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Ireland Plans Bold Measures to Lift Housing

published by Tom Sullivan on Mon, 2012-10-15 19:56

With its economy still reeling from the housing crash, Ireland is making a bold move to help tens of thousands of struggling homeowners.

The Irish government expects to pass a law this year that could encourage banks to substantially cut the amount that borrowers owe on their mortgages, a step that no major country has been willing to take on a broad scale.

The initiative, which would lower a borrower’s monthly payment, could prevent a tide of foreclosures, an uncertainty that has been hanging over the Irish housing market for years. If it works, the plan could provide a road map for other troubled countries.

Source and full story: NY Times, 8 Oct 2012

Tags: 
IRELAND
BANKING
DEBT
FORECLOSURES

Comments

Submitted by Heydrich on Tue, 2012-10-16 01:07.

Governments overruling banks? I’ll believe it when I see it, and even then I want to read the fine print.

One problem for the USA is that the average American is incredibly stupid and selfish. If anyone suggests that banks should have mortgage write-downs (i.e. reduce the principle owed), then other people scream that this is “not fair.” The self-righteous bastards refuse to admit that this would help everyone, including themselves.

Unlike in the United States, Irish banks have foreclosed on very few borrowers. While Ireland’s leaders have considered it socially unacceptable for banks to seize large numbers of homes, they also feared the fiscal cost of foreclosures.

In the USA there is a mad free-for-all, with banks claiming houses they have no right to, and throwing people onto the street. The banks cannot prove they own any of the houses they steal, but they get away with their theft because they own the judges. 

The debate is whether to push lenders to take losses now, in hopes that things will get better faster, or wait for the housing market to heal on its own, which could cloud the economy for years to come.

 The housing market will never heal on its own, unless the banks are reined in.

While banks aren’t required to reduce the mortgage debt, the legislation gives them a powerful incentive to write down mortgages for troubled borrowers. Under the new rules, it will be less onerous to declare bankruptcy, making it easier for people to walk away from their homes altogether.

(1) U.S. banks should be required to reduce mortgage debt, since banks are getting trillions in free money via “quantitative easing.”

(2) Regarding bankruptcy and mortgages in the USA, laws vary from state to state. Some states allow a “deficiency judgment,” in which banks can come after you for (what they claim) is the mortgage balance after you default. Other states do not allow deficiency judgments, or they do allow it, but with restrictions. Here is a comparative chart. In the later cases, people who are underwater on their mortgages simply walk away from the house. I presume that all of Ireland allows deficiency judgments. So essentially the new rules (if Ireland passes them) would reduce or remove this nightmare.

As the threat rises, banks are more likely to reduce homeowners’ debt, rather than risk losing the monthly income and getting stuck with the property.

That is totally different from the USA, where banks throw as many people onto the street as possible, and then keep the empty houses off the market, in order to sustain a housing shortage, thereby increasing the sales prices of new houses.

Submitted by Tom Sullivan on Tue, 2012-10-16 18:52.

While any measure to reduce the amounts mortgage customers owe to the banks is welcome, this proposed legislation appears to be predicated on the false assumption that the housing market and the economy are one and the same when they are not. The health of the housing market is a factor of the economy, not the other way around. No amount of debt forgiveness will kick-start the housing market if people are still losing their jobs and can't afford any mortgage payment, even a reduced one.

While I'm on the subject, banks need to be forced to come clean about the nature of the money they lend and the fraud they are perpetrating by not being above board about it. That is that the borrower's signature is used to literally create the money out of nothing, using the bank's reserves as leverage and that it is NOT drawn from reserves or the deposits of savers. Borrowers need to understand that the banks have the power to conjure the money they lend out of nowhere but the borrower does not have the power to similarly "create" the money to pay back the loan, 

Submitted by Heydrich on Tue, 2012-10-16 22:45.

While any measure to reduce the amounts mortgage customers owe to the banks is welcome, this proposed legislation appears to be predicated on the false assumption that the housing market and the economy are one and the same when they are not. The health of the housing market is a factor of the economy, not the other way around. No amount of debt forgiveness will kick-start the housing market if people are still losing their jobs and can't afford any mortgage payment, even a reduced one.

I agree that the housing market is not synonymous with the economy, but I also think it is an important component of any economy. So are energy, jobs, a nation’s general productiveness, and the supply of money and credit. The basic formula is GDP = government spending + private spending, minus imports from abroad. So, ultimately the economy means the amount of money and credit in circulation. Or, looked at another way, the economy means the amount of human and non-human energy and resources in circulation, with money as a means to measure this.

That said, I agree that the Irish proposal will make no difference if people have no money to pay any mortgages at all. As Sullivan implies, the proposal seems to be a means of ignoring the need for jobs. “We won’t create any jobs, and you peasants will have no money, but we don’t want to hear your whining, since we are talking about reducing your mortgage principal.”

It’s like the repeated “bailouts” of euro-zone nations, which are debts added upon debts, none of which can be repaid.  "We know you have no money to pay any of your debts, but we don't want to hear your whining, since we are talking about extending your repayment period."

While I'm on the subject, banks need to be forced to come clean about the nature of the money they lend and the fraud they are perpetrating by not being above board about it. That is that the borrower's signature is used to literally create the money out of nothing, using the bank's reserves as leverage and that it is NOT drawn from reserves or the deposits of savers. Borrowers need to understand that the banks have the power to conjure the money they lend out of nowhere but the borrower does not have the power to similarly "create" the money to pay back the loan.

Yes. Fractional reserve banking. In theory it can work. In practice it is a scam. Banks only become insolvent when they have no money to pay on their obligations to other banks. In any case, the big banks are not lending in the USA, since they can make more money via arbitrage, and by speculating in the financial market. And why should they lend, now that “quantitative easing” has become permanent and infinite? 

Submitted by Amerikagulag on Wed, 2012-10-17 17:14.

Let's hope Ireland follows the example of ICELAND and kicks the bastard bankers out!  SCREW the IMF. Dissolve the FED!

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