Q4 2013 Mortgage Arrears Statistics

A home represents a highly leveraged exposure to a single,stationary plot of ground,about the riskiest asset one can imagine. Property bubbles don’t grow out of thin air. They have a solid basis in reality,but reality as distorted by a misconception.

An important part of what happens during a property bubble is mediated by the marketplace,and by prices that are observed there and subsequently amplified by the broadsheet media. The broadsheet media weave stories around price movements,and when these movements are upward,the broadsheet media tend to embellish and legitimize “new era” stories with extra attention and detail. Feedback loops appear, as price increases encourage belief in “new era” stories, promote the contagion of these stories, and so lead to further price increases. The price-story-loop repeats again and again during a speculative bubble.

Ninety five per cent of all property sold in Ireland,is sold by surveyors/estate agents and they controlled where the property advertising money was spent. Almost all of this money was spent with the broadsheet media and the Irish Times,the owner of the property portal MyHome.ie, got the largest share. During the years the bubble inflated, the Irish Times revenue from property advertising was a substantial part of their gross income,and the surveyors/estate agents were allowed free rein with their puff pieces and property propaganda. Essentially this newspaper became the largest property market in the state with a newspaper bolted on.
The paper of record morphed into the paper of property.

Below is the link to the elementary property valuation error that bankrupted Ireland;

http://www.irishexaminer.com/viewpoints/yourview/a-question-of-valuation-220487.html

Buy to Lets:

Over 20,000 mortgages 1 year or more in arrears.
12,218 are more than 2 years in arrears.

From the Q3 report:

BLTs between 1 & 2 years in arrears 8,675.
BLTs over 2 years in arrears 11,597.

From the Q4 report:

BLTs between 1 & 2 years in arrears 8,092.
BLTs over 2 years in arrears 12,218

OK, so the general trend toward polarisation – shorter term arrears numbers reducing and the over 2 years increasing – is replicated in the BTL figures. Between these two quarters Over 2 year BTL arrears, increased by 621.

So we would expect around 600 or 700 repossessions/surrenders FOLLOWED BY SALES during a quarter just to keep the over 2 years figures static.

If the twelve thousand odd are to be cleared over time that figure would be many times more.

What action is in fact being taken in response?

Residential properties repossessed during quarter 24
Residential properties voluntarily surrendered during the quarter 45
Residential properties disposed of during this quarter 60

So 69 properties taken in by the banks and a mere 60 sold on to the market.

Leaving the banks’ ‘stock’:
Residential properties in possession – at the beginning of quarter 494
Residential properties in possession – at end of quarter 503

The deadbeat BTL numbers pile up by 621 (no action required, apparently) while frustrated first time buyers bid up target properties dramatically.

Meanwhile there is all sorts of shenanigans going on with ‘pressured’ sales by landlords…

@grumpy Seamus has the PPR table above,equivalent BTL is pg 10,interesting ‘arrears cap.’ numbers:) h/t David Hall.
could not resist the 🙂 ok ok check out arrears capitalization,assume that simply increases the debt not already getting serviced but reduces the lenders arrears numbers:)
allsop’s inventory has been dwindling must be the protestors!
http://www.allsopspace.ie/auction/past

Can I raise the P + I > P issue again?

To summarise:
Banks create the money they lend such that every euro is born with a debt plus compound interest.
Banks delete the money they receive to settle of a debt. Hence reducing our personal and business debts does not leave the economy in a better position.

When the population is trying to pay back the principal plus interest of each loan with only the principal could this lead to some arrears problems?

I know someone is going to point out that, theoretically, since banks only delete the principal of a loan repayment and respend the interest in circulation it should be possible for all loans to be repaid. However given the extent of the arrears issues as described in the post should we not question this theory?

Forgetting about yesteryear and taking the present situation at our starting point, how can we expect to resolve the mortgage arrears problem? More money to repay mortgages can itself only be created by banks with a corresponding interest-bearing debt?

Finally, is there any reason why we couldn’t have the ECB create a significant portion of our electronic money base instead of outsourcing that role to the commercial banks?

Ninap,
it is also very likely that a lot of the BTL are in the leafy burbs and are producing healthy rent rolls, lots of it taxpayper subsidised.

I see the landlords have formed their own 21st century version of the land league where the landlord is to be protected from evicition by the tax-payers representative.

I agree with JF, now is the time to move on the free loaders, whip the property from under them and sell to the next generation at market prices.

@ Grumpy

I think BLTs are something else
GBLTs are the ones you get in Galway.

@Ninap, JF

There are plenty in Dublin.

Landlords are messing some estate agents around discussing or fake selling properties. Sometimes it is foot dragging so the whole arrangement is effectively an option with their choices dependent on how far the market bounces. Sometimes the bank does not know what is going on, sometimes the keys are with uncooperative tenants who are connected to the landlord – viewings can be ‘tricky’ while a connected purchaser appears and hey presto “sale agreed”, great price.

There is no doubt where the initiative lies.

Of course, there are no academic papers to demonstrate this sort of thing, so it cannot be happening.

Banks are going “sale agreed” on stuff then pulling out sometimes more than a year later – not exercising that put.

All in all the idea that anyone should have to sell real estate in Ireland seems to be as “unthinkable” as bank creditors taking some sort of hit.

Maybe it’s a cultural thing.

@ JG

That’s a very interesting link. Dublinwise Neg Equity would seem to be concentrated in the counties around Dublin- the people who were pushed out of the city by land hoarding during the boom, the Dubs supporters driving KE and MH cars, the ones who were the backbone of FF support during the Bertie era , the ones on v#lium now …

” If the voters of Meath East think they’ve had it bad over the last three weeks – assailed from all angles by people with sympathetic faces and here-to-help smiles, it’s been horrendous for politicians. They have been enduring a doorstep diet of unremitting reality through stories of quiet desperation from a once-gilded generation.”

@ Johnny

Don’t forget all the people who thought buying a few places would pay their pensions.

“The quietly desperate types are the people who refused to buy during the boom, waited for their judgement to be rewarded, and instead have had to foot the bill for those who drank the kool-aid.”

Poor them.

By all means flog the BTLs at market rates but there are 300,000 less people working now compared to 07 and the banks aren’t lending so don’t expect house prices to rise.

It’s a complete dog’s dinner.

But maybe Dan McLaughlin can give you some rose tinted glasses . I think he was on the Kool aid as well.

http://www.bankofireland.com/fs/doc/wysiwyg/irisheconomy_overview.pdf

” There is a consolidation plan that should see the Government
deficit cut to under 3% of GDP by 2014 and this plan has
been approved by the European Commission

While Ireland’s debt to GDP ratio has increased substantially,
it still compares favourably with the Euro Area average
– Ireland’s gross Government debt at end 2009 was
€106bn, equivalent to an estimated 64.5% of GDP.
However this takes no account of the cash balances
held by the NTMA (E21.4bn at 31 December 2009) and
the assets of the National Pension Reserve Fund
(E22.3bn at 31 December 2009), which would result in
a net debt ratio of 38%
– Ireland’s gross debt ratio is projected to rise to 78% of
GDP in 2010 and to peak at 84% in 2012, still below
the Euro Area average which is forecast to reach 88%
in 2011

The actions taken by the Irish Government to stabilise the
public finances have been well received internationally
“What I have seen coming from Ireland has been quite impressive
in terms of adjusting to new circumstances without losing time
and not hesitating to take the kind of bold and courageous
decisions in order to put the economy back on its feet.”
Jean Claude Trichet, ECB President, January 2010

Expectations about the near-term outlook for Ireland have
improved, with the consensus forecasting a return to annual
growth in the second half of 2010. The median consensus
GDP forecast for 2011 is now 3% growth following a
contraction of 0.5% this year”

@ Johnny

” Buying a house to pay your pension’ sounds very nice in the abstract, when you eliminate actual living breathing people from the equation and pretend the pension fell off a money tree. ”

You could say the same about any financial asset.
And people did buy houses thinking they’d be able to retire off them. Still do in London. Just because it all went t*ts up it doesn’t mean their motivation never existed.

@ Tull

“Leveraging up to the hilt to buy a 2nd home to rent out to some Polish subbie is not a pension plan. It is a gamble that has gone wrong”

Who said the 2 were mutually exclusive ? Did anyone ever lose money on blue chip bank shares ? Pensions – the ultimate dumb money. Wall St loves to see them coming.

@Ninap

Seamus Coffey gave a presentation at the DEW (not online at the moment – http://www.dublineconomics.com/13/papers.php ) which had the numbers of renters more than doubling in the last 6 years – yet the BTLers continue to lose money hand-over-fist.

Another bunch of Irish investment geniuses (or more likely thieves)!

“BTL are a great investment for the free loader’

Is that specifically in Ireland or just everywhere ?

Bonds were even better, Tull. You could buy Anglo for 25c and they’d pay you 100.

I think a lot of people who bought BTLs in Ireland during the madness thought it would be like London.

http://www.rightmove.co.uk/property-to-rent/London.htmlP;

Certainly some people will tell you that Sean Dunne wanted to turn D4 into Knightsbridge.

It was rather unfortunate that Lehman Bros collapsed. Very few people saw it coming. Anglo got into difficulty

http://www.politicalworld.org/showthread.php?14509-The-Bank-Guarantee-and-Anglo-Irish-Timeline-the-Full-Monty/page8

” Fitzpatrick thought Quinn was a “real 1960s Irishman. He was one of those hail fellow well met, ah sure I will go down there and play the old cards, five or six lads for 10 bob, or whatever it was. He was always producing all that and would be nearly blessing himself. Everything will be all right. He was very human but, I didn’t easily like him.”
On March 25th, 2008, the four men met again, this time in a room in Buswells Hotel in Dublin. The ongoing fall in the Anglo share price was threatening the Quinn business empire and the bank. At one stage Quinn and FitzPatrick were alone in the room.
“He was very close to tears. He could see what was happening.”

At some stage FF had to give up and bring in the IMF. Fianna Fail had always been known for their astute financial management so this was a real blow to their self esteem.

And then AIB got into trouble .

http://www.thepropertypin.com/viewtopic.php?f=19&p=190913

“The Irish Government’s decision to nationalise Anglo Irish Bank, together with a variety of other developments here, in the US, the UK and in other parts of the Eurozone, have all had a knock-on effect on share prices and have led to renewed uncertainty and speculation as to what is going to happen next. I can understand that seeing our share price drop severely is worrying and that you may wonder whether some of the speculation might be true.
Share prices continually rise and fall as a result of many factors and the present extreme volatility in the financial sector serves to exacerbate and exaggerate that process. AIB continues to be a strong, sound, internationally diversified organisation which serves a huge range of personal and business customers across a wide variety of sectors. We have the depth and strength required to manage our way through this period of uncertainty as an independent organisation and I believe we will do so. ”

AIB subsequently ran out of road. And Bank of Ireland was severely ill.

The people who backed the bailout said it would draw a line under the banking crisis and by 2010 growth would be 3%. NAMA was going to help.

Now it’s 2014. 300,000 people out of work. Mass emigration.

JohnnyF says it’s stupid to buy property and expect to rent it out but he also says anyone who thinks the green shoots of recovery are a mirage is a doom monger.

Some coherence would be preferable.

Loads of freeloading went on right, left and centre.
http://www.politics.ie/forum/economy/140523-anglo-irish-bank-bondholders-revealed.html

There just isn’t enough money to bail out the BTL crowd given that bondholders and PS employees had to have their claims met first.

But it’s hard to get the facts, isn’t it ?

ps: Third para seems to be missing last four words of a sentence ??

“[That said, if there are some – and we know this for a fact, who are ‘gaming’ the system, then whose in ‘charge’] should act, not complain.

One interesting feature emerges clearly from these tables – Irish mortgages are de facto unsecured loans. Another unusual aspect is that Irish mortgages seem to have as high or higher default risk than Irish credit card loans, the other big category of unsecured consumer loans. That is the reverse of typical international patterns, where credit card debt has higher default risk than mortgages.

@Gregory what discount would you apply to the pool off face value ?

The numbers do not even include the financially illiterate that were preyed upon by predators after getting bombarded with property porn by the govt/media/TCD profs,subprime.Gosh imagine trumpeting such a sketchy and sleazy product,even the CB wants no part off this “market”,why should IRBC borrowers get special treatment,GE borrowers didn’t !

@ Johnny F

“The quietly desperate types are the people who refused to buy during the boom, waited for their judgement to be rewarded, and instead have had to foot the bill for those who drank the Kool-Aid”

Ask John Gallaher if he can get Janet to wind back the S&P to where it was in 1980 for you.

As someone entertaining the idea of buying a house in the near future these stats give me great comfort. Things have crystallised in my mind as regards home ownership recently, I had several concepts backward.

I thought being prudent was wise, but now I see that you have little to gain by being prudent. I thought being reckless and overextending was unwise, but now I see that being reckless actually comes with huge perks, the entire political establishment is agreed that you should be offered every chance to stay in your home, whether you pay the mortgage or not in the medium term. You gain several champions, such as David Hall, who will fight for your right to holiday and keep your kids in private school and obtain a split mortgage for your 3/4 bed in Clontarf.

I had it backwards, I see it now. My new and more sensible plan is actually to max out my mortgage approval (I only ever wanted to borrow 70% or so of it). There is no risk to doing this, if I get “in trouble” then I’ll start paying a reduced amount, or even the interest, and all right thinking people everywhere will agree that I should be allowed stay in my nice house in a nice area, and the bank will fold. It’s probably a split mortgage I’ll target, they seem to be flavour of the decade. There could even be a debt write down, who knows? I’m a nice guy and I have kids, and I engage with the bank when they call or write (not too often mind, but enough so that it would look good if I ever got before a judge)

All I ever wanted was to do right by my family, and that’s not a crime is it? Surely paying your debts and honouring contracts isn’t more important than family? Maybe I’ll consider going to a 4 day week in work, I’d like the extra time to be with my family, and seeing as paying the mortgage isn’t really a firm requirement I can probably get a reduction in repayments right there by 20%. Less work = less repayments, see?

I had it backwards, I know that now. And while I probably will feel bad that my behaviour in turn forces costs onto the good, prudent citizens who still hold onto quaint notions of responsibility and paying debts, I don’t really see an alternative that doesn’t result in me being the butt of the joke and paying 350k to live in an ex-council house in Drumcondra.

It is far better to aim high in these matters. Remember, when it comes to buying property in Ireland, it’s the taking part that matters! There really are no losers among the home-owners of Ireland.

@Gregory, Tull

Ordinarily the unsecured nature of lending in the Irish mortgage market would push up mortgage rates through the ‘analytical channel’. This might still happen wrt securitisations, although the implicit, sort of/maybe, state guarantee (remember the official version of history is that these were not an error) could reduce the effect.

What remains on the Irish banks’ books should require higher rates via credit risk to funders. While property prices are going up you can imagine everyone including investors simply ignoring the question, but as and when they stop, it will be very tempting for politicians to verbally intervene to attempt to place the tax payer between the bank’s creditors and an upward re-rating of risk.

To do otherwise, and have rates forced up, would be seen as failing to support people getting their foot on the property ladder etc (read: property owning political base).

“12.6 per cent of accounts are in arrears of 90 days or more”

That’s probably bigger than what the Labour party is polling at the moment. Could be a big election wedge issue if people got thinking.

” Excellent unemployment data today lads! Rate below 12%”

Very hard to excited about 12%, Johnny
Goodbody’s were projecting way less back in 2010. What happened ?

@JF

From the RTE website, ‘The Live Register figures, however, do not include the 85,028 people who are availing of programmes helping the long-term unemployed return to the workforce.’

@grumpy here ya go.
“The impact on RMBS transactions from potential losses through partial write-offs of split mortgage debt is already captured in our current RMBS criteria, which factors in the prospect of greater losses through loan foreclosures. Regarding mortgage covered securities programmes, the covered bond pools are dynamic and loans three months plus in arrears are removed on a regular basis in outstanding Irish programmes; therefore three month plus arrears would only occur in the cover pools post issuer insolvency.”
https://www.fitchratings.com/creditdesk/press_releases/detail.cfm?pr_id=820233

@seafóid

Very hard to excited about 12%, Johnny

Ireland is not Iceland (6.1% unemployment rate) but we are still better off than Spain (26%). In Germany’s Europe the best we can hope for is that the situation becomes unmanageable more quickly elsewhere and provokes a policy change.

What gives me hope is the record high unemployment in France (11%). The spin is that the rate of increase in unemployment is dropping. Surely it can not be long before the French lose patience with the restrictions of EMU and unequal partnership with Germany? Their elites may be invested in the Euro and a place on the world stage but France is five republics down already – why stop now?

@JG

Maybe you are. Forget about current pricing – write downs are visible and its a post property bust legacy market with everyone aware of the arrears data and a rapidly rising current market Dub-centric. Instead, imagine a few years hence when possible declines and neg equity might be considerations back on investors’ radar. The fact that ‘mortgages’, demonstrably, have underlying security that is effectively merely theoretical in Ireland should then be a relevant factor in pricing.

An interesting question would then be whether to allow the consequent higher rates, or move to make Irish mortgages ‘security enforceable’, or bridge the gap between perceived risk and politically acceptable pricing of it by implicitly laying some of it off – to the state.

“The fact that ‘mortgages’, demonstrably, have underlying security that is effectively merely theoretical in Ireland ”

Is it not linked to the scale of the problem in Ireland, Grumpy? I read something a while ago in the FT that Ireland was ahead of the pack in declaring bank losses but didn’t have a plan to distribute them which lead to the Troika coming in and imposing the bond holder bailouts. If you look at some of those 2009 analyst projections with permagrowth coming back 3 years later debt was going to peak at 88% – now it’s closer to 140% I think.
And then the PS was never reformed- another drain , trackers another – now there is no money left.
So they are just sitting on the problem.

None of the solutions worked. Trichet was probably the worst offender but NAMA was pointless – and here we are in 2014 with interest margins still banjaxed, growth anaemic and banks nowhere near full health.

What would Jesus do?

You know the standard blurb that goes with mortgage ads – “your home is at risk if you do not meet your repayments” – in Ireland it’s more like “The solvency of your country may be at risk if enough of you do not meet your repayments”

@all

Speaking of ‘mortgages’ worth remembering the waiting lists for ‘social housing’, how these have increased over the krisis >60% and how building of social housing has declined by >80%

Michael Taft: “There are nearly 90,000 households in need of social housing. These households make up approximately 170,000 people. 60 percent have been waiting for two years or longer and since the start of the crisis, the numbers in need have increased by 60 percent.

[T]he numbers in housing need have increased by 60 percent and social housing output has fallen by 82 percent (2008-2012).”

http://www.irishleftreview.org/2014/02/10/friday-stat-attack-housing-recovery/

Of course, most mortgage holders and landords may now also be classified as ‘local authority tenants’ or ‘state tenants’ …. tenants of the proxy-sov which has been forced into hock by the EZ ideologues in power.

What would happen if everyone stopped paying the mortgage?

What would happen if local authority tenants and those foisted off onto landlords stopped paying the rent?

p.s. Blind Biddy is still in Kharkov.

@John Gallagher

“given that AIB/BofI have just reported rather stellar numbers,”

You are being serious?
I hate to spoil the upbeat mood, but AIB results do not look good to me.

1. They have restructured the organization into three units: DCB (Domestic Core Banking), AIB UK, and FSG (Financial Solutions Group).
The FSG group is effectively another NAMA (‘ANAMA’), nested within AIB, a bad bank with a bad bank. It has gross loans of €21.8 billion, of which €18.3 billion are impaired. Provisions against these of €11.6 billion.
Total loan approx 82 billion, therefore ~25% gross of all loans have been sent to the ANAMA. Remember ANAMA does not get its funds at cheap rates, like NAMA.
As a business unit structure, for one of the pillar banks, it sounds awful, apart from anything else.

2. AIBs strategy is still driven by the need to pay bank ECB funding (Refer to page 36 of the annual report). AIB boasts that it has reduced ECB funding by €9.5 billion or 43%.
I simply cannot understand how the ECB has been both willing and able to implement such a destructive deleveraging process on Ireland, and why the Irish government and AIB have complied so readily to the dictates of the ECB. So only another 9.5 billion to go, even though AIB say they have finished their deleveraging targets last September, it is clear that they see paying back the ECB as business priority number one.

3. It’s net interest income is still extremely poor. €1.3 billion on 117 billion of net assets 1.1%. NAMA probably makes more than that much on less than 30 billion of assets. Maybe we are shooting the wrong horse.

4. One final point, take a look at note 27 just to see who is getting write-downs.
Residential Mortgages: 87 million
Other personal:114 million
Property & Construction: 296 million
SME / Commercial: 456 million
‘Corporate’ (whatever that is): 181 million.
Total write downs 2013: 1134 million

So the debt write downs are not in the RMBS. The big write downs are going to the bigger fish.

Altogether, not so impressive, IMHO.

@Joseph you guys are paying peanuts,in the FIRE economy you get what you pay for.They are great results given the handcuffs on senior executives by financially immature owners.
Will break them down for you later great work by AIB management,hopefully you will get headhunted and properly rewarded.
Apols on the iPhone.

@Vincent Browne, team, & The Peopl’s debate on TV3

Nice one!

@all interested in Ukaine

Trotsky on Ukraine

The Editors 3 March 2014

Trotsky on ‘The Ukrainian Question’ in Socialist Appeal, 22 April 1939 (via Counterpunch): [h/t nakedcapitalism]

http://www.lrb.co.uk/blog/2014/03/03/the-editors/trotsky-on-ukraine/

An interesting report from Suzanne Lynch in today’s IT.

http://www.irishtimes.com/life-and-style/homes-and-property/irish-house-prices-undervalued-by-13-says-commission-1.1714195

Perhaps the most interesting aspect in the context of this thread!

“However, it noted consumption behaviour of only 10 per cent of Irish households is directly affected by mortgage arrears resolution.”

This is good news in terms of the overall economic impact of mortgage arrears but not, however, in political terms as the households in question constitute an important voting block and the sentiments they hold extend well beyond them.

(The Commission paper referred to is not, it would seem, available on-line at this point in time).

@DOCM,the most egregious part of this whole “debate” is the non separation of data on Buy To Let and Principal Private Residence.
They really should not be in the same report,in NY lots of offshore investors and locals too have purchased apartments/flats to rent out as a put on the housing market.Yet I’ve never heard nor come across any research or gnashing off teeth if they fall behind in serving/paying the debt associated in placing this wager/bet.The collateral simply gets taken off them or they voluntarily surrender it.
Over here it’s extremely difficult to secure high leverage loans on second or third “homes” as they are not owner occupied,it’s treated from the start as an investment and its non emotional.One suggestion for Irl would be that going forward there is a cap or better yet all BTL mortgages are non recourse,the lenders remedies are limited to repossessing the property.This should also be non judicial-fast track the resolution process.
BTL can be a decent investment but the mistake many buyers made was in factoring in supposed capital appreciation into the numbers.A BTL should carry itself,in a good BTL investment the rental income exceeds the mortgage and other costs,feeding them is not much fun.

Some numbers on repo/foreclosure.
“Despite a 4 percent decrease in the average time to complete a foreclosure from the previous quarter, New York continued to register the longest state foreclosure timeline at 1,049 days from foreclosure start to bank repossession (REO). New Jersey came in second highest at 1,002 days followed by Florida at 893 days, Hawaii at 824 day”

http://www.upi.com/Business_News/Real-Estate/2013/04/15/Foreclosure-processing-time-at-new-high/3401366060350/

@ DOCM: DOCM, I credit you as being a sentient being!

Those ‘estimates’ are just that – estimates. They are virtual values computed, in some fashion, from real raw data. And it is with the latter that the problem may lie (apols for that Freudian!) – that is, the sample may not be random. There is of course the identity of the item being measured: what is its quantitative (or perhaps qualitative) relationship to the datum values being used to compute those estimates?

And as I have mentioned on a few occasions – the little matter of the ‘Meaningless Mean’. But as my grandmother used to intone – as she read her morning paper, “The paper never refused the ink”. She was mighty fond of ‘An Cruiskeen Lawn’!

Caveat lectors! And consume statistical estimates, sensibly!

My op: Irish residential properties are still overvalued’ – by 50%, plus-or-minus, depending on nature of property and its location.

See if you can ID a median income for persons in full-time employment. Multiply that by 3. This shuld give you a ‘quick-and-dirty’ estimate of the likely median residential property (home) value. Urban values will be higher; ex-urbs and rurals lower. Lots of pieces of string; all of indeterminate lengths!

[ps: It would be more valid to use (monthly rental income x 10)/ 0.07]

@JG

I attach the esteemed Dr Gerard Hogan’s legal opinion as requested ;

http://irishcommercialtenants.wordpress.com/2012/09/13/opinion-of-counsel-re-prohibition-on-upward-only-rent-review-clauses/

@ jg

Thanks for the link to Charlie Rose and Robert Gates! (I cannot be bothered with Saakashvili).

I think it was Bernard Shaw that said that the US and – English speaking – Europe were divided by a common language. Gates is looking at the matter from a completely American point of view and his conclusions may be correct from that point of view but do not correspond with the European reality. This opinion IMHO is much nearer the mark.

“Support for Yanukovych and repeated Russian calls for ruthless suppression in Kiev reflected Putin’s concern at risks to the Russian status quo. It is the example and ideals of the West, however imperfectly realised, that is the threat to Putin and his system, not some cunning US or European plan.”

http://www.independent.ie/opinion/analysis/putins-cheap-and-easy-victory-will-be-nothing-of-the-kind-30056101.html

Putin has already lost as far as the Ukraine is concerned whether he continues on his present path, halts (the most likely outcome) or reverses course. More or less the same point was made by a former EU adviser Robert Cooper on RTE just now.

On the BTL issue, the argument advanced is that many saw these investments as their pension and, if I am not mistaken, most owners have only one property. Dealing with them is a political not an economic problem. (Seamus Coffey has posted the Commission report on a new thread. He does not have a high opinion of it).

@DOCM on the BTL issues the loans are crossed in that the borrower is responsible for any loss on the BTL and his PPR.
In order to keep the PPR numbers ‘decent’ subprime is excluded,rent has to be getting diverted form BTL towards paying PPR debt.Thats the only explanation as the vacancy rate/factor,rent growth, does not support that level of non pmt by BTL owners,but they may simply be keeping it somehow i doubt that,i think its servicing debt just not the BTL’s.
On Ukraine there appears to be a ‘delay’ Henry as on last night the interview may not be up on Charlie’s page yet.I tend to avoid commenting on PPR as its truly none my business i ain’t paying any taxes in Irl any time soon.Foreign Policy also not really my area of expertise interested in CG’s opinion but so far nothing,he did have a great ST article last weekend on housing,which i know a little about!
http://trueeconomics.blogspot.com/

@ JG

The bottom line as far as I can see, from the point of view of someone not versed in the actual statistics, is that the problem in personal economic terms – whether PPR or BTL – impacts a lot less people than is generally thought.

For the politicians, the PPR issue is one of emotion and the BTL one of powerful lobbying by many small investors – and some not so small – in all the recognised parties.

On the Ukraine, Kissinger makes more sense than Gates. Indeed, his proposal for the “Finlandisation” of the Ukraine has also been advanced by Zbigniew Brezinski and also makes superficial sense; until one compares the size and geographical location of the two countries.

The IT has dramatically upped its game in terms of coverage in recent days cf. this analysis.

http://www.irishtimes.com/news/world/ukraine-crisis/kremlin-on-course-to-make-crimea-an-influential-russian-thorn-in-ukraine-s-side-1.1713879

@DCOM

Thanks – but that just refers to a “recent study carried out by the Commission services” – and contains no data – so no joy there.

Interestingly though it’s price-rent ratio suggest the opposite to the IT report – “…a bit above it (the long-term average) suggesting house prices may not be so cheap.”

The IT seem to have selectively quoted.

It’s also interesting that in an era of ZIRP they caution – “These ratios have certain caveats in providing accurate estimates of imbalances. For example, they do not take into account changes in interest rates over time which can change the equilibrium level of house prices.”

Seems legit!

Anyways, the hunt continues to try and find the data underlying this 13% number.

but when you skriek back and take a closer look, it is just the USS Truxtron, and it has a time limit of 21 days, according to the montreux convention, unless they fudge some involuntary mooring, like with the USS Taylor

@seafoid these guys can’t chew gum and walk at the same time.
“After Kellogg, the highest reported base salaries for new MBAs were $350,000 at Wharton, $310,000 at Columbia, $260,000 at Duke University’s Fuqua School, and $250,000 at Chicago Booth”
http://management.fortune.cnn.com/2014/01/28/mba-pay-highest-lowest/

Looks interesting h/t IT.
http://www.flac.ie/

@ Joseph was hoping cut and paste an equity analysts review of AIB,surprisingly limitled coverage so despite my delay tactics will have read the fecking thing!
It’s beside my elbow but will read and comment,Seafoid is determined to not let this tread fade into obscurity…

The comment by Poor Uncle Skeleton and the propertypin renter are both spot on. (here’s the skeleton comment http://www.irisheconomy.ie/index.php/2014/03/04/q4-2013-mortgage-arrears-statistics/#comment-487269)

Of course in Ireland there’s no consideration of “right”, only of “convenient”.

@Brian Woods Snr

I have always stated that the one and only reason for the asset bubble disaster was the gobshite bankers.

At the end of the day their one and only job was to not go bust – but instead they did this spectacularly.

Politicians, civil servants and their lapdog regulators didn’t come up with the idiotic tax breaks and light touch regulation ideas in a vacuum. They obviously got lobbied by the finance industry and happily went along for the ride.

It was in 2008, as the storm gathered on the horizon, that the politicians and civil servants needed to step back from their incestuous relationship and do some game theory strategic planning. Some of them obviously had done so, as there was plans drawn up to let Anglo, and I would assume INBS, go.

Instead we got the blanket bank guarantee.

Allowing a bank insider to become CEO, giving a civil servant a European job to get him out of the country and setting up an opaque, off balance sheet bad bank showed the banking, political and civil servant class working hand-in-glove to bury the problem.

Everything else is a Kabuki play.

5 years later, the politicians and bankers have obviously conspired to “extend-and-pretend” the mortgage crisis. Every time a post appeared here about “strategic default” I always stated that the strategic bit was on the part of the banks – it’s their job to bring in the money and if they aren’t, then it just shows they continue to be crap at their job.

At this stage though, the banks not doing their job has been sniffed out by the less wholesome of the BTL brigade and they are obviously deciding “in for a penny, in for a pound”. At some stage you have to recognize that the system is intentionally rigged and the only thing left is to try and watch for who is looking to game the system.

Now at the end of the day, on a broader scale, this is a problem created by, and perpetuated by, both the politicians and the bankers to keep our European overlords happy. Allowing the banks to not repossess and thus restrict supply, letting Comical Mickey offer (and extend) tax breaks for commercial property investment, seeing the CSO publish figures that only contain 50% of the transactions, watching the propaganda machine pump stories to make it appear that prices are rising despite record low levels of mortgage drawdowns – all these things are beleaguered short-term efforts to massage the banks books to get them through the ECB stress tests. The Europeans seem to be happy to sign up for this short-termism as it suits their political needs as well.

So now, instead of having an outside agency seeking to sort out our screwed up economy, we have a new rogue to add to our gallery.

I’m happy to share the blame around – but also happy to recognize that there are no innocents left in this whole mess.

@ Brian Woods Snr

According to the Central Bank, as of June 2012 57% of those in arrears had positive equity. Yes, you read that right. Of the 57% subset, well over 40% of them actually have a LTV of less than 50%. Yes, you read that right too.

When speaking about those unfortunates in arrears, we should not default (snigger) to the cliché of the poor fool who swallowed the lie to put a roof over his head, and through no fault of his own now finds himself in much reduced circumstances (probably having lost his job). Similarly, they don’t appear to be direct victims of the boom in the cost of PDHs. If they were, why are the LTVs so low? The true state of affairs is that those in arrears are a very mixed bag. But if YOU MUST pick a stereotype to represent them it would be more accurate to settle on someone living beyond their means, who lives in a property with positive equity, from which they could trade down but seemingly don’t feel the need to. They are the majority. They are not trapped by any means, they are ensconced. They are no doubt a mix of the social classes, with some of them very wealthy indeed.

Now, where is the harm? First we have the dire supply situation in Dublin. Scarcely 2,000 houses for sale, could really do with some natural churn couldn’t we? But why bother, sure we have reasonably decided as a society that a bank must accommodate in every possible way a home owner who can’t pay for their house, and that applies be they in positive equity, negative equity, be they very poor or very rich. All in all, there is certainly no urgency needed on behalf of a borrower who can’t meet their obligations (remember, 57% of them have positive equity, much higher now in Dublin what with a good 18 months of price increases behind them). Hold on to that house folks, don’t go handing it over to someone who can pay for it, whatever you do. Let’s not be rash. Perhaps if we engage in enough ethical flip-flopping we can come to some sort of conclusion that supports keeping people in houses worth more than their mortgage but where they can’t pay for them. There is no differentiation here in Ireland, the unemployed boom time heartbreak case gets the same treatment as the greedy credit addict who can’t run his own finances.

Second, we are back to our old friend moral hazard. Moral hazard never got a fair crack of the whip here, it started certain folk frothing at the mouth. But I’m here to tell you it is a very real issue, I know because I’ve changed my own behaviour in reaction to how this arrears crisis is playing out. In answer to your own question of whether I was naive or cynical, I am certainly not the former and I don’t believe I am the latter either. I am a realist.

The incentives are very clear for borrowing as heavily as possible. There is no disincentive for over-borrowing in Ireland. You’d have to go off the chart completely for it to come back and bite you. I was last year told I could get a mortgage of 300k, but I declined. I only wanted to borrow 275k max, I consider myself a prudent man (I’ve never had a loan since college)

I probably don’t need to tell you that my house hunting experience in Dublin since last year has been dispiriting in the extreme. Simply put, I can’t really afford what I consider to be a decent house in a good area for my family (and I’m not snobby I can assure you, I am not even looking on the South Side!) I am being outbid, either by very desperate people or investors, or who knows who. All I know is there are not enough properties for sale, but yet there are 32,000 PDH properties nationally over 2 YEARS in arrears.

So, it is fairly clear to me what I should be doing. If even BTLs with 2 years arrears aren’t being repossessed, it’s pretty clear what way the wind is blowing. So I’m going to join the herd, leverage up and hope for the best. But I don’t really need to hope very much, because even if I suffered what I’d previously have considered a catastrophic pay cut, I’m pretty sure the bank is bound to accommodate me in making my problems go away. Split mortgage, debt write off, reduced interest rate blah blah blah. I don’t care what they do, alls I know is that there isn’t anything to fear by overextending and falling down in Ireland. I can now borrow 310k, perhaps a little more. I’ll take every cent.

I never had this attitude before, I was probably quite innocent when it came to financial matters (and I still SAVE, how quaint is that?) But there comes a time where you have to look at your options and all you can say is there is a massive incentive to buy property in Ireland, with very limited risks which are utterly outweighed by the benefits. I think I’d be a fool not to. This is not a normal country and normal rules do not apply. Buying a house here comes with a whole range of attractive Options that you can avail of as and when you need them.

@Uncle any link to the CB data specifically the methodology underpinning your/the LTV ratio tks.

PUS: Thanks, again. The McCarthy paper is OK, I was at the presentation. Was attempting to make some sense of the arrears mess. Seem to think that Neg Equity might be a causal factor of decision to withhold repayments. When in fact, its loss of incomes (mostly).

If I had the means to do so, I would embed an explanatory graphic (pics being worth 1000 words!) to illustrate the extent of the global financial problem.

For 150 – 200 years, or so, we had a Production/Consumption economy; [P/C]. Not altogether a bed-of-roses. However, beginning in 1970s the P bit (in western economies) was slowly (over 3 decades) eroded away: P => small p.

A Production economy usually has many ‘well-paying’ waged-labour employment opportunities. Those real, actual current incomes permit the Consumption bit to function. Crucially, the emission of credit (fiat money) is tightly controlled, and lenders deploy tried-and-tested risk-analysis protocols.

So, we had P/C, but this morphed into small p/Very Large C.

With the steady decline in the purchasing value of waged-labour (real, actual current) incomes, the only way to maintain, and increase C, is to emit credit ( = probable future incomes). But a central tenet of Globalization is to cause a REDUCTION in actual future incomes. Its called ‘enhancing competitiveness’. Actually, its pure un-adulterated, Grade AAA+, ideological propaganda.

And some dozy economic folk are now wondering why we have an intractable debt problem? Perhaps they are so busy dy/dxing and modelling virtual reality, that they have forgotten that 2 + 2 = 4, and not 5! And, God help us – they appear to have zip appreciation of the nasty, real economic outcomes of exponential rates of population growth, use of fossil energy resources and of course, Compound Interest. Maybe ‘dozy’ is a tad polite.

@uncle traveling today so had bit time to reread Yvonne’s medal winning paper,I was having all sorts problems on original tread posting.I may have started out on the wrong foot by rudely pointing out the authors expertise and background is in studying migration a bit churlish i know…oh i also tried get a few digs in at that “daft” thingy as a non academic and safely ensconced thousands of miles away i just don’t give a f**k.
Ok back to your point which is a good one.
Oh these are the authors own views and not those of the CB.
Pages 4/5 provide a overview off the “math” such that it is involved in calculating the LTV ratios.
Issues/Problems/Gripes.
1-excluding subprime.
2-including BTL.
3-upending the capital stack.
4-utilizing the banks who made the loans “valuations”

Just on 4 heres my issues,valuation is an art form not a science,in the resi space it’s based on past transactions.For many years reliable house price data eh such as the actual purchase price was simply not available in Irl.
At the point the valurer is retained the deal has momentum,it behoves the valurer not to “miss” the number,derailing the deal.Purchaser and bank valuations are worthless,it’s estimated in the same paper that 50% of mortgage holders are in negative equity,pg 1.One the bigger surprises is that none the major firms have been sued by the banks over their “valuations”.

Over here,the states,BPO’s or broker price opinions would be utilized not extrapolating from date of loan the “value” on the lenders file,or the lenders would have done updated valuations once the borrower started falling behind in payments.I think/believe the original valuations are fatally flawed and extrapolating using the indexes further compounds the original errors.