that cannot be repaid – cannot be repaid!” [Prof Michael Hudson]
The lending paradigm was fatally flawed, but anyone who suggested this was slimed. Best let our incompetent legislators come up with another unworkable solution. At least we can say – “You tried your worst!” Now try again and make it worser!” And they will! 😎
“The shareholders (principals) were wiped out by the actions of their senior management. These agents, who were a fairly small group, were able to seize control of the business, and set its corporate strategy in a way which suited their personal interests.”
IMHO it would be a good idea if readers actually re-read and contemplate what Paul has written as it would be a pity for the important message contained in this awful truth to be lost within the rest of his comment.
After contemplating it readers may begin to understand why most reasonable people on the Centre Right and Centre Left throughout Europe are finding themselves fighting on common democratic ground.
I think people are missing something quite substantial – we all know the credit hyperinflation has been socialised as that is what CBs do but we have not thought out the consequences of such a action.
To argue that the commercial Banks must now seize inflated property assets after such a astounding criminal event when characters such as Bond at the time suggested credit deposits was money and not a liability of a bank and must somehow be bailed out is truely sick.
If credit deposits become money it has no business claiming its assets as the credit deposit itself has become a form of state money or bank asset via Goverment guarantees although not formally so.
The entire mess is folding in on itself – just as all criminal enterprises do.
If ever there was a argument for Treausry issued fiat this is it.
“……reserved for the defaulter?”
these are good questions but actually IMHO the last bit has already been answered.
The deeds of the dwelling remain with the lender until the loan is amortised.
However in all cases (including,I have no doubt, if we “dig” deep enough into the small number of non domestic banks operating in the Irish mortgage market)the lenders who originally borrowed the money have effectively defaulted at the expense of shareholders, taxpayers and other stakeholders.
Therefore since the dwelling has already been “reserved” for the original “defaulter” (the bank) it starts to become interesting to speculate whether precedence dictates that the second “defaulter” (the mortgage holder) has a reasonable expectation to expect similar treatment.
Whatever way we look at it one thing we can be sure about is that : “it is economics Jim but not as we know it”. 🙂
@Bond: You are missing what Brian Flanagan seems to grasp quite readily, which is the rather dramatic double standard. Concerns about “moral hazard” are not being applied at all to people in the political/economic inner circles, only those at the bottom of the heap. And that is true not only in Ireland but everywhere else. And this is made worse by the fact that the inner circle people bear a great deal of responsibility for the predicament those at the bottom are in.
We might argue about what the solution to this is, but one thing we should not be arguing about is what the solution is not: making large numbers of people at the bottom homeless. This accomplishes nothing, in addition to being socially destructive and gratuitously cruel.
@Colm O’Leary: So many websites to choose from. Try Steve Keen’s linked to my blog. Michael Hudson, also linked. My blog itself, which may be an underrated resource (LOL) with many posts about monetary theory in less technical terms.
James J.: P.J. O’Rourke is funny, but he’s not a lawyer. Contract and property are two different areas of the law. Contracts are more of a “positivist” thing which depend on court enforcement. Property is more of a “natural rights” thing. Thus the US constitution, for example, groups “property” with “life” and “liberty”. Contractual rights don’t have the same status. Which is not to say that contractual rights should be lightly set aside or disregarded, but better contracts than property. And, I’ll ask you to think about this: security for loans is not about making a lender whole and almost never does; it is about pressuring the borrower. There is nothing immutable about this mechanism, and even now there are loans that are described as “non-recourse”
@Dork of Cork: I think the act of simply issuing fiat to solve the crisis would be wrong headed, and you might find the commentary under the post on my blog entitled “Liquidity Trap Explained” interesting. Briefly, though, because I consider it so important to recognize the primacy of law and self-government over economics wonkery, I greatly prefer that the people of the world address this as a legal issue and not an economic one. Although if it comes down to it, I would prefer a Steve Keen type solution to anything the ECB or Federal Reserve “technocrats” are likely to come up with.
I am not talking about MMT stuff – or the symbiosis of money (Treasury) and credit (banks / CB) into some optimum level judged by responsible bankers whatever or whoever they are
No I am talking about going all Henry the 1rst like.
Producing money as a token of state and not a loan in any form.
Deficits or at least internal defecits do not matter in this form as there is no interest to be paid on this token of symbolic value.
Its value is the wealth of the country divided by the amount of tokens issued and thats it baby.
If you want to speculate on investments you are on your own mate.
The Handmaiden of the commercial banks – the CB would become instantly redundant.
@Dork: The problem with the tokens is that they have no criteria for existing other than the king’s whim. It would be a regression to a very primitive social structure.
And I have a genuine interest in this subject matter on a number of levels, but my own personal investment speculation is not one of them. I own no gold or silver or related investments and do not stand to profit from the ideas I have suggested in any way, other than the solemn satisfaction I could gain from righting wrongs and helping others. Not that I’m claiming sainthood, mind you. But there are no crass, self-interested motives behind it.
Do you not need a Kings whim to balance the whims of Bankers ?
All money is a token (not bank credit) – even Gold.
Goverment Debt for example is a asset created out of nothing – it does not need a mortgage to justify its existence so therefore at the moment it is the only accurate measure of leverage simply because it is a nothing , a abstract , a token.
Anyway not sure the US congress or Modern Monetory Kings Collective creates real debt when it increases its internal sovergin debt if you know what I mean , it just increases the amount of tokens that may replace lets say bank credit as it is being paid down.
The FED now merely holds it , sticks a interest rate on the stuff and gives most of the interest back to the Treasury , ditto for Americans holding US treasuries as they spend the stuff back into the economy eventually.
Its a terribly obtuse system but the Bankers and the State are locked into a deadly embrace – its called the Nation State I believe.
The FED bailing out private bank & international “investments” is a different matter of course.
Thats the global Imperium role of America & the problematic $ reserve which goes far beyond its capacity or role as a normal nation state with defined borders.
This is the international crevice through which bankers gain much of their power – by playing one nation off against another.
As for my personel views on where this will end up – well I will stick to my belief that everything will deflate against the $ or inflate against Gold as much of the Bank credit at least post 1971 , perhaps before destroyed rather then created wealth.
In the end there can be only one………..
February 23rd, 2012 at 6:06 pm
It is really about the future and whether Ireland wants to be considered a safe place to do business. If residential housing is seen to be exempt from seizure, in the case of default, then it will no longer be seen as security.
London is having a mini boom because foreign money is buying up property, why? Because the UK is seen as safe with regard to property assets.
“We might argue about what the solution to this is, but one thing we should not be arguing about is what the solution is not: making large numbers of people at the bottom homeless. This accomplishes nothing, in addition to being socially destructive and gratuitously cruel.”
“It is really about the future and whether Ireland wants to be considered a safe place to do business. If residential housing is seen to be exempt from seizure…”
I do not see how a situation possibly brought about by corporate theft in banking and “casino banking economics” has to do with real business investment and FDI.
The only relevance I can see your argument being to potential “real economy” business investors would involve whether or not potential employees have other major distractions (e.g unnecessary concerns about homelessness) or whether bank officials in the economy are incapable of finding solutions to mortgage problems which would obviously cast doubt on their competence and ability to facilitate complex global business transactions.
Currently we have around half a million domestic property “investors” (mortgage holders) in Ireland who provide very few additional jobs so logically,IMHO, the type of investors we are interested in attracting from overseas would be in other areas.
Property speculation is no more “real business” than tulip speculation which also experienced “a boom”. Tulips also experienced a massive “bust” in the past as did London property prices (several times) in the past. 🙂
Here’s how it could ruin FDI.
A union of mortgage strikers is formed, refusing the pay banks. Banking capital is wiped out a second time. Depositors realise they’re next. Bank run starts, banks have to sell assets at fire sale prices to pay off depositors.
Ultimately banks can’t do this, banking system collapses. Google and other multinationals has to pay its staff with bartar.
Think this is extreme?
Just look what the troika is doing to Greece.
@James J: Personally, and this may be only me, I think it is a very bad idea to have residential housing “financialized”. What sort of “boom” is it when foreigners are buying up the residential properties of you and your neighbors, turning hordes of people into beggars and renters in their own land, subject to being put out onto the street by your own government in the absence of the monthly tribute? Has any military conquest ever been so shameful and draconian?
I’ve discussed this with Steve Keen, and he doesn’t agree with me, in fact I haven’t had anyone agree with me – yet – but my view is that borrowing to meet any personal expense, including housing, is morally wrong both for the borrower and the lender. And on the practical level it distorts people’s perceptions and estimations of what they should be paid. A man must EARN his living, not borrow it. One of the worst aspects of the borrowing and lending monetary system is that people lose their sense of what they should be paid and what they should pay others, because borrowing is always threatening to supplant earnings.
People should borrow less and be paid more.
Property bubble bursts in the order of 30-50% are systemic events which last 15 to 25 years. Political economy is the apt subject.
Vehicles like NAMA and the banks extending and pretending exacerbate the problem.
What needs to be protected is the primary residence of every family. No forced foreclosures allowed, in the event of inability to pay the lenders must refinance at market value with previous obligations forgiven. The Gov’t particularly the DoF, Financial Regulator, Central Bank and the Banks themselves played a major role in ruining families. We are Irish. some of us with religious leanings combined with a social conscience and a sense of justice should be able to recognise when people making over Euro 250,000 per year gamed the trusting and innocent.
Great believers in the markets that we are it is just and fitting that the banks face up to the present value of their assets (collateral).
the benefit of being able to spread the cost of a large capital expense over the long period of time that the asset will be used is undeniable. A Responsible credit/ debt system does exactly that. Without it, there can be little or no investment in imfrastructure.
the responsible bit is difficult to create, unfortunately. When there is a generalized mis calculation of risk or if, this case, irresponsible credit is driven by an artificial separation of risk from rewar. Our recent system was based on a model of securitization in which upfront and ongoing service fees reward the bank while risk is apparently transferred to the end investor. I say apparently, but it never was. The hedge fund that bought the securitized product borrowed from the bank to leverage up the returns while other hedge funds/ insurance comoanies promised to insure against default without the least capacity to meet its potential obligations. The risk always stayed with the banks, that is the big lie to the whole thing and the banks, perhaps unconsiously, understood that they needed to be as big as possible to ensure that, once the system fell, there would be no choice but to rescue them. in that sense “mission accomplished” as they say. Ireland, appare tly didn’t have the securitization problem, theirs was a simpler system. they borrowed from EU banks and loaned the money onto all comers. The end effect was the same, though. grow as big as possible, cash in the bonuses and then, when everything collapsed, allow the brutal logic of the collapse hit the regulTors and wait for the rescue. Again, mission acomplished.
So now taxpayers get to pay for developer loans, generous pensions for PS workers and while they do this, they wave goodbye to their kids as they emigrate and look forward to lower pensions, poorer health care and extra chafges for every concei able service that should be covered by taxes. On top of all that, they are told that, hey you signed a contract for the mortgage you now can’t afford, suck it up, YOU shold have known what regulators, bankers, developers and even politicians argue nobody could have understood. No these people, who were paid to understand, cannot be expected to have known, but those that were encouraged to “trust your betters” are expected to have been completely intimate with al of the tricks, structures and fallacies of the Efficient market theory.
The moral implications of walking away from your debt are very easy to understand and nobody should sign a debt contract lightly. That said, if Neo Cinservatives can argue that the liberal, welfare state is immoral, that any policy that “kills the beast”, however harsh is acceptable, then why can’t everyone?
In this moral framework it woud be right to refuse to pay your mortgage, withdraw any and all deposits from your bank, and insist that any salary you make is paid in cash. then when the second bailout comes around, write to your TD to say that you will vote out Anyone who votes to approve another bailout. developers and bank managers should be jailed, NAMA debt has to be returned to the banks that extended the debt and the government has to let the banks carry the debt they extended.
Now we see the
Well if you are an economist and do find yourself evicted, there’s always this nice little six month gig in Qatar at UK£1,100 per day
By the way, if you suddenly hear around 10.03 ET today that Greece has defaulted, it’s just some guys on Zerohedge experimenting with trying to bring down the markets using Twitter. Why you would want to leave it that late on a Friday…..
@JR: “A man must EARN his living, not borrow it.”
Nice quote. And, some precient commentary above also Some critters DO get it!
If you deliberately allow a completely unustainable financial predicament to evolve into a full-blown crisis – then fess up and deal with it. And have the courage, intelligence and technical know-how to solve it. Solving it means real trouble – political trouble, that is. TDs have to face their electors, sooner or later. And that, in a nutshell is where we are – up Shithouse Alley!
Our existing legal framework for private property ownership, personal finance contracts and insolvency were enacted in another time, when there were responsible adults in charge of lending. Unfortunately a bunch of hooligans got control of the decision making process, and we are where we are. Our existing legal frames are useless to address the predicament of those owners of residential properties who are currently experiencing severe financial distress. The eviction is a salient issue, not the substantive one. I would put money on the political outcome: no practical solution. Just some ‘whiter shade of pale’ version of the existing frame.
Just read the latest epistle from St Enda. “Jobless must be ready to take anywork”. Pity he did not apply this policy to those ‘special advisors’ who baulked at the pay they were offered (they wanted more taxpayers money!) and tell said advisors to “Sod off!”.
I paraphrase Paul Krugman (to-day’s NYTimes).
“As I see it, it comes down to the cynicism underlying the whole enterprise. Once you’ve decided to hide your beliefs and say whatever you think will get you (re-elected), to pretend to agree with people you privately believe are fools, why worry at all about truth? ”
Who organised the valuations ?
Who controls the broadsheet media property propaganda?-the property advertising revenues of the auctioneers and surveyors.
95% of all property sold in this state is sold through members of Society of Chartered Surveyors or auctioneers. They control which broadsheet gets the advertising revenue. They had the power. They controlled the broadsheet media. Can you recall an Irish Times editorial saying there was a property bubble? Their property advertising revenues would have finished the same day. In every loan file there is a valuation from the property professionlas. They are the property experts.
The property professionals controlled the country.
@ John Regan
this guy has had 6 years to find a new place to live. The council housing list isn’t that long. In most countries the process of evicting and foreclosing is much shorter. I believe in Denmark, which has an extremely efficient and stable mortgage system, the process is completed no later than 6 months after you miss your payment.
The losses reported by Ulster bank yesterday, and today by Lloyds, in Irish property implies that domestic banks receiving state support may be ‘containing’ another shoal of bad loans that have yet to break the surface. Evictions and repossession will become a more regular occurrence by the end of the year – factoring in ESRI projections that employment will probably shrink again. How can it be otherwise?
in fairness, BOSI were by far the most aggressive in their lending, 90% of commerical real estate loans “impaired”.
@ The Moderators
seriously lads, its almost lunchtime and no ESRI thread yet? You’re better than that…. 😛
@Bond: “this guy has had 6 years to find a new place to live. The council housing list isn’t that long. In most countries the process of evicting and foreclosing is much shorter. I believe in Denmark, which has an extremely efficient and stable mortgage system, the process is completed no later than 6 months after you miss your payment.”
You’re missing the point. An “efficient and stable mortgage system” is not a good thing.
Looking at people’s homes as “financial assets” and pining for a more “efficient” mortgage market is not healthy:
FYI. (Appropriately enough, one of the US programmes has the acronym HARP).
February 24th, 2012 at 1:58 am
February 23rd, 2012 at 9:26 pm
Property and rental property in particular, need to be considered like any other business rather than being clouded by rather emotional language.
As to who would consider Irish law had failed to protect an invester: just about anyone who was thinking of doing business here.
One problem is the foundation stories about evictions and Land agents. Roofs torn down and families driven to choose between the Workhouse and starvation. All very useful in forming a national identity as is the colonial bogeyman across the water but pretty irrelevant now.
“Property and rental property in particular, need to be considered like any other business rather than being clouded by rather emotional language.”
I fear that transactions concerning peoples homes are more than just “business”. Wishing it otherwise doesn’t really help. And who exactly has this “need”? And does this “need” conflict with other considerations where the property in question happens to be dwellings? And if there are conflicts how should they best be resolved?
“As to who would consider Irish law had failed to protect an invester: just about anyone who was thinking of doing business here.”
In the midst of chaotic failures by many parties in Ireland in many aspects of life not just property failures of the law to afford protection to property or bank investors is a small part of the whole. Personally, I am grateful that things are not worse on the island right now than they are, and that FDI is still flowing.
>>Property and rental property in particular, need to be considered like any other business rather than being clouded by rather emotional language.<<
Moral language is not the same as “emotional” language. Let me substitute terms to see if you can grasp the problem:
“People having food or not needs to be considered like any other commodity or business rather than being clouded by rather emotional language.”
Food and shelter are pretty basic human needs, and are bound up with moral considerations that transcend business concerns. It is not being “emotional” to acknowledge that; it is being morally obtuse to ignore it. Indifference to homelessness and hunger is hardly a triumph of “reason” over emotion. Seriously.
There are also moral concerns regarding protecting investors, but they are not of anything like the same magnitude. Plus, to the extent you want to look at the situation in purely business terms, investors take risks, including economic and political. You win some you lose some.
Required reading for the Emerald Isle – and the US too:
“As to who would consider Irish law had failed to protect an invester: just about anyone who was thinking of doing business here”
So let me get this right.
A potential investor thinking about doing business here WOULD NOT “consider” the fact that thousands of investors in Irish banks had their shares wiped out by incompetent (or worse) management but they WOULD “consider” the fact that individual mortgage holders may not be able to pay back their loans.
If you know any MNC`s who use that criteria maybe you would be kind enough to let us know who they are as I am sure this site has quite a few readers who may want to (re) “consider” their personal investment portfolio .:)
Shelter is a pretty basic human need.Having a shelter does not mean owning it.Germans and Swiss are mainly renters,close to half of the French are too.The passion for home ownership which created the housing bubble is an Irish specificity that is irrational.
@Overseas: I would disagree that it’s “irrational”. Given historical norms, maybe unrealistic. A renter is almost never secure in their dwelling beyond the next monthly payment or so, and I think this insecurity is deleterious in a very fundamental way. Look at it from a US legal perspective: there is a constitutional right to property, but there is no right to a job or an income. Without owning your dwelling outright, then, your right to property is practically illusory, because your property can be lost as soon as you lose your job or your income is interrupted.
It might be fairer to say that if you don’t own your dwelling free and clear, believing in your “right” to property is irrational.
In Germany and a few other European countries the rental market is dominated by housing cooperatives. Entry is by buying a share or shares in the cooperative which then rents you a unit. Eviction is unheard of, although on your death your shares can be sold to pay off what you owe the cooperative. Even in ordinary rental situations it is quite onerous to evict renters. In many countries there is very little multi-unit building for rent. The multi-unit building market is dominated by condominiums where the units are sold to individuals. When an owner wants to evict a tenant they simply give the tenant notice that they will be moving into the unit and the tenant is compelled to leave. This means that increasingly tenants are vulnerable to eviction without cause.
In countries where rental housing dominates and the tenants have votes the laws reflect the power of the tenants. Ireland with its high level of home ownership and council housing does not have good tenant protections in place.
I remember reading a musty Victorian investment advice book from the Carnegie Library which strongly advised against investing in multi-unit rental buildings in England due to the influence of renters through the ballot box on Socialist Governments.
@ Mickey Hickey
What you say is, of course, correct. The lack of protection for tenants is the real source of difficulty.
There is, however, another aspect; the failure to price property assets in terms of their rental potential. If press reports are to be believed, the first step in actually illuminating the dark corner that is the Irish property market will come to fruition by June with the establishment of a sales price register cf.
Of course, who knows what may be lurking there? cf.
One way or the other, whatever happens will mark a sea change in the Irish approach to property not because those involved wish it to but because the reality of the country’s financial situation dictates it.
Now be the moment. Rents are actually rising!
@ Mickey Hickey
The word ‘may’ is missing before ‘be’ in the last sentence.
The relevant element in the Indo report is;
“But the “enhancement” to the bailout programme is also likely to include a plan to resolve the uncertain future of Permanent TSB and deal with the issue of unprofitable tracker mortgages that are weighing down bailed-out banks”.
There seems to be a certain understandable reluctance to actually establish – publicly – the true state of the Irish property market.
February 24th, 2012 at 8:46 pm
In a welfare state shelter and food are provided by the state in cases where someone is not able to provide for themselves.
In these instances the purchaser borrowed money to buy a property on the understanding that they would forfeit that property if they failed to meet the conditions of the loan. If they remain in the property without meeting the conditions of the agreement then they gain the advantages of the property without the disadvantages of needing to pay for it. I think you may have to substitute other terms before many of us are able to grasp your point.
Whether or not individuals or institutions should be held to account for negligence is another point.
These properties should be auctioned and allowed to be bought by individuals or organisations who could then rent them to people made homeless due to defaulting on their mortgages.
Just allowing these people to squat in the properties is ridiculous.
@James J: I understand the rationale for putting people out of their homes when they don’t pay their mortgage quite well. No need to explain.
I am aware that they agreed to forfeit the home if they did not pay their mortgage. I am also aware of many agreements that are breached for which there are no real consequences to the breaching party. This happens all the time – constantly – at the top of the socio-economic ladder. A strict not to say draconian application of the terms of “legally binding” agreements is reserved for those at the bottom. This disparity of treatment has been especially prominent since the “crisis” began.
It is indefensible.
I don’t agree that for the umpteenth time in the last 50 years the solution is some showy criminal prosecutions of whatever malefactors at the top the other malefactors at the top decide to hang out to dry. This has happened over and over in recent history and quite predictably will accomplish nothing other than crucify a few select people, deserving though they may be, while the vast majority of them skate in style by virtue of their ample swiss bank accounts. In the end nothing can be done about those people at this point that is worth doing.
What is very much worth doing is to approach the matter from the other side, and give people at the bottom the same pass that the people at the top have routinely taken for themselves. And it requires no one to do anything other than leave them alone and not send the sheriff to dispossess them of the roof over their head.
And this will have the additional salutary effect of discouraging future malefactors of the financial class from recklessly making other people’s homes into cash generating machines for themselves, because they will know that the rubes have figured them out and the spigot can be shut off at any time.
Yet I run into your objections all the time when I bring up this subject. The term “squatters” is readily invoked, but of course it is wildly inaccurate. The people involved often have legal ownership and always have lawful possession. They have breached an agreement. That is all. Happens every day.
The counter-party to this agreement, who is almost never a human being, bids the government – your government – to enforce this agreement in the most severe possible way. Not to mention that the whole arrangement is rife with fraud by that very same counter-party at the inception of the agreement on a hundred different levels.
I don’t mean to pick on you, but you suffer from the slave mentality. You would visit harsh consequences on the weaker party because you can relate to and understand the arguments that he is in the wrong. You find it impossible to understand the wrongfulness of the stronger party’s conduct, and in any case do not feel it is your place to question them. That should change. They have no more right to invoke government enforcement to benefit from their frauds and other crimes than the hoodlum that robbed a bank has a right to his spoils.
I’m praying that people all over the world begin to see this situation for what it is, begin thinking in terms of humanity and forgiveness rather than “markets” or profit and just let each other be.
Does this little diatribe help you grasp the point in any way? Even a little?
An asset/property has two values, the price you can get for it,or the net present value of it’s future cash flows. If somebody auctioneed a 5 euro note on Grafton Street and an unwise person bidded it up to 20 euro, then a surveyor would value all 5 euro notes as 20 euro notes. Now we know the net present value of a 5 euro note is 5 euro. Likewise if an unwise person paid 2 million euro for a house whose net present value was 0.5 million euro ,then a surveyor would value all other similar houses in that housing estate at 2 million euro.
The commercial property market was similar. If an unwise tenant on Grafton Street paid a world record rent for a shop, then all the other shops on the street would be obliged to pay this rent, and surveyors would value all shops on Grafton Street accordingly.
Almost all of the Irish banks reckless lending was done using surveyors/auctioneers valuations. These valuations were as good as money. This is the valuation error than created the property bubble and bankrupted the country.
M.Sc. Economics London School of Economics and Political Science.
@ John Regan
It’s easy to paint this as a good guy v bad guy (ie a bank) argument. The bank will never win such an argument. Let’s imagine it more simplisticly – you, John Regan, have some spare money, hard earned and saved from tireless work. You decide to lend it to somebody, on commercial terms, so that they may buy a house. They subsequently stop repaying you on those pre-agreed terms. Is it fair that you cannot enforce your claim on the underlying security (ie the “if you do no keep up with repayments, you may lose your home” part of the terms and conditions)?
@Bond: No, it’s not fair. This is not a debate about absolute unfairness v. absolute fairness. There’s more than enough unfairness to go around. We’re in the position where unfairness is going to happen – IS happening, and we have to choose which unfair scenario we want to live with.
An across the board debt forgiveness is quite imperfect, but it leaves everything where it is and people can go on. There are many problems with it, but one problem it does not have is multitudes of homeless people, which is what you are going to have if all debts are enforced. Creditors will lose, but their debts will be forgiven them, too.
And as it stands all debts will not be enforced, and have not been enforced. What is determining the difference right now is who is powerful and connected and who is not. For those who are not, we say pay up, or you and your children will be out on the street. What an irresponsible wretch you are. For those who are, we say here’s $12 trillion or so to bail you out, watch those bonuses don’t get out of hand, oh, okay what’s $10 or $15 million among friends?
Surely this arouses disgust at some point. Surely we have some basis on which to conduct our affairs other than limitless indulgence to the well-heeled and draconian exactitude pressed upon the weak.
I would not suggest that any of this is easy. But if you want an outline of a solution where we don’t wind up destroying ourselves, here it is:
[…] been actively discussing financial matters in the comments section here. Pulled out all the heavy rhetorical guns I know of. Don’t know if I’ve hit […]
A memento of my foray into Irish politics and economics over here:
My thanks to the generous host and fellow commentators. Perhaps some good will come of it all.
@ JR: On the question of a Jubilee, I recall saying as much almost two years back. Quite an unfriendly reception then. Its the damn Calvinist mind-set many folk have. Fine if your financial critters are behaving themselves and acting prudentially (they hold the cash for rental, and are more than a mite careful how they dole it out) – but if not, and they have not; Jubilee it is. I think it most distasteful – and it will ‘reward’ the criminal and it will ‘punish’ the innocent and the prudent. But I reckon I would prefer to get 10 lashes, than 100.
Anyone notice how tongue-tied the Mitred are? They are not known for their reticence when it comes to some moral issues. This debt predicament is one. Perhaps its not theoretical enough.
February 26th, 2012 at 12:07 am
You seem to believe your views are difficult to understand which they are not, just not based on economic sense. You are putting forward a proposition that is designed to appeal on the grounds that financiers and others got away with misconduct so no one should be punished.
Our legal and political class must take a more strategic view, although in the case of our political class this is unlikely, and enforce the contractual liabilities of mortgage holders in order to preserve Ireland’s reputation in the future.
Debt forgiveness of mortgage defaults will only make people sitting on half a million Euros of unpaid property wish they were sitting on a million Euros of unpaid property.
Those that can’t afford to pay should seek alternative, probably rented, accommodation. Ireland has a glut of accommodation it just needs to be made available.
Life is not a bowl of cherries and if you make a serious mistake it has serious consequenc
February 26th, 2012 at 12:07 am
Of course if people start to be evicted it will be difficult for the establishment not to be seen to pursue individuals and organisations that got us into this mess. No evictions: no consequences –for anyone. Three Hail Marys and everything is fine.
@ James J.
I presume that a debt Jubilee would result is a significant (further) decline in residential property asset values (and sales prices) to something close to their mid 1990s levels (ie. before the property boom started). All credit cards would have to be be voided and withdrawn and bank lending, for all purposes, would have revert to the plain vanilla boring old stuff it was. Interest rates would be around 6% – 8%. So, anyone selling a ‘500,000 residence’, would only expect to get around 70,000 or so – if their residence was in a good location. Otherwise they could expect a much lower amount. And here’s the kicker. The purchaser would have to have 25% of price in cash, on deposit, in the lending institution. That might take a while to accumulate. The residential property market would be virtually static for almost a decade. New (olde style) credit game. There would be lots of ‘lunches’. Just no ‘free ones’.
Brian Woods Snr
February 26th, 2012 at 7:33 pm
Free Lunches have always been a rare event in business.
Society has become infantilised, unable to face up to the consequences of actions whether it is joining a currency union with highly diverse economies or taking out mortgages they can’t afford.
If mortgage defaulters suffer no consequences it does not mean others escape. Those paying mortgages end up paying through higher interest rates and future borrowers due to the fact that residential property will no longer be seen as security.
Time to grow up and take our medicine rather than whingeing about the unfairness of it all.
@James J. Some interesting points you raise. I have a nasty suspicion that our legislators may have some hand in the decline of ‘standards’ and responsibility for one’s actions. Mind you, the media have helped a bit.
The dye has been cast on the mortgage/debt matter, and the colour fixed. The outcome is either bad, or worse. Its not a question of ‘winners’ and ‘losers’; its a question of the stability of our society in an era where politicians can no longer make reckless promises about future spending. All have got to face that unpalatable prospect. We can only fund gov spending on the basis of what comes in in taxation. Borrowing for current spending has got to stop – before a stop is forced.
If residential property is treated as a means of shelter, and not a tradable asset. A real fixture, not a virtual financial derivative – then progress will have been achieved. Unwinding the last 4 decades of financial chicanery will not be a ball of laughs – for anyone, least of all politicians. They either deal with the predicament as adults, or behave like feckless adolescents. So far its been the latter.
Just keep a close eye on the spot oil price. Its in the economic Red Zone. If it remains there, we have major political trouble in prospect.
I’d like to know what NAMA has paid for initial portfolio valuations and what has been paid since annually to keep these valuations up to date. Of course, in what passes for parliamentary democracy in Ireland such figures are unlikely to emerge for public scrutiny. But making a wild guess at 45k annually for repeat valuations may not be too far off the mark?
One day Reform will come and other fairy takes will come to pass. NAMA appears to have been set up like all else in the state dependent on the public purse without adequate prophylactics for conflict of interest contagion.
They should never have employed a local valuer,who were valuing 5 euro notes as 20 euro and who were part of a cartel using the most anti-tenant commercial lease law in the world,to exploit and destroy Irish commercial tenants. These were the exact crew who destroyed the country. Nama lost all credibility once they employed these people. Failure should not be rewarded.
Methinks I’ve found a living being with a similar view to myself.
By your comments here and elsewhere you are endorsing the view I’ve been beating out for the past 3 years.
This debt problems really boils down to a pricing/valuation error conducted by the valuation community and copperfastened by the banks who ultimately priced the houses and the commercial properties. I don’t think it really is any more complicatated than that. Fix the valuation error and move on. And yes to fix that error will not be ‘fair’ or even close to it – but I think the tide is slowly turning – the ordinary folk are begining to realise that unless we help our neighbour, there’s no hope for me either.
@Yields or Bust
Precisely –property has TWO values-the price you can sell it for–or–the net present value of the future cash flows. So,if an innocent naive person gave you 20 euro note for a 5 euro note an Irish valuer would value all other 5 euro notes at 20 euro. This was the fundamental error that bankrupted Ireland. It’s as simple as that.
M.Sc.Economics London School of Economics and Political Science
A wonderful video, the harsh reality of the law bumping up against the barely legitimate commercial activity of a Bank. regardless of any moral objection one would have towards the individual involved, the act of repossession is still unlawful. If the gentleman had broken the law, a repossession order would have not been necessary as he would have been arrested, so in a Jesuitical feat of mental gymnastics it is clear that if an Sheriff arrives with a repossession order it must be -de facto- an illegitimate order and can and must be challenged.
Additionally members of the Gardai cannot act to enforce the order as that would constitute an illegal act, and we can’t have the Gardai breaking the law.
Once we have the referendum to change article 40 to make it more compatible with the needs of our lending institutions (perhaps we could have it on the same day as the ESM referendum) this type of affair can be regularized. For too long these operatives have been using the general ignorance of the people as a means of benefiting themselves.
God bless the Law.