August 8, 2013

Negative equity generation needs hope

Posted in Banks · 194 comments ·

The idea that the economy is a morality play seems to be taking hold in some quarters. This is particularly the case when it comes to this term “strategic defaulter”. The strategic defaulter is someone who can pay his debts but decides not to. The central bank suggests that these defaulting characters lurk everywhere, sticking their two big delinquent fingers up at the banks.

Some people have suggested these new villains – the so-called strategic defaulters – may constitute as many as 30pc of mortgage arrears.

It is very convenient – particularly for banks – to paint the picture that there are good and bad borrowers, and bad borrowers are those that take the mickey while the good ones struggle with their responsibilities and go without to pay back debts.

It makes for good radio and can provide all sorts of fodder for the ham indignation fraternity that sometimes replaces economic analysis here. The truth is we have no evidence at all about this devious character, the strategic defaulter. We have no data on how many people in mortgage arrears are willfully not paying their debt. There are obviously some people like this, but the notion that the average person is a willful defaulter is mendacious.

What we do know is that arrears are rising and rising.

Many years ago, those of us who suggested that the housing boom was nothing more than a bubble and the collapse in house prices would leave a generation in negative equity unable to pay their massive mortgages were laughed at.

In fact, the few of us who publicly forecast this sorry predicament were ridiculed by the very bankers and the central bankers who are now suggesting the country is full of cunning strategic defaulters.

Our mortgage arrears crisis has deteriorated over the past year. Of those who own their houses and live in them, 13pc are now in arrears. If you take the 42,235 mortgage loans already restructured and not in arrears, the total ‘problem loans’ is close to 18pc of all Irish mortgages.

“In arrears” means people who haven’t paid the mortgage for more than 90 days – missing three consecutive months’ payments. There are an enormous amount of people and families in this position.

The amount of loans that are beginning to default but haven’t yet crossed the three-month threshold is another 6pc of total mortgages. Assuming that these people, having missed one or two months’ payments, are likely to miss three, the total arrears is set to increase.

The question is whether a significant proportion of these families are choosing not to pay because they couldn’t be bothered and they are not worried because the chance of getting thrown out of their houses is almost zero?

Despite what the central bank governor stated recently, there is no evidence that the number of people willfully defaulting is rising. It is a supposition, but nothing that we have any hard facts on.

In the US, where there is a more relaxed attitude to walking away from homes and mortgages, the estimates about the number of strategic defaulters range from 15pc to 25pc. It is hardly likely that this number could be higher in Ireland.

So what’s happening?

Rising arrears are much more likely to be the delayed effect of rising unemployment. People who lost their jobs initially tried to pay what they could in the expectation that they might pick up work in the future. It is only after this hope has been extinguished by a long period on the dole and dozens of rejection letters that the person stops paying – not because they want to default but because they don’t have any money.

So rather than the central bank pointing the finger at delinquent defaulters who are sitting on cash, it would seem more constructive for it to articulate a coherent economic strategy that might increase employment and reduce arrears.

Failing that, the central bank could push the banks to write down mortgages more quickly. This would reduce arrears because the monthly mortgage would fall for the debtor.

If our central bank doesn’t want to do this for fear the banks will not have the capital to absorb such writedowns, it might be better for it to go to the ECB and tell the troika that Irish banks need more capital and taxpayers and depositors don’t have any left to give.

Rather than doing that and having both the courage to stand up for taxpayers and display clarity of purpose, our central bank is taking the adolescently sneaky way out by suggesting that the debtors – rather than the lenders – are the problem.

In the real world, when a bank is faced with mounting arrears, the solution is called co-responsibility, where the debtor and lender sit down, negotiate, and both take a hit. For the creditor (the bank), that means accepting there will not be full payment, and for the debtor (the mortgage holder), that means sticking to the new terms. For the person that has a huge mortgage and has lost their job, it must be more attractive to give the keys back to the bank and both the bank and the person accept that there is no way of paying. In such a case, the mortgage needs to be cancelled and the house put on the market, leaving the bank to claw back what it can. This has to happen in extreme cases.

For the others, debt writedowns are essential. In the US, they typically reduce monthly mortgages by one-third, and the evidence shows that few default again. Defaults after a significant write-down fell from 42pc in 2009 to just 15pc in 2012.

The implication of rising arrears, falling income and a stagnant labour market means that rather than inflaming a nasty debate about the “character” of debtors, our central bank should be looking for solutions to an evident problem. If this means going to the ECB and the troika and looking for a new deal, well so be it.

It is not sustainable that defaults keep rising because hundreds of thousands of people will be locked out of the economy wallowing in a financial limbo. Hope and a belief in the future is what gets most of us out of bed. If the negative equity generation loses hope, the political ramifications could be incalculable.

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  1. lovely morning in paradise

    • Adam Byrne

      Where are you now Tony?

      • Paul Divers

        Paradise of course. Celtic Park :-)

      • Tony Murray

        Is ‘strategic default’ a rational position? Economic Law suggests that the consumer is rational… Consider you are in possession of a single dwelling mortgage and in negative equity.You want to appear rational…!!

        So how do you rationalize your position to either keep paying what you can or alternatively give up an save what you can until the banks repossess… Use what funds you can build up to secure your future move. In simple terms, well I think most people would begin to offset the value of the unit/home in terms other than financial. Community, location, commute distance, friends, children – school, disruption etc, etc.. If your a rational consumer you’d offset the losses financially and otherwise and then make the decision to stay or go.. Each of these rational consumers would be directed by the various circumstances they’d find themselves in, each may find themselves in differing circumstances.. If you can call some a strategic defaulter if they decide to pack up and go then this is what it is called… It’s not necessarily a nice term but it does grips some of the thinking processes that lurk behind mortgage default. If you’ve no skin in the game then it’s easy to walk away.

        The default figures on BTL’s are disproportionately higher. Think the rational consumer again… Easy credit. It’s 2002, capital gains are very high on property. Buy 10 unite for example on interest only credit for 5 years. Rent each unit. Pay the interest, pocket the rest as earnings. Happy days! Sell out in 2007 at the top of the market and its early retirement. Big pension – good business. Now try the same trick beginning in 2005/6. The bubble burst in 2008, your two yeas in. Three years of interest only to go… then you have to start paying in full. No chance of selling, your caught in big negativity trap. Ruination!! Your a rational consumer. The banks can’t repossess, their hands are tied. Calculate as the rational consumer your financial losses against other losses, community, friends, commute to work, family home etc ect. The latter is negligible. The only skin you’ve in the game is financial loss. Your bust at any rate, there is no chance of recovering the position – unless you can play for a debt write-down. Think rationally… What would you most likely choose to do? Are you more likely to choose to be strategic, play all the cards you’ve left! A bad hand and a good bluffer is worth something after all. It’s all just business rational.

        What would rational people likely do?

  2. Most people do the best they can.
    Bankruptcy laws need radical amendment to allow a finish with the old and a new start. Debt is strangling the total economy world wide.

  3. Grey Fox

    Have to disagree with you on that, bankruptcy only facilitates a massive transfer of wealth in the wrong/traditional direction, we need some out of the box thinking for solutions and strategic manuovering of Banks and Government into weaker positions vis-a-vis distressed family home mortgages at least, and maybe distressed SME’s to protect jobs, some sections of concerned entities are working on this but I fear they will be too late… here’s hoping, but it has to be a solution which addresses all concerned equally, I have always maintained that the ordinary distressed family home owner should not bear the brunt of all punitive measures, there has to be burden sharing after all, when these unsustainable loans where made literally all stakeholders in the Financial world, Media and Government where shouting from the rooftops about how good everything was and was going to stay.

    • I understand your efforts and work in support of those suffering trauma and distress largely not of their own making as regard the economy, but, of their own making in signing on the dotted line of a mortgage.

      Keeping the bankruptcy laws as they are is simply more punishment and distress, I would suggest relief there is not amiss.

      Previous postings have suggested a comprehensive idea designed to bankrupt the banks by repealing odious debt to provide relief for the taxpayer and put the crooked/inefficient banks out of business. National debt is also significantly reduced.

      Government forecloses on the banks to retrieve the loans paid by the government. Those that do not pay have their assets seized to recover the money. That is the state forecloses, in other words, on the delinquent banks. (source for the Goose etc.)
      All physical assets are sold to recover funds.
      Government now would own a good swath of mortgages held by those banks. These mortgages would be offered for sale and the mortgagor would be given right of first refusal.

      Net result would be that the further in default a mortgage was, the lower its market value. People could buy back their mortgage at a discount and lower their indebtedness.

      Just a few thoughts out of the box and further things can be done to pay off the national debt but that is not a part of this theme.

      As David said,”So rather than the central bank pointing the finger at delinquent defaulters who are sitting on cash, it would seem more constructive for it to articulate a coherent economic strategy that might increase employment and reduce arrears.

      Failing that, the central bank could push the banks to write down mortgages more quickly. This would reduce arrears because the monthly mortgage would fall for the debtor.”

  4. Puschkin the Black and White Cat

    Good Morning David and all the regular contributors to this wonderful forum.

    Today is the last comment I shall make, goodbye all.

    There cannot be drug dealers without drug users. Thus to blame the crisis on the banks is simply facetious. The people who are now in negative equity bought in at the top of the madness. They were completely living in a state of self-delusion and overwhelming greed.

    As I have said on this forum before I had my stag party in the “Snail Box” with 4 childhood friends. I did not go on a mini-European tour lasting 3 days and costing 6,000 euro. My wedding cost about 3,000Euro in today’s money. We were aware of needing our money to setup home.

    Some time ago I worked at a company noted for its high tech wonder Kinds, they were the opposite of me, they did not read (anything as far as I can ascertain), a stag party was 6,000 Euro and they happily spent 60,000 on a weeding, of course a mortgage was 350,000. I tried to tell them but they so woefully un-educated and so “blank” there simply was no way to warn them. Like drug users they imagined the thing that was killing them was “good”.

    In other posts I have showed the 5 ways one can get a “ball park” figure on the affordable price of a home. I showed these to our nations wonder Kind, but again greed and arrogance won the day and the lemmings en-masse dived in.

    My local shop closed today. My local pub closed last Januarary. My town (noted for its prosperity) is closing down.

    The people now in negative equity caused this. Yes the banks were complicit and so were the government Boyos, but nobody was forced by the boyos.

    Dignity dictates that I should think of my own position in all this. My pension is gone, having paid it since 1985 (how will I live on 196 per week ?). My income is halved, I am assaulted by new charges. The only light at the end of the tunnel, could have been reasonably priced homes for my children, but no, property prices will stay stupidly high.

    The “crash” was just business as usual for the “boyos”, NO change has occurred, NO structural reform, NONE.

    Of course, many of the lemmings were well heeled “professionals (!)” , teachers, doctors and the like, they got a big taste for foreign shores and queued up to buy “a little place in” somewhere far away.

    Yes, I do favour help for these people, but they MUST attend a week long course where each day for 8 hours they will continually say the following:

    1) I accept that the average home in Ireland is worth 125,000 and no more.
    2) I MUST not tell lies about my income.
    3) A lender does not give a dam about me, and why should they.
    4) I am responsible for myself and I am not a whinging greedy moron.
    5) I know that work is a good way to make money and that being a landlord is for pigs.
    6) Greed is BAD.
    7) All this was my fault, nobody forced me.

    Good bye all, this cat is going for a big long cat nap for a few years. It’s all over.

    • tomahawk

      Well said, agree fully.
      Cheer leaders (usually state paid)for debt write down are effectively advocating that the state pay for mortgages.Of course the bank guarantee etc was criminal but lets not compound our stupidity.
      Portrayal on media of us Irish gagging at the bit to pay our debt at all costs rings a bit hollow considering our gombeen psyche.
      If there’s a good deal going we’ll all pile in…

      • Eireannach


        DMcW is trying to tell us the Irish aren’t ‘strategic’ non-payers of debt.

        I simply don’t believe that. I don’t believe it because I’m Irish, my parents are Irish, my grandparents are Irish, and I know the Irish people very well indeed.

      • 5Fingers

        +1 and to Puschkin as well. Strategic defaulters are out there driving their 4x4s and letting others pay. 35%??? I think this is conservative.

        We are a nation of strategic defaulters. It is in our blood. The Government do not pay bills on time. The culture of business is is not pay bills on time. It is ruinous.

        • Eireannach

          Remember the joke ‘Angela Merkel thinks we’re working’?

          The new joke might read ‘the neighbours see my new 4×4 and they I’m not drowning in debt like they are’.

    • jeeaaan

      The article is embittered and the total opposite to the points David is making.Why should people be villified for buying a house at the top of the boom?So you infer you are leaving the country,is this not to get a better life ?Make your fortune and come back to show how well you done?You are earning 196 per week so on the dole.This is the workers who are supporting those payments the same people who are in negative equity and trying to pay their debts and keep the show on the road.You are clearly wasted heading furthur afield as you seem to have all the answers for all the people.I wish you well in your future endeavours and think perhaps you should do the same for the people who are left behind picking up the pieces.

    • michaelcoughlan

      Hi Puschkin the Black and White Cat,

      Your post is reminiscent of someone who is fatigued with the bleakness of much of the failure of the establishment in Ireland.

      I sympathise with you so maybe it might be a good idea to look for the good in situations and build a new outlook from which you will recover your vitality.

      Remember no matter how bleak a situation there is always some positives
      so take some time for reflection. It would be a pity for you to stop posting as your posts would be missed.

      Take care,


    • Grey Fox

      1) I agree
      2) I could show you in person many many cases where the Bank completed this section of the Mortgage Application and it was not the Mortgagee who pressured the Banks to offer 110% mortgages.
      3) I agree with the rider, I don’t give a shit about the lender either, if our illustrious politicians had taken this view we would be much better of today, but they had a patsy in B Lenihan who was probably aware he was going to shuffle off this mortal coil and decided to take/give one for the team with the knowledge that most Irish people will not speak ill of the dead…
      4)Claptrap, you are buying into the “strategic defaulter” bullshit and to expect any sane person to accept that a family who cannot pay their mortgage and are looking for help should be described as “whinging greedy morans” is insulting to say the least
      5) So now every Landlord is a Pig, that is stupid beyond discription, and thats all I will say about that one…
      6) Totally agree
      7) Again, utter claptrap, very hard for people who depend on and have been reared to take the advice of the proverbial “policeman, Priest and Bank Manager” the pillars of Irish society for decades, to go against popular belief especially when the chorus to populated by every single heretofore trusted entity….
      Enjoy your few years off…don’t forget to set your alarm and hopefully you will wake up to a brave new world….

    • Irishgeezah

      I find your assessment of the our current situation very troubling. I really think you should consider changing your forum name to “Captain Hindsight, Banker’s Fanboy”.

      The Negative Equity Generation were doomed from the start.

      While it may be true that many people took on mortgages that were clearly unsustainable from the very beginning, to lay the blame firmly and completely on their heads for the collapse in our economic fortunes is utter balderdash.

      Lets go back to a time when property porn was rife in our daily newspapers, buzz words and soundbites all talked about getting on “The Property Ladder”,virtually full employment, a time when we were bombarded with news of record banking profits,house prices increasing at 2 or 3 times the rate of inflation and government surpluses and when naysayers of the state of the economy like David McWilliams were vilified by both press & our political masters.

      It should be noted that during this period, you and your generation re-elected a party that was hellbent on the destruction of the Irish economy, a party that reduced all forms of regulation, actively encouraged the property bubble with it’s tax breaks for developers while at the same time reducing income tax.
      So I say to you, that it is not the fault of the Negative Equity Generation that our economy resembles that of a poor 3rd world country. The fault lies fairly and squarely at your doorstep…..

    • Paul Divers

      Good luck Puschkin. Heal your soul and don’t be a stranger too long.

    • bentley

      Firstly. perhaps seeing as you mention it, you might show some dignity and do not use Pushkin as a handle. Eta ochen phloka, Pravda. Your generic comments are not appropriate. I set up the debt resolution business in Ireland in 1995 when nobody was doing it ( and only by 2001 did we get the copy catters). I know more about this business than anybody else. Nobody in UK was doing it then either. I am constantly surprised at the bullshitters that come onto sites like this pontificating about stuff that they have I suspect no real day to day experience of. Media has doomed many borrowers from availing of great deals that are possible with lenders. Pity for them. We get really great results for people in a way that is not possible for those who court the public eye.

      • tomahawk

        Its great to find somebody who knows more than anybody else.
        Debt resolution is good and necessary but this time round its the taxpayer who will be picking up the tab. Therefore the ‘public eye’ is very important to ensure that public money is spent wisely.

  5. Jimmy Gavin

    If you pardon the expression David, but you might as well be “pissing against the wind” as trying to suggest that the Irish Central Bank is capable of anything creative!
    Up to the most recent appointment of Honohan as Governor of the Central Bank (who was an external academic), all previous incumbents’ or some might say incompetence of this position were indoctrinated in none other than the Department of Finance, a Department I might add that is at the heart of everything that is wrong and rotten with this country.

  6. Jimmy Gavin

    It is only when the gombeens that run the country realize that it is not in their own self interest that you will see write down of unsustainable debts.That screeching noise that we will all be hearing before to long is the sound of the barrel bottom being scraped….

  7. Eireannach

    It’d be tempting to use intemperate language and to say ‘it’s a financial war’ between debtors and creditors. Instead, let’s use calmer terms. It’s a ‘power struggle’.

    On the one hand, the creditor banks want to be paid on time, in full, because any other solutions, from write-downs to extend-and-pretend, leaves then with big holes on their balance sheets, holes they can’t adsorb.

    Some poster on this thread posted a link to Max Keiser and Reggie Middleton discussing the probable collapse of the Irish banks, and subsequent bail-in of depositors.

    Here it is for those who missed it. Ireland chat begins at 14:55.

    So, in financial power struggle terms, the Irish banks must reduce and/or hide their mortgage losses as much as possible, at all costs, otherwise they face collapse and bail-in.

    Debtor families, on the other hand, want write-downs, extend-and-pretends, and so on, because that would be much better for them. In so doing, they are putting the integrity of the banking system at risk – they risk collapsing the banks and a bail-in fiasco.

    So the big question is …. politicians decide policy.

    Do the politicians want to save the banks, or the families?

    Since the families of Ireland tend to keep their debt problems to themselves, out of shame or whatever, the answer is obvious. Save the banks.

    In all likelihood, those families under water now will vote FF at the next election, and FF will also save the banks!

    So unless the debtors can find some sudden surge of solidarity, and can find politicians who will save them, even if it jepardizes the banking system, anyone watching this power struggle from the outside, as if it were a game of chess, would conclude that the banks will win this time.

    We should put manners on the banks for the next time, but the public has such a short attention span that I’m not even persuaded we’ll successfully do that.

    This power struggle will be won by the banks, in Ireland at least.

    All families can do is individually save themselves. There will be no coherent mass movement to change the way things are going today.

    DMcW finishes this article with a threat of the reaction of the disappointed and dispossessed. I think that’s a bit of an idle threat, unless he thinks the banks and politicians are afraid of yet more typical Irish inchoate, inarticulate rage.

    • Eireannach

      BTW before any poster on this thread wants to threaten the banks and politicians with the ‘rage of the people’, consider this:

      In a recent survey, 60% of Irish people didn’t know who or what the Troika is, and 12% thought AIB were part of the Troika!

      This is the public with which you’d like to threaten the status quo of the banking-political complex?

  8. uncle fester

    Two things about this.

    1. Debt relief while keeping the asset the debt is secured against is nothing more than wealth transfer from the solvent to the indebted.

    2. Look at what MABS are saying about the age profile of the people coming to them with arrears problems. Over 60% of them are in the 41-65 age bracket.
    Their comment is as follows:
    “It is reasonable to assume that this cohort (those aged 41 to 65) should be approaching the end of their payment term, or in some instances should have paid their mortgage, in full.”

    That’s our landlords (the baby boomers) who are in trouble, not generation X wannabe first time buyers. Why should renters be bailing out their own landlords?

    • michaelcoughlan


      “1. Debt relief while keeping the asset the debt is secured against is nothing more than wealth transfer from the solvent to the indebted”

      If the asset gets returned to the bank you are transferring the asset from one insolvent party to another. If the bank tries to sell on the asset in this market they will increase their own losses since banks are lending very little new mortgages.

      Renters aren’t bailing out landlords. Everyone is bailing out banks. I’m not sure what your beef is with the 40 plus category.

      Your points need to be thought out better.

      • Eireannach

        Spoken like a +40 landlord.

      • ps200306

        Perhaps it’s you who need to think your points through. Whether the bank repossesses and sells the house, or writes down the debt of the mortgage holder they take a loss. In the first case, the loss is realised and the bank’s loan book is reduced. In the second case the loss is realised and the bank still has an outstanding mortgage with a debtor who has a demonstrated bad credit rating. This increases the banks borrowing costs, and these costs are pushed on to everyone else with a mortgage, as well as the capital amount of the loss potentially having to be borne by the taxpayer.

        There are two major holes in David’s argument. First, the strategic defaulter notion is not something dreamed up by the big bad banks, it is the work of an academic in the finance area. Second, people with large outstanding mortgages do not “own” their homes, they bought them with money rented from the bank. The idea that they should be gifted a huge wodge of cash at everyone else’s expense, while those who rent in the conventional sense from landlords should get screwed to pay for this fiasco is beyond immoral. Irish people need to get over this idea that it’s only a “family home” if there’s a mortgage on it. We’re all paying for our houses — what makes you special just because you have a giant loan for yours?

        • Eireannach


          There is a disgusting selfishness in all of this talk about saving ‘family homes’. And no, I’m not being ironic, I’m deadly serious.

          As you say, they bought these ‘homes’ with rented money. They now want to use their children, emotional investments in furniture, nostalgic attachment to the back garden, etc. as shields to hide their cock-up, which they won’t admit.

          In any other country, the UK, the US or Australia, to pick three examples, they’d be told to heroically fall on their swords.

          It is despicable populism to suggest giving huge wodges of cash to people who squandered huge wodges of cash because of manipulated feelings about ‘families’, ‘homes’ and other words designed, by debtors, to ‘emote’ their way out of problems they created for themselves, in a free society.

          • Paul Divers

            This is all opinion based and sounds like it was pulled out of the air.

            Maybe we should get hold of that link the poster mentioned and look at the evidence, if any.

            And just because the study was written by an acedemic does not necessarily mean it is worth jack.

          • paddythepig

            Agree fully with you eireannach.

          • Paul Divers

            It is empty headed rhetoric because the only person agreeing is a troll called Paddythepig. No-one listens to Paddy and he is a troll. An anonymous muppet who is ripe for taking apart. Hence the abrupt replies

            You come in here today kicking down the saloon door laying down the law and bullying people. It doesn’t work that way you prick. Fuck you. You need to get a grip and stop sounding like a wanker

            You are all opinion and appear to think the world would be grand of only the world listen to YOU

            I used to like you but now I know you are a loser.

          • paddythepig

            Paul, do you agree with free speech? Or is everyone who doesn’t agree with you a ‘troll’ ?

        • 5Fingers

          The insolvency laws will force the issue. If a write down is needed, then let it happen after a forensic accounting analysis of the family assets. None of this stuff taking flight to another’s name. In this way a fair and square deal is done. We get “bottom” on proper “cannot pay” and banks take the hit for incompetence AND we get what can be paid from strategic defaulters.

      • uncle fester

        Michael. Try applying some thought to your own points. Responding with “everybody is bailing out the banks” is completely avoiding the point at hand.

        ps200306 has covered why it’s better for the bank to take the hit now and lend to a new debtor with a clean credit record.

        I’m sorry but you’re going to lose your BTL’s and you’ll have to come to some sort of arrangement with the bank on the outstanding balance of the loans. If you’re insolvent, go for PIP and don’t be conned into a split mortgage solution which will see the bank tapping you for the rest of your life.

        • michaelcoughlan


          Your point and that of ps200306 are intelligent and articulate so please let me respond respectfully.

          First of all I have got the slightest inclination from your response above that you might know me. If so you have the advantage as I don’t use a pseudonym.

          Your point regarding returning a house to the bank to be sold to someone else would be valid in normal circumstances where banks are run be prudent management. The point I made regarding the bank being insolvent is because the same perpetual fuckup merchants who caused the problem would have an asset returned to them to make yet another mistake since there has been very little reform of the Banks since the collapse. Let me show you that AIB just blew another €0.75bn in the first 6 months this year and the guys in there are STILL getting their bonuses. Ditto for BOI.

          Your post indicates that the borrower is the problem. Some borrowers are the problem but not all. Some borrowers are not defaulting on their loans and are still not in negative equity. Your response does not take this into consideration. Furthermore, with gross yields approaching 10% professional investors know that there has never been a better time to be a landlord since only 10k houses were added to the national stock last year in a country needing 30k houses per year. The vulture capitalists from abroad are hovering up prime commercial properties at knockdown prices but I can assure you they are doing so KNOWING how incompetent the Irish Government and the people in charge of the banks and are and are prepared to do their business IN SPITE of this fact.

          As for loosing BTL’s that comes down to affordability. You can rest assured that the people who are well qualified for property and construction were prudent enough to have their asses well covered to ensure their investment choices were made with a crash of the magnitude we are experiencing taken into consideration from the start to allow them hold onto their BTL’s.

          With regard to ps200306 and “the renters are getting screwed to pay for landlords” that’s just not correct since all the extra taxes which are being levied are not just focused on people in rented accommodation.

          Sincerely and respectfully,


          • uncle fester

            Don’t know you Michael. Just made an educated guess as to your agenda.

            Again your solution is a moan about the banks. What do you want us to do? Give every bank employee ten of the best from a birch each morning as they clock into work?

            BTW we don’t need 30k houses per year. The current FTB generation are the cohort born in 1993 and there’s only 50k of them, plus they are emigrating. The babies being born now won’t need houses for another 20 years.

          • michaelcoughlan


            “What do you want us to do? Give every bank employee ten of the best from a birch each morning as they clock into work?”

            I’d like to but this smacks of sack cloth and ashes etc. Before any citizen is called to account the people in charge of the banks should be. That is all. I’m not holding my breadth though.

          • Paul Divers

            Great post

            It’s un-nerving talking to someone using a non de plume when you think they know you but you will handle it.

            It’s no fun being a rock star

  9. hughsheehy

    Economics is far more than a morality play. If we’re to take money seriously then economics has to be moral.

    At the moment the banks are not foreclosing on people who bought houses during the boom. Despite the fact that many of them are not paying their mortgages and that many will never (sadly) be able to pay their mortgages.

    This, in effect, is a state run cartel restricting houses coming onto the market and keeping house prices higher than they would otherwise be. That has an immoral impact on anyone renting or looking to buy.

    Whatever the situation for the people who bought during the boom, screwing people who didn’t, couldn’t or wouldn’t buy during the boom (including people who were in their teens) has nothing to do with morality.

    • Grey Fox

      Our Government made it possible for the people who “didn’t, couldn’t or wouldn’t buy during the boom” to be pitted against the people who bought during the boom, that should never have happened, aggrieved borrowers should be free to battle it out with the Banks without the rest of the tax base worrying about having to pick up the tab, same old story of divide and conquer, employed against unemployed, private against Civil servants etc..etc.. and we fall for it every time, I fear we will never stand together as a people for the good of the people but I still live in hope…

      • jeeaaan

        correct and yet the mortgage holder seems to be attacked for buying a house at the height of the boom.Estate agents are getting off very loightly here ,despite what most people think demand for housing was huge and stuck in here people needed a roof over their head as opposed to investment property .Why are mortgage holders being villified?.I did not see anyone refusing the stamp duty which was making politicans work very easy.I think the co-responsibility needs to be addressed for people in jobs that should have called a halt to it all,instead you have a regulator who constantly refers to the great catch phrase”MORAL HAZZARD”

  10. BoCualain

    Eireannach, Pushkin, what you say in regards to people who bought into the boom though logical, flies in the face of reality. Psychology tells us that most of us become caught up in whatever is the current reality, be it Tulip Mania, co-operation in the murder of Jews and other undesirables during the 3rd Reich or our own property & stock market bubble. Indeed were it not for the fact that people are ready to soak up whatever ideas or “truths” are thrown at them, there would be no such thing as private media because they simply would not be able to operate without the revenue they receive from businesses who sell their wares by means of placing advertisements in the media which they know will cause the general public to go out and by their “products”. This pavlovian response to consume has come about through generations of indoctrination through the schooling system and through the media itself which is a full partner in the business of perpetuating this mass delusion. Economics itself is the pseudo-science by which the system seeks to fool us into believing that it has a rational basis but the truth is that we live in a chaotic resource limited world whose “externalities” (acts of war, of gods, of nature, of unpredicable man) are never included in the calcualtions of economics or a neo liberal system which want to make us believe that growth is infinite and that profits will allways rise.

    • Eireannach


      So, if I understand you correctly, you agree with me that the banking-politician ‘axis powers’ will defeat the indebted mortgage holders, because the former group plays to the psychological weaknesses and pavlovian responses of the latter group, this being a strategy with which to defeat the public.

      If I can assume that this is your conclusion, then I wholeheartedly agree with you.

      Consider the psychology of the Irish public RE: debt.

      Nobody you talk to in Ireland is in debt. The entire national psyche is to talk about it at the societal level, but to cover it up at the personal level.

      This being the conditioned response of the Irish debtors, they will hang separately, alone, in cublicle at MABS, talking to their creditors about extend-and-pretend last chance saloon deals, or talking to solicitors about ‘descrete default’ or some nonsense where the neighbours don’t know they lost the house because they stay on as tenants.

      The Irish psychological, pavlovian obsession with home ownership, big McMansions with 8 bedrooms and en suite bathrooms, new cars, SUVs for blond haired women – the whole thing is psychologically predictable.

      Anyone who studies these Irish obsessions can easily use this knowledge to screw the Irish public.

      And lo! This is exactly what is happening, and will continue to happen, until the groupthink ends, which is still a long way off in the mid- to long-term future.

      • BoCualain

        I agree yes. But you can’t fault the dog its training. I’m not implying that the masses are no better than dogs, but they can’t be blamed for doing what they were induced and even seduced into doing.

        • joe hack

          Advertisement is far from the 3rd Reich, People don’t need or have to do what the likes of Apple, and others tell them to do.

          Dumbing down of a society’s responsibility for their actions will mean the continuation of a dumb society, some may wish for that.

        • Eireannach

          Of course I’m not ‘blaming the trained dogs’. I’m simply observing a power struggle, watching two strategies and tactics, those of debtors and those of creditors. The creditors will win, because they were the psychological manipulators during the boom. Like Dr Faust, the debtors gave away their power when they borrowed huge sums of money which they spent on family homes, btls, new cars, etc.

          The borrowers thought they were winning, now they know they’re struggling, but they won’t pull together because they are still trying to disguise their weakened position with denials, bank blaming, government criticizing and other transparent, diversionary tactics.

          The debtors are losing as a collective. They can now only mitigate their loses on a case by case basis.

          The politicians will expend all their energy on the other side, trying to prevent bank runs and collapses.

          It’s utterly, pavlovianly predictable.

  11. joe hack

    @ David

    “It makes for good radio and can provide all sorts of fodder for the ham indignation fraternity that sometimes replaces economic analysis here.” (and thousands of words in the print media too)WE TRY OUR BEST HERE TOO!

    It is mentioned that MABS gets calls from mostly over 40s those people you have previously mentioned are least likely not to need help. ‘Ham and cheese indignation’
    Ireland, as you well know, is not the USA and is not a reserve currency, Ireland cannot “print money”.

    To do what you suggest we need sovereignty…

    “An economist has 101 ways to fix an economy but he does not have a girl” a bit like Ireland

  12. Grey Fox

    Master of the High Court says “30% of all mortgages are void by uncertainty” and the Banks had better come to terms with the fact they they have no security in those cases. Now it doesn’t mean the bank won’t get paid but it does put the borrower in a stronger bargaining position and that is great news….

    • uncle fester

      Marvellous solution. Just chuck it onto the taxpayer.
      Are you sure you’re not a member of Zanu FF?

      • Grey Fox

        Taxpayer has the option to say NO! instead of taking the easy option of siding with Government who made the wrong decision and standing by it and siding with corrupt Banks, and turning on distressed mortgage holders, they could, say, stand shoulder to shoulder with them, ah… but they would have to get the old begrudgery gene surgically removed first…

        • uncle fester

          So you want taxpayers to burn their own banking system in order to save the ones who got into debt? Sorry mate. We need banks and the horse has long bolted re the guarantee.

          I never cease to be amazed at the extent to which debt monkeys demand that the solvent ones jump into the boiling water with them.

          • Grey Fox

            Ok Fester, I understand you now, thanks

          • Jimmy Gavin

            I never cease to be amazed that when David writes an article which mentions debt write down people like you who have never written anything on this forum suddenly turn up to let fly at anyone offering any support for the possibility that debt write down of unsustainable debt might represent a feasible option to halt the type of decline evident in the Irish economy; that is to all but the blatantly obvious and usual bunch of begrudges, vested interests and opportunistic cute hoors who are frothing at the mouth at the prospect of buying up distressed assets at knockdown prices with funding from their pals in the already discussed busted banks that are beyond saving…….

          • uncle fester

            Jimmy. I’m all for debt write down but if you want to lose the debt, you must lose the asset the debt is secured against. Anything else is just plain greedy.

            Furthermore, I’d like to see MABS get an expanded role so that debtors don’t get pushed into long-term solutions which suit the banks (split mortgages, etc) and look at the short-term pain but long term gain of PIP.

  13. Paul Divers

    Excellent stuff with evidence supporting the thrust of the article. Today you proved you are on the side of the people and I am proud of you.

  14. Paul Divers

    Found this 15 year old post:

    “a bank takes deposits, then loans out all but a fraction of that money, the banking system as a whole takes more deposits based on this “new money” in circulation, all but a fraction of that “new money” is loaned out, etcetera, etcetera. But it is never possible to pay out anything but a small fraction.”

    The banks are now skint. Why did they lend out so much of other people’s money?

    Did people force the banks to take such risks?

    Or were the banks so arrogant they thought found a way to turn water into wine?

    Or perhaps they are just as stupid as the people who believed them.

  15. Wills

    Giving that the banks are the biggest and most successful ‘strategic defaulters’ in the history of civilization the phrase ‘…kettle calling pot black’ comes to mind.

  16. Clare Leonard

    Banks have a built-in corporate incentive to push the borrower into default.
    Step.1. The borrower signs a loan agreement with the bank.
    This loan is placed on the banks balance sheet as an asset.
    In the VERY small print the borrower gives the bank power of attorney, with this power of attorney the bank issues a prospectus onto the stock market to sell the borrowers loan agreement ( loan note /mortgage deed) through securitisation.
    Through securitisation the bank sell all Right, Title, Interest and benefit to the borrower’s loan.
    Depending on the credit rating of the borrower at the time of the granting of the loan, A, B, C, D, etc, The bank receive the full value of the loan from their
    investors and substantially more for a good credit rating loan.
    The selling of the loans through securitisation is primarily transacted through a SPV, (Special purpose vehicle,) this sale should appear as a liability on the banks books,
    however if that were to happen, ALL banks would be even more insolvent than they are already.
    Therefore the Central Bank obliges and allows them to park the
    liability OFF BALANCE SHEET.
    Then the fun really starts.
    Now the bank just manages the loan as an agent for the investors.
    The borrower has no knowledge of what is going on.
    The bank no longer has any vested interest in the survival of the borrower,
    in fact the bank can now make a very large profit from pushing the borrower into default.
    Once they push the borrower into default the borrower’s credit rating is changed from A or B credit rating to C credit rating (i.e. In default).
    The downgrading of the borrowers credit rating allows the bank to buy
    back the loan from their investors, for a third or less of the face value.
    In the meantime the borrower still owes the full value of the loan to the bank.
    When capital was flooding from a pillar bank in Ireland during 2010/11
    The bank made a statement to the stock exchange “ it had met its capital target for 2011 by buying back approximately 1.1bl. mortgage backed securities”.
    The bank paid 33 per cent and 92 per cent of the note ‘face value’ .
    Thereby a profit of 350 million.
    The bank now has regained ownership of the borrower’s loan note/mortgage deed.
    They can go back into the market and sell the loan note AGAIN.
    When the bank get a judgement against the borrower in the courts, they
    collect the insurance on the default.
    The problem is not whether the borrower has a 4 X 4 in their front garden.
    Grow up and deal with the sick reality of the unethical and immoral banking.
    The Central Bank are the real culprits, for allowing the banks to park the liability OFF BALANCE SHEET.

    I say, let the banks ALL GO TO THE WALL.
    As a society we need some kind of moral backbone. Deal with the real issues
    and stop slobbering in envy over the neighbours 4 X 4

    • Grey Fox

      Clare, thank you, eloquent, sucinct, to the point and absolutely true, but these are the “little” details most commenters choose to ignore in the name of “too big to fail” banks and fixing the economy, thankfully there are more and more Irish people every day saying that they will not lie down, it may never reach critical mass but I am so thankful I am one of these people in the same way as I am so thankful there were people like DMcW who tried to warn us for many years, the folks who say the Banks are too big to fail and individual Irish people must pay the cost of these corrupt Banks are paving the way, not for the same again but for much ,much worse. Government is complicit, statistics show that a massive amount of families are one minor financial shock away from default but most people just don’t get it, even the one’s I am talking about, the one’s most at risk and then we have the “I’m all right Jack’s” don’t show me that stuff, I don’t want to know, these are the ostriches, or as I like to call them ” the not yet’s” (thanks Barry).
      Keep on shouting your message from the rooftops Clare, it is so important!

      • Eireannach

        The title of this article is “Negative Equity Generation Needs Hope”.

        There is nothing in the title of this article about the ethics of banking, eg. collatoralized debt obligations, CDSs, etc.

        What you, Clare, and you too, Grey Fox, are doing with this thread is the usual, typical, predicable tactic of the Celtic Tiger debtors.

        You are trying to shift the conversation back to criticizing banking practices, which the dogs in the street know are immoral.

        This is a pure diversion tactic to avoid the real subject of this thread, which is….

        ….should non-insovlent Irish people be liable for the losses of insolvent Irish people.

        Or, in plain English, should we give more money to our neighbours who squandered money during the boom, and are in difficulty now.

        “Let the banks go to the wall” is for another thread, on this thread is a pure diversion tactic to keep our noses out of your PERSONAL indebted predicament.

        We’ve been criticizing the banks for 5 years.

        Now it’s time to DEAL WITH THE MATTER AT HAND!!!!! Namely, get the insolvent households to give back the properties they bought with borrowed money that they cannot now repay, or come up with some scheme to save their sinking ships.

        Tell us Clare and Grey Fox – do you want us to help you keep your properties? Do you want us to fight for your right to keep these properties, no matter how far in arrears you fall?

        • Grey Fox

          The mistake you make Eireanach is you want to believe the spin, you want to believe there are many many strategic defaulters so you can back stop your argument that 100,000 families should just walk away from the roofs over their heads and to what? I know as fact that without fail distressed mortgage holders actually want to pay they just can’t because the banks and stupid Government Austerity policy has taken their jobs, the only default these families are in is that they cannot conform to the schedule of repayments in their loan contracts they are not in default of the term of the loan yet, but as usual any restructure has to be on the Banks terms, the same Banks that created the problem. Fairness and Equity are the pillars of our civil justice system but I don’t see too much of that these days. To say that this thread should not discuss the Banks or their conduct is to do what Banks and Government have been doing for 5 long years, ignoring the elephant in the room, I kmow you have started new business and I wish you the best of luck, truly, I know you want the economy fixed, so do we all but to write off distressed mortgage holders as you advocate is simply not acceptable, not when the Banks get to carry on with their corrupt and immoral practices as business as usual. It is you who continues to link the taxpayer with the distressed mortgage holder as if it is a link which cannot be broken, anything that has been done can be undone it just takes will, will of the people and instruction to Government at the ballot box. The defiant distressed mortgage holder bloc grows bigger and more defiant everyday, believe me I know. Its not going away, these people now know they cannot depend on anyone except themselves, government has abandoned them, the banks are lecherous and dogged in their approach so resistance has now become duty, they are fighting for the right to a life other than financial penal servitude, they are willing to pay what they can for now but thats not good enough is it? for you.

        • Jimmy Gavin

          Seems to me Eireannach like Clare Leonard just blew a massive hole in your position,
          Mayday, Mayday, Eireannach about to sink under the weight of his own misplaced loyalty…..

          • Eireannach

            I am not loyal to the creditors, nor to the debtors.

            You criticize the creditors – the banks – over and over again ad nauseam. I criticize the banks as usurers, parasites, renters all the time.

            But I look at the other side of the equation, the debtors, and I don’t see a picture of perfect innocence either.

            When the creditors lie that they are impartial, or the debtors cry that they are impartial, I stand back from both sides and see a power struggle unfolding.

            I was livid when the creditors got a bail out. His should I feel when the debtors want a bail out?

          • Eireannach

            I meant the banks as rentiers, a term Michael Hudson has popularised.

          • Paul Divers

            Eirenannch is anonymous and hiding behind a non de plume means he / she a troll. A troll full of total bs

            It’s odd that you can’t see this.

            Like many failures they troll, have no profiles far less blogs and spout all day

            They are loners peeing in the wind.

            Don’t fall for it.

      • jeeaaan

        master of high court now paying attention to this.

    • Wills

      Very informative post.


      An anti-free market business model disguised as a legit business – is it any wonder the criminal banks have gotten away with their engineered ponzi property bubble, been bailed out with OUR monies and reset to do it all over again.

    • ps200306

      Sorry Clare, that’s tommyrot. The banks are not reselling your loan over and over and buying it back at a discount. Where do you think these gullible buyers for securitised Irish mortgages are magically appearing from? Some corner of the world where the news of Ireland’s arrears problem doesn’t reach? And if there are all these suckers out there, why are the banks all availing of Emergency Liquidity Assistance instead of selling knackered Irish loans to the queue of willing dupes?

      The banks cannot hide their situation. That’s why they can neither borrow nor lend efficiently. For sure we need to grab this bull by the horns. Like in every other country in the world, insolvency legislation now exists to properly examine each underwater borrower’s affairs. Those who can be got back on track should be, with appropriate forbearance to allow them to recover. Those whose debts are unsustainable should have them written off after an appropriate period of time and level of payment. And, of course, they must surrender the assets which are the security for the loans they are defaulting on. How could anything else possibly be appropriate or, to put it another way, specifically who *else* is going to pay for this?

      • Eireannach


        This is the nub of the matter – they must surrender their assets as part of personal insolvency, as is standard practice in almost every country in the world.

        It’s very unpleasant, and should be avoided wherever possible, but it’s how it works.

        • Grey Fox

          It is how it works in the world according to the Banks!
          You forget, the Bank’s have already been paid for these loans via securitisation, they are merely “servicers” now, there may well be some entity who believes they have the right to foreclose but it is not the Bank, and by their own admission they sold “all rights, title and interest in present and future payments and all related security”, they also did so without the consent of the Mortgagor, our Central Bank states clearly in their regulations that the Bank must write to the Mortgagor and seek the written consent to transfer a Mortgage. The Bank is then further indemnified and protected, and may well wish for the Mortgagor to default by having terms in their contracts with the new owners of the loan whereby if the credit rating of a particular class of Notes falls below a certain point (which they all have) it triggers a clause whereby the new owner may ask the Security Trustee to perfect the the Mortgage loans in the name of the new owner, there is clear communication between the Bank and the new owners of the Mortgage on the Irish & London Stock Exchanges where the bank advises not triggering these clauses as it may result in performing Mortgagor’s stopping payments if they become aware the Bank has sold their Mortgage, instead the Bank tenders to buy back the loans at a significantly reduced rate, which is what Clare is speaking about.
          The question is…how can a Bank sell all rights, title and interests in all present and future payments and the related security which breaks the chain of title and also sells on the power of attorney granted (unknowingly) to the Bank, how these matters are legal and can all be reinstated during a repurchase of the loan without ANY consultation/input from the mortgagor concerned is beyond me….

          • I am thinking back to the time of the bankruptcy of Bear Sterns which precipitated the 2008 collapse and the TARP and subsequent QE 1,2,3, etc.

            Seems BS was broke beyond repair. My understanding of it was as follows but I am pleased to be corrected.

            BS entered into mortgage agreements and used fractional reserve principles to do so. Let us take the 10-20:1 ratio often quoted. Let us be conservative at 10:1

            BS receives deposits and proceeds to lend out 10 times the amount of the deposit in mortgages. Good business so far but as the money runs out there are no further mortgages to write and so no more fees to earn.

            What to do. BS collateralizes the mortgages and sells income securities to investment funds, thereby recovering their original cash.


            Now it is easy to see how in a short while this could have been done ten times over effectively making the deposit to loan ratio 100:1 This is not unreasonable when we know that other markets trade one ounce of product for every 100 paper promises to sell the same ounce.

            It would benefit BS to maximize the sale prices of the mortgage backed securities so that they guaranteed the return on investment, or interest rate payable on this money fund.

            Bad times hit and people missed payments and after a while the investment fund realizes it is not being paid fully and asks that the guarantee be upheld by BS.

            BS takes back the MBS but it is now worth less than 100%. Let us say there is a 5% default rate building and so the MBS are worth less than 95% maybe even 90%. Nobody knows how bad it is or can be as there are a number of suspect covenantors mixed with the good ones. And the MBS packages have been sliced and diced and some resold with upgraded credit ratings.

            At 95% delinquency the BS bank liabilities are 5 times the deposits and growing. Each major bank is in a similar position so over night trading ceases between banks. nobody trusts anyone and the TARP disappears into the banks but does not come out the other end to the borrower or consumer.

            At a 10% delinquency rate the bank is short of reserves by 10 fold or more.

            This situation has bankrupted the financial system and we have not started with other derivatives that multiply the bank problems by 100′s.

            Hence the hesitancy to foreclose if they do not have to. Each foreclosure adds to liabilities as the banks have to value at market rather than the current book value. This requires further reserves yet again.

            Grey Fox , your comment on the Pension funds being buyers is likely correct.

      • Grey Fox

        ps200306 Have you considered why Pension funds are in such difficulty, have you considered that MBS where a staple of Pension Funds due to the stability of the underlying product-Mortgages, and one of the few investments available to Pension Funds due to the constraints of having to be ultra conservation.

    • Pat Flannery

      Clare Leonard:

      As a long-time (now retired) California mortgage broker I am very familiar with that “villain” (as DMcW calls him/her herein), the strategic defaulter. I would venture to say that most mortgage defaults in the U.S. are strategic defaults just as the initial borrowers were strategic borrowers.

      But then taking out a mortgage on a home is not selling yourself into slavery in the U.S. as it appears to be in Ireland.

      Unlike in Ireland U.S. mortgages are non-recourse security instruments – they are legally worth only what the secured asset is worth at any given moment. Therefore unlike Irish people most Americans are not forced to continue to make payments on homes with negative equity and little hope of a turnaround.

      Which brings me to the reason I reply to your excellent post today, if what you write is true.

      You quote some startling facts as follows: “The downgrading of the borrower’s credit rating allows the bank to buy back the loan from their investors, for a third or less of the face value. In the meantime the borrower still owes the full value of the loan to the bank.”

      You follow with: “The bank (you describe it as “a pillar bank”) made a statement to the stock exchange “it had met its capital target for 2011 by buying back approximately 1.1bl mortgage-backed securities”. The bank paid 33 per cent and 92 per cent of the note ‘face value’. Thereby a profit of 350 million.”

      Are you absolutely sure of all that? Because if it is true it is truly shocking (although I am not sure what you mean by
      “33 per cent and 92 per cent of the note ‘face value’. That is unclear).

      Do you have access to a typical securitization buy-back agreement? If so could you post a link here?

      Also could you please describe the bookkeeping involved whereby the Central Bank allowed the pillar bank to “park the liability off balance sheet” (when each securitized loan bundle was sold into the market through a Special Purpose Vehicle) and how each individual loan was then brought back onto the pillar bank’s balance sheet after it entered the securitization market and bought back its own mortgage-backed security at a discount?

      I would really appreciate your help on this because if you are correct it goes to the heart of what happened to Ireland.

      • Grey Fox

        I have all the proof of this that you need. In fact it is available in the public domain via the Irish Stock Exchange and other outlets, the Banks are that cocky!
        Clare may want to add to this.

        • Pat Flannery

          Grey Fox,

          Can you post links? Please! All these pivotal documents should be made available online to everybody.

          Then maybe we can start to get enough people to understand what Ireland is up against.


      • Clare Leonard

        I hope the attached links will help.

        The Price ‘The Bank’ paid to buy back RMBS when the Credit rating dropped.
        Credit rating D grade———33% of original face value
        Credit rating C grade——–36% of original face value
        Credit rating B grade——–51% of original face value
        Credit rating A3 grade——-75% of original face value
        Credit rating A2 grade——-88% of original face value.

        Thank you for your kind comments.
        I cannot expand on the information I have provided you with, as much as I would like to. In the future I promise I will.

        • Pat Flannery

          Thanks Clare. I will study them very carefully and get back to you. Pat

          • Pat Flannery

            So Clare, after a quick look at the documents you so quickly and graciously provided, it seems that there never was any contractual obligation on the Irish banks to buy back their MBSs, senior or junior, at face value, as was told to the Irish people and if I am not mistaken stated by David McWilliams here. Is that correct?

          • Grey Fox

            There are many avenues of discussion in relation to these financial transactions, legal, ethical and moral but the simple fact is that the borrower was hoodwinked from the start, the bank was set up to win no matter the outcome and some will say thats good business and from a pure business point of view they would probably be right, the complicating issue is how this has affected Irish society, our economy and our future. To people who have spent a lot of time studying this issue, it is clear that the Bank’s have a serious case to answer, if it were the US one might even expect a Class Action but this is not permitted under Irish Law so there will be lots of individual cases, some of which are underway in the Courts right now. Bank’s are relying of defective contracts to enforce their perceived rights, the Courts have not ruled against the Bank’s in any significant way because no comprehensive case has been made, (there have been some small individual victories), this is due in the main to the fact that most ,if not all Plaintiffs in such cases are appearing IN PERSON, without the benefit of legal advice (maybe not a bad thing) so they are prejudiced from the word go even from the understanding of Court procedure let alone the Law, free legal aid does not extend to Civil matters as a rule.
            Mainstream media coverage of these matters is minimal if not non existent which, I believe is purely to keep this information from the general public and other distressed mortgage holders, it is worth remembering that while a number of the commenters here feel very aggrieved and hostile to the fact that the taxpayer may end up carrying the for defaulting mortgage holders, where is the hue and cry about the likes of Independent News & Media’s bailout of 80 million which the taxpayers have paid for and why such a deal from a Bank to a National Media Outlet, when these thoughts are examined maybe the connection with non coverage of certain court successes becomes a little clearer.
            apologies I have gone off topic a little….the Banks removed all risk from lending when they engage in securitisation, the selling of mortgage loans in this case, and they did sell them, they will try to use all kinds of descriptions for what they did but the facts are clear in their private contracts with their private clients in these matters, the bank sold, and I quote,” all rights,title,interest in all present and future payments and all related security”, there is no ambiguity in that statement, it is not arguable but deep pockets can always find a legal team who will try to argue anything and that is what we are up against, their is much much more and I have all the evidence, so it is not as clear cut as several of the posters here would have us believe, and I would go as far as to say that they know this and are simple pushing a different agenda whatever their reason, they are entitled to do that. i will finish by simply saying that this issue will continue regardless of the never ending spin, threats and downright lies from financial institutions, government and the media, they are shoring up a building whose foundation is built on sand, the outcome is unavoidable, it is the tenure of the fight that remains unknown.

          • Pat Flannery

            Grey Fox: Thanks for a very good summary.

            It seems very clear to me that the bottom line is that Ireland’s politicians/elite put the international money markets ahead of its own citizens.

            Both the previous and present governments could have avoided economic disaster with a stroke of a pen.

            The mystery is how could the collective psychological mind of the Irish citizenry have accepted it? Is there a parallel with the Great Famine?

            In 1845-48 somehow the Irish people, particularly the merchant class, continued to sell vast quantities of Irish food products to England at famine prices. This Irish profiteering merchant class became known to Irish history as the “Gombeen Men”. Their privileged descendants have ruled Ireland ever since.

            It wasn’t until 1979 when Michael Davitt proposed a rent strike that the killing stopped.

            Is that what is happening again in our time? How long will it take for a mortgage-payments strike?

          • Pat Flannery

            Sorry, I of course meant 1879.

    • jeeaaan

      As always Clare well put!

  17. Wills

    If the banking kleptocratic eunuch jelly bells get to go again with another ponzi property bubble when their press-gang fox hunt of the strategic defaulters gets really going breaking family homes up, sending children and parents into a penal limbo will the media simply go along with it as if its all an accident again?

    • Jimmy Gavin

      Sure the fuckwits have already broken up families and scattered them all over the globe in search of a life….terminals 1&2 out at Dublin airport is where the real dramas are being played out every day…..

    • Deco

      Yes. They have been engineering it since the debacle started. Whenever you hear somebody on television talking about a crisis, it is the interests of such people that are in jeoporady. But the television news never tells us it like that.

      Instead they talk about “the economy”, and “growth” like as if everybody is in this. This is about motivating the plebs to chp in and save the rich (from the misadventures of the rich).

      The rich have influence over the media, and the media have influence over the people.

      If the people ignored the media, the people would be free.

      • Jimmy Gavin

        It is all a matter of perspective Deco. As an example you had a situation down in Anglo where a dozen blokes borrowed over 16 billion euro between them to gamble on property, which went bad. Hedge funds and other general vulture funds step in to hoover up this stuff at cents in the euro, leaving the citizens of Ireland to shoulder the shortfall and not as much as a peep from some of the more vociferous posters on this forum. Then when it is suggested that some debt write down of joe blogs and his 3 bed-semi in some fucked up backwater in Mayo or wherever might be necessary, moral hazard, blah de blah and all that shit hits the forum, from TROLLS &Co………you see my point here….they haven’t gone away you know…;-)

        • Jimmy Gavin

          They talk about these home owners as if they were some sort of financial whizz kids with their terminology “strategic default”. They should bring down Paddy o’Gorman and his famous dog down from RTE to interview some of these people who cannot pay their mortgages here in the midlands where I live. Strategic default me arse, most of them could’nt set up an online bank account, never mind working out the Net Present value of money or such like……give me peace….

        • Eireannach

          We’re perfectly aware of all the destruction of wealth by developers, etc.

          You clearly feel entitled to the same treatment, except you don’t want to file for bankruptcy as the developers did.

          You don’t want to face bankruptcy. Like Sean Quinn, you want the people on your side.

          You’re upset ‘the trolls’ don’t want to give you their money.

          You think we, the trolls, must work for the banks, because in your self-inflicted predicament, you’re losing your composure and your objectivity.

          As I mentioned above you’re comparable to a chess player in a corner. You need ‘an out’.

          • Jimmy Gavin

            Sorry to disappoint pal but I am not bankrupt, havn’t a mortgage, don’t need a bailout, sympathy, dig-out, debt write down or anything from anyone.
            So have you any more bullets in that gun that you want to shoot at the messenger???

          • Paul Divers

            This nasty little fucker needs putting in his place. Stand up for yourself!

        • Jimmy Gavin

          Oink Oink padraig an muc, I noticed these debates become uncomfortable when you stop calling them property’s and start calling them homes….I am sure the landlords of old had the same PR problems when they were out collecting their tighs…captain boycot and all that…oink oink

        • StephenKenny

          You’re not being quite fair on many people who raised these issues again and again, back in 2007-2010. But essentially you’re quite right.

          There are a number of problems – for example that a ‘default’ is seen as a free lunch, which it sort of is for the individual, but is not, as you say, for the economy as a whole.

          What has been stunning, over the past few years, has been the installation of a system that transfers almost all excess wealth from the majority to a few bankers, and only a very few people in the mainstream have peeped at all – David McWilliams, Matt Taibbbi (at Rolling Stone) are two.

          The vast majority of commentators have been marginalised as ‘crazies’ or ‘xxx-bugs’, even people such as Prof Bill Black and Simon Johnson are referred to, on the very rare occasions that they are referred to, with a slightly derogatory smirk.

          We are copying Yeltsin’s Russia – just handing out great swathes of wealth to a new class of oligarch.

        • Deco


          It is an Orwellian amount of official bullshit. And the media is compromised and fully paid up.

          We even have the chief chicken licken for the rich, who specializes in the sky falling in when you make the lenders take pain for their testosterone fuelled lending programs, Mr. Suds in the picture. And with massive quantities of patronizing, we are informed that it is in the interests of the poor, that welfare is extended to the rich. The whol system will collapse if this does not occur.

          It is a pile of steaming sh1te.

          So is the newspaper that allows him write his commentary almost as if it were editorial content.

  18. joe hack

    “The problem is not whether the borrower has a 4 X 4 in their front garden.
    Grow up and deal with the sick reality of the unethical and immoral banking.”

    Clare Leonard

  19. I think the article demonstrates the impossibility of resolving the mortgage arrears problem under the present system.

    For a start, the mortgage arrears problem was started because banks create the money the lend; yet they only create the principal of each loan but expect the principal plus interest back. It’s systemically impossible for all loans to be repaid not matter how prudent the banks may have behaved.

    But just as every euro has a matching debt, every bank liability (our current accounts) has a matching asset (our debts to the banks).

    If people default, the banks’ assets go down and one way or another we delete money from people’s accounts to reduce the banks’ liabilities.

    How can the mortgages arrears problem be resolved?

    One way would be to recognise all bank ‘deposits’ as legal tender. This would mean they would no longer be an agreement from a bank to pay you money – they would be the money themselves which for all intents and purposes they are.

    • Joe R

      Correct on the impossibility comment.

      For me a line needs to be placed between speculative games and real family homes.

  20. Negative equity generation needs hope .

    Who pays for it ? Do borrowers continue to be blind sided by their lenders while the bank park their loans and make a profit subsequently with third party investors while the borrower still suffers but this time in a captured state of a new Taliban marriage with the lender .Are existing borrowers wearing burqas to hide something ? It is time that borrowers should rally and appoint a leader to negotiate before some legless politician acts as a pretender to their lost cause .

    Is the Financial Regulator an IMPOSTER ?

    Is he concealing more than we care to know ?

    Will he make Neary seem like a saint in good time ?

    What colour is his underpants ?

    Blood is on the morning breakfast tables for many families unable to feed their children .How long more does this last ?

    • uncle fester

      Quick heads up. The borrowers signed legal agreements before they took on the loans. They were told that if they did not keep up repayments, their home would be at risk. It’s all there on their contracts if they care to read them.

      There’s no blindsiding going on here bar a select group who think they should be given a discount on their homes because they got caught with their pants down. They had the option of not entering this contract and staying out of the game but chose to jump in anyway.

      • Grey Fox

        Ask a selection of borrowers a couple of simple questions yourself..
        1) Did you understand that you were giving the Bank an unrevocable power of attorney when you signed your loan contract?
        2) Did you understand what securitisation meant when you signed your contract.
        Thats just two questions, and before you say that it was up to your solicitor to explain this and not the Bank, remember, in the predominant number of cases, the Solicitor acted for both the Bank and the Borrower which raises the question of impartial legal advice. This is a minefield, and one in which the Bank knows where all the mines are but the borrower doesn’t.

        • uncle fester

          Ask yourself this, do I really care a whit that people signed contracts without fully understanding them and now expect me to stump up for their mistakes as well as keep paying my own obligations? You signed your contract, not me. Sort out your own problems.

          Your line of argument is a total red herring. Keep up your repayments and you’ll stay out of trouble. If you’re in trouble and can’t keep up with repayments, then go to MABS, seek advice and prepare to lose the asset(s) you’ve borrowed against.

          Freemanesque nonsense filibluster does nothing to help your position because the intended recipients switch off the second they hear some VI pretend they are the Matlock of the contract law domain.

          • Grey Fox

            It is evident that you do not care a whit with the exception that if people question the wrongdoings of Banks and the Legal profession and it affects you then you will bang on about them being whingers etc….so it stands to reason that those same people should not care a whit about your concerns and again that just leads to the division of people which plays right into the hands of the Banks and Government. I understand where you are coming from Fester but when you say that you do not care a whit about these same people, that where the debate ends…, your way or the highway….thanks anyway

          • jeeaaan

            Little fish in a big pond,same struggling classes are paying same tax as you.

      • Eireannach

        The folks in negative equity today ignored the warning signs. The Ancient Greeks called this selfish, tone deaf bullish attitude ‘Hubris’.

        All Greek tragedies are in 3 parts.


        It must be hard to listen to those of us on this forum who insist that assets, pledged as security, must be given up as part of personal insolvency.

        But we are merely ‘the voice of Nemesis’.

        We have ALWAYS followed, indeed haunted, Hubris.

        We always bring down hubris.

        And yes, of course that goes for the banks as well. The hubris of the banks is greater, it’s nemesis (exposing the fractional reserve system, etc) will be greater and take longer to build and build., and the tragic fall of the banks will be more profound and catastrophic than the mini-hubris of individuals.

        It has always been thus. Hubris ends in Tragedy.

  21. Deco

    Market Crash is highly likely between now and November.

    Ireland’s current “recovery” is hanging by a thread. (Does it feel like as if we are in a recovery, when the main streets of most Irish towns included boarded up shops ? ).

    A key part of the “recovery” is the level of inward investment from US multinationals, and the consumer market in Britain. And these are both vulnerable to a stock market crash.

    The D4 banks are still is an ugly state.

    And on top of this Australia has peaked out, and is heading for a massive thud to the ground. [ once again the Aussie Labour Party have proven to be more FF like, than FF themselves, with their idiotic policy framework].

    Get ready for an economic downturn, within a downturn.

  22. Adelaide

    My interpretation of David’s argument is that the economy is suffering because too many economic participants are spending too much of their income on mortgage repayments rather than in the domestic economy, which in turn destroys domestic jobs which in turn increases the overall destructive ratio of income-to-debt. To break this vicious circle there must be debt restructuring for our indebted economic participants so that their income is freed up to spend in the economy which will create jobs and reverse the spiral.

    But surely this argument, would logically follow, that going forward, the income-to-debt ratio must be universally capped and copper-fastened to insure that future disposable spending power is sufficient to sustain the domestic economy. That means regulating house prices. A national cap being set at Nx1year average annual income.

    Otherwise the argument is incomplete. Merely restructuring debt and then returning to usual business, the business model which caused the debt bubble in the first place, is in itself a vicious circle. And more importantly it offers no hope to economic participants in the rental market.

    As a reluctant renter I’d be more than happy to financially assist the restructuring of indebted mortgage holders if this also guaranteed affordable house prices in the near future which I myself can realistically ‘afford’.

    Otherwise, what is the point? To stimulate the economy, or more accurately stimulate another bubble and bust, to alleviate bricks&mortar debt of one sector of society while copper-fastening another to a lifetime of renting. “The Road To Hell Is Paved With Good Intentions”. “A Good Intention Without Joined-Up Thinking Is A Weapon Without A Holster.”

    Debt restructuring without price regulation is cronyism.

    • Grey Fox

      We are five long years down the road of crippling austerity and we have nothing to show for it, we are no better off, we are worse. We are but a pimple on the arse of Europe and they don’t care a hoot about little old Ireland, we should reciprocate that sentiment in spades. The only way the Irish economy will get fixed is if we fix it ourselves and that means exiting the failed Euro monetary project and taking back the responsibility for printing an Irish Currency, devaluation and rebuilding, their will be more pain this way and it is all the more difficult having wasted five years already, and all for the benefit of Banks and Bondholders.

      • Adam Byrne

        But Grey Fox:

        “Everybody loves the Irish”

        “It’s an Irish thing” (RTE, 2013)

        “Sure, aren’t we great ‘craic’ (whatever the f*ck that means)?”

        …and more self-important #PADDYWHACKERY sh*te ad infinitum.

        90% of people I’ve met outside Europe don’t even know where Ireland is, or they think it’s part of Britain.

        The land of the Get-Rich-Quick-Scheme.

        Time to grow up Ireland and stand on your own two feet.

      • jeeaaan

        It is the only option,painful for a shortwhile but will give hope to people,and a fresh new start where the dictatorship is no longer needed and the puppets are no longer needed.We will take back control of our own country and the EU ponzi scheme little sick game will be over.We should then consult with our constitution.

  23. [...] Negative equity generation needs hope | David McWilliams Sign in or Register Now to reply [...]

  24. joe hack

    Little boxes on the hillside,
    Little boxes made of ticky tacky,
    Little boxes on the hillside,
    Little boxes all the same.
    There’s a green one and a pink one
    And a blue one and a yellow one,
    And they’re all made out of ticky tacky
    And they all look just the same.

    by Malvina Reynolds; copyright 1962

    Malivina Reynolds wonderful song never mentioned Price /Location/Growth…

    You can’t be selective about parts of an economy when the foundation of the economy is flawed.

    I have read here that the definition of insanity is doing the same thing over and over again and then expecting different results each time. (David McWilliams via Einstein?)

    Certainly using the USA as an example of a basting economic sanity or as of a perfect bankruptcy model is insanely bankrupt… The consequences of which bring us back to where we are over and over, this is INSANITY. No lessons learned by mistakes, Einstein must have been reading the thoughts of an economist when he was quoted.

    The education system has allot to answer for, as appears to deactivate common sense.

  25. Joe R

    David McWilliams,

    There is strategic default in Ireland. The figures are clear about it.

    There has been a mess in the banking system, with them seeking money back from first small businesses and then the government. More critically perhaps there is a huge delay in the court system, and has been since the credit crunch in 2008.

    As a consequence many people have learned that there is no consequence for not paying. Bills wages redundancy and for houses. Solicitors in particular are aware of it. There is a shunting of defaults along the line. Some are deliberate, some are involuntary.

    I am saying that in midst of the real and genuine distress there have been people who have used the confusion not to pay. The poor mouth, an beal bocht, has been hauled out by people who could pay but are utilising the narrative of the genuine distress of the many to avoid paying.

    I have had repeated direct experience of this.

    There have been no mass evictions in Ireland, no repossessions and no mass distressed sales and still there is no strong real threat of any of this.

    If I can giove the example of Spain, on the other hand which has many parallels to Ireland in terms of the nature of it´s property related crash has a just a 4% distressed mortgages rate but the unemployment level there is far,far higher. Practically double the Irish rate. And general wages are lower. Spain should be worse than Ireland by your logic but they aren´t.( Link follows in Spanish ).

    Evictions, repossessions and distressed sales do exist there. This is a major difference, though not the only one.

  26. joe hack

    With reference to Joe R above,

    The “moral hazard” started when the banks were bailed ‘a strategic default’, as a result the majority of Irish people would rightly rage if people were evicted on mass, the judges are Irish people too. The government is fully aware of the reaction there might be to mass evictions and “moral hazards”.

    So nothing happens

    David McWilliams is suggesting another “moral hazard” the consequences of which will be far reaching. It is not the leaking roof that needs replacing there no point in replacing the roof if the foundation is unstable, we need to call in the engineers and work on a plan to unpin our economy.

    Somebody had to say “moral hazard”…

    • joe hack

      “unpin our economy” = underpin our economy but ‘unpin’ works too

    • Joe R

      I agree in general that the malise started with the banking bailout, Joe hack.

      But NAMA is an engineered attempt to underpin things, to use your metaphor. As is high rent allowance and a failure to engage in normal capitalism with regard to distressed mortgages. These amount to three huge attempts to consolidate what is a nothing short of a mess for various interested parties but not society as a whole.

      What is worse for me in all of this is that it distracts from what the real issues should be right now for Ireland; providing secure suitable homes for society in general, creating a built environment that is a reflection of what a society aspires too and services its real needs, including the economic ones. All that is spoken about now in terms of property are monetary values and loans and negative equity. It is a direct continuation of the property fixation of the boom. Everything else has been lost as part of the debate.

      I can point to just one society who said no to a bailout for the bankers, no to that injustice, that being Iceland.
      I would like to know where they are at.

  27. 5Fingers

    Reading the comments above, I do see a lot of unity albeit from both sides of the camp as it were. Basically we all want it to be better. But we need a more unified narrative that puts everyone on the same page. We are all people – just with different views of the same thing. Winning arguments is pointless. Winning knowledge or an insight which can unify thinking is what I love to see emerge (fat hope!)

    The banks are a problem…whether it be due to malice, amorality, incompetence or the plain facts of life relating to the dynamics of borrowed money plus interest not being repayable for whatever reason (let’s not dwell on why the economy in recession for a moment).

    The borrowers are a problem… whether due to poor self management, greed, foolishness, the need to get on a property ladder the lack of Irish community experience with previous property collapses (a very significant factor by the way), embarrassment and unemployment and lack of unity for reasons of keeping a good face up.

    The above relates back to the “Power Struggle” that Eireannach aptly described and which I agreed will be won by the banks because of their more organised nature.

    Ireland has an antedeluvian style of government that simply does not know how to approach these problems – it is a divisive style of governance that keeps us all apart and maintains status quo. Machiavelli’s “A state without the means of some change, is without the means of its own conservation.” should be taken very seriously. And I stole this from reading Dan O’Brien in the IT today. It has a few interesting points.

    The plain people of Oirland need to rise up and clean out the cute hoors. But since we all admire them and would love to emulate them, I fear these pointless discussions will just go on and nothing will happen.

  28. Ryu Hayabusa

    This ‘government’ continue to fall about the ground laughing at their ongoing tactics to split and turn the citizens of this country against each other… but they won’t be laughing for very long! There is no doubt that they grasped the ‘crony capitalism’ mantle and took it to another level.
    As for the foreclosure faucet that is currently in drip drip mode… oh now move it on to a slow trickle at first, not enough to cause outright public uproar but a contained insurgency. A very delicate balancing act& i don’t think ol’ noonan is exactly a high wire officianado of any note.
    He’s coming down from said wire from a lofty height and i don’t imagine he bounces too well!!!

  29. Grey Fox

    Pat Flannery,
    There is a planned mortgage strike campaign underway, whether it will have effect or not remains to be seen, I support it wholeheartedly as a mechanism to bring the Bank’s and Government to the negotiating table in relation to distressed mortgage’s,

  30. Eireannach

    Grey Fox,

    Earlier on this thread, you claimed that I believe the spin about strategic defaulted.

    Now, you have posted a link to a FB page of a mortgage strike campaign, aimed at ‘bringing the banks to the negotiating table’.

    Is such a strike not the perfect dictionary definition of ‘strategic default’?

    • Eireannach

      Strategic defaulted.

      • Eireannach

        Strategic defaulters! Damn smartphone spellcheck

        • Grey Fox

          Strategic Defaulters, as you call them cannot partake in a Mortgage Strike for, if they are out there, they are withholding payment already, the purpose of a Mortgage Strike is not to avoid paying but rather to withhold paying in order to get engagement from the Banks on a fairer playing field. You have only to read todays Sunday Independent to see the views of the Banks towards people who are breaking their backs trying to pay the Banks, the problem in essence is, the Banks want it all and their way and that is not acceptable with their track record, the moral hazard occurs if we allow the Banks to have it their way and continue unpunished, which is what current and previous Government would have us do. Banks are merely service providers and they do not provide any service which would not be provided by a different entity should they fail due to their negligence and mismanagement, the service is no different than any other, if there is a market for the service, somebody will fill the void and if there is no need they won’t.
          Artificial support of failed business is wrong with the exception of some critical public services where cost is the issue in the public interest such as Dublin Bus, I expect that Dublin Bus would be supported in the interest of service provision but even that issue has been completely clouded by crony politics, mismanagement and downright corruption. Banks do not fit the template for support in the interest of public good, they are capable of making huge profits without intervention so they should stand of fall on their own merits.

  31. Dorothy Jones

    By B Lucey: We know little about them so stop being meme to those in mortgage arrears :

    • 5Fingers

      Strategic defaulters are ones who very well can and just won’t and as he rightly says, the whole NAMA thing was about facilitating same. Lucy is only muddying waters by pulling in those in genuine distress.

      I think there are a sizable number of BTLs that fall into this category. Only have listen to the large mess there exists where many BTLs are not paying maintenance fees to the detriment of many community schemes. There is even this attempt in some cases to cripple the management of these community schemes so that the place devalues so badly they can walk away and blame poor environment etc This is all a game for these guys.

      • Joe R

        I put up a comment against Lucey´s argument on his blog.

        He has refused so far to let it through!

      • Joe R

        I have some facts which I deem to be critical and one negative observation of your own extrapolations above, to offer to you Mr Lucey.

        I would be curious to hear a least a simple response to my comment below if you can afford the time.

        1st observation. The US does not have the social model that Europe has, in particular Ireland with its generous social welfare and rent supplements which underpin the´property rental sector. It also does not have NAMA or any such agency operating within its territory. Also it has large-scale foreclosures in the event of and no recourse mortgages. These are five critical factors which make it impossible to use a US model to extrapolate anything relating to property or mortgage defaults in Ireland. It is simply too different.

        My facts. Spain a European country with a strong social model, though not as generous as Ireland´s, and which has experienced a very similar property bust, many critical stats and ratios are very similar across the board for Spain and Ireland relating to property, mortgages vs wages, migration and the boom period in general. Spain is basically 10 times bigger than Ireland so any overall figures for the two are easy to compare. Overall losses in Spain in banks due to property related loans are hitting Irish levels heading for 29%.

        General and youth unemployment rates are way, way higher than Ireland. Basic social welfare is about half and is not indeterminate in nature.

        So by your logic above ( and your Russian mate and the demagogue McWilliams, too) the figure in Spain for mortgage default should be way higher than Ireland should it not? But….

        …..the mortgages in arrears figure is only 4% as opposed to the Irish 12%.

        ( link in Spanish follows – throw the headline into google to translate it if you like it comes out clear enough, `promotors´ are developers by the way)

        Spain has full recourse mortgages, if the property is in negative equity at the time of repossession. Other wise you can hand back the keys as per the US. It has plenty of repossessions something like and distressed property sales if arrears occur. Figures for repossessions in 2006-2012 are as follows in Spain; 2006 (16.097), 2007 (17.412), 2008 (20.549), 2009 (37.677), 2010 (54.250), 2011 (64.770), 2012 (75.375).

        ( Source here is a referecenced Wikipedia article, also in Spanish;

        In Ireland the rate is simply unfeasibly low. Particularly with such a massive delinquency rate.

        Extrapolation of my own from the above facts, 4% mortgage delinquency in Spain, strong recourse and non-recourse possibilities for defaulting mortgages, and repossessions figures that are far higher ; Strategic default in Ireland exists and is driven by a lack of deterrent and a lack of options.

      • Joe R

        Apparently refering to David McWilliams as a `demagogue´ ( in jest ) was too much for Lucey.

        That or the revelation of facts, which he said don´t exist but do actually, upset him.

        This the main problem I think. Facts. As he pointed out me by email it is his blog, so he has badgering rights. We wouldn´t want to contradict blessed Brian.

        He doesn´t understand the meaning or concept of `ad hominem´. Or spam. Or have a sense of humour. Judging by the same curt email to me about the above comment.


  32. Pat Flannery

    Clare Leonard & Grey Fox:

    Having read the documents you have provided it seems to me that the reason the sale (of bundled loans into the securities market) is not put on the bank’s balance sheet as a liability, may be because of a hidden buyback agreement.

    If I sell my car to you with a guarantee to buy it back whenever you ask me to, I really haven’t sold it to you at all. I have merely lent it to you.

    Therefore before I make up my mind on this Irish situation I would need to either see a typical Irish buy-back agreement or see positive proof that there never has been one. Only then would I go to the Central Bank and demand the reason why it allowed these full and final sales not to appear on the originating bank’s balance sheet.

    In the States as the principle of a mortgage originating firm, I personally had to sign many such buy-back agreements as I originated thousands of mortgage loans. But the buy-back agreement had to do with the discovery of origination fraud only, not with market value. In America a mortgage remains real estate, never a security. Its value is always that of the secured property. The fraud buy-back provision kept broker/originators like me honest. You bet it did.

    Except with Veteran’s Administration loans there is no automatic personal recourse in the U.S. A lender would have to go through a lengthy and expensive judicial foreclosure process in order to obtain a Deficiency Judgment against the borrower. Few lenders ever do.

    It seems that up until now at least, Irish judges have automatically given deficiency judgments to creditors and there is no non-judicial foreclosure process in Ireland.

    Perhaps the place to challenge all this pain therefore is at the judge’s bench. Is it equitable to automatically grant deficiency judgments in all cases against borrowers who were clearly at a contractual disadvantage at the time the mortgage contract was signed?

    This giant default and foreclosure issue is really now a judicial matter rather than an economic or business matter. It requires a “balancing of equities”, which is what civilized countries have judges for.

    • 5Fingers

      A few questions about this very interesting post

      Example of a borrower deficiency?
      How are borrowers clearly at a contractual disadvantage?

      • Pat Flannery

        Deficiency Judgment:

        Contractual disadvantage:

        when the contracting parties are judged unequal economically, intellectually or otherwise e.g. if a rich man married an employee and made her sign a pre-nuptial agreement it may be judged later to be invalid due to unequal capacity.

        It could be argue that the contracting parties in many Irish mortgages, particularly when, as often was the case, that the lender’s lawyer also represented the borrower, had unequal understandings of the monetary obligations involved.

        • 5Fingers

          This is again very informative and possibly very unifying. I would suggest people start to use this language to properly express the imbalance and inequality that exists in non emotive manner.

          If the bias is towards borrower deficiency AND we have inequality in contract then you have laid out the problem in a way that is independent of whatever else the banks were up to.

          Keep it up. Brilliant (and thanks to Clare too)

    • Clare Leonard

      You may find this link of interest,

      Appropriate accounting treatment for securitizations.
      A bit late to try to bolt the stable door when the horse has bolted.
      From January 2005 listed companies in all EU countries are required to present group financial statements in accordance with International Financial Reporting Standards, HOWEVER!!!!
      it only applies to consolidated accounts, many SPV’s
      that have listed debt are single companies that are not required to prepare consolidated accounts.
      All smoke and mirrors.

    • Grey Fox

      The Irish Central Bank, has minimal input to these MBS transactions, they do not even view the Prospectus offered as all these transactions take place within the Irish Stock Market on the Global Exchange Market (GEM)
      “The Global Exchange Market (GEM) is an exchange-regulated market operated under the supervision of the Irish Stock Exchange.
      Currently over 200 High Yield deals listed from the EU and Latin America including Plain Vanilla, Upstream Guarantee Structures, LBO, M & A and Balance Sheet Restructuring issues.
      GEM does not fall within the scope of an EU regulated market under MiFID, therefore requirements of the Prospectus and Transparency Directives do not apply. GEM is aimed at investors who are particularly knowledgeable in investment matters. Regulatory requirements are therefore less onerous than EU Regulated Market requirements.”

  33. Pat Flannery

    P.S. This has to be the most awkward site I have ever posted on. DMcW?

  34. 5Fingers

    “Historically, the most terrible things – war, genocide, and slavery – have resulted not from disobedience, but from obedience.”
    ? Howard Zinn

    • joe hack

      Great to see that you have realized that the fence you sit on is starting break? It only takes one to be disobedient when the autocrats overload the fence of obedience.

      • 5Fingers

        It’s all about getting the right narrative or ammunition. So far the victim arguments tend to be weak and need strengthening. If disobedience is needed let’s make sure it had best chance of success

  35. Paul Divers

    The converse is also true

    Disobedience can lead to better laws eventually

  36. Pat Flannery

    Hi Clare,

    Thanks for the link. You really are a great researcher. I very much appreciate it.

    It appears from a quick reading of IAS 39 (Revised) that all the de-recognizing tests apply at both consolidated and entity level (I assume they are referring to the consolidation of the SPV) and that if the entity retained substantially all the risks and rewards it must continue to recognize the asset i.e. it cannot offset it on its balance sheet with a “liability” entry.

    The facts as we know them then would point to a hedging/risk management agreement between the originator and the investor (with the originator retaining substantially all the risks and rewards) in all the securities that the ICB allowed to remain on balance sheet.

    The only way I can think of how that would square with the FT article you linked me to:

    “In a statement to the stock exchange on Friday BoI said it had met its capital target for 2011 by buying back approximately €1.1bn of residential backed mortgage securities issued by Kildare Securities Limited and Brunel Residential Mortgage Securitisation No 1.

    The bank paid between 33 per cent and 92 per cent of the notes’ face value, which enabled it to raise €350m in core tier one capital.”

    is if the €1.1bn referred to consisted of a de-recognized tranche. It is not clear whether the €1.1bn is the re-purchase price or the original face value, presumably the former. If so the face value would be €1.450bn i.e. the re-purchase price plus the transaction profit of €350m . The nearest corresponding tranche on the Prospectus is Class A3 at €1,062,000,000

    We have a lot of work to do to get to the bottom of all this and I am retired :)

    • Joe R

      Look this securitization related love-in going on here has nothing got to do with arrears, or the social reality of this disaster in Ireland.

      It is yet more accounting games. There is lots of stuff like this that the banks engage in. Elaborating on is just distraction from the important stuff in Ireland on the ground.

      • Grey Fox

        Look this securitization related love-in going on here has “EVERYTHING” got to do with arrears.
        The arrears are being pursued by the Bank and people are being dragged before the Courts by the Banks, who have no standing in the matter! they have been paid!
        Let the injured party show themselves!
        The Bank is not the injured party!
        Furthermore they are misleading the Courts and defrauding the homeowners, there are serious issues to be answered by the Banks regarding unjust enrichment, Joe you may be willing to ignore these issues in your quest to repair the economy but you are rebuilding on yet another foundation of sand!

        • Joe R

          Grey Fox,

          You are getting worked up about nothing.

          Quote from Ronan Lyons from 2011;

          “During 2010 in the UK, there were 36,300 repossessions, according to the Council of Mortgage Lenders. If the same rate of repossessions had applied in Ireland over the last 12 months, we would have seen 2,300 repossessions – i.e. about fifteen times the rate of Court-ordered repossessions that we have seen in the last 12 months.´´

          The situation has not largely changed.

          And secuiritization, distasteful or not cannot be dragged into mortgage contract resolution.

          • Grey Fox

            Securitisation is at the centre of the Mortgage Contract, along with defective paperwork, the Banks are relying on the contracts and Charges they created and this paperwork is far game, they simply cannot strut into the Courts day after day and expect to be given judgements based on lies or defective/nonexistent paperwork, that my friend is the Law, whats good for the goose…… all concerned are very quiet when it comes to explaining the conditions which where imposed on borrowers ( without their knowledge or informed consent) the Law Society knows its members have failed miserably in their duty of care to borrowers, they simply complied with the Banks instructions in the name of repeat business, acting for both sides is an absolute no no in all other western jurisdictions yet it is perfectly acceptable here, how can impartial advice be imparted in such conditions…how?
            The fact is the Banks, Legal Profession and Government have created a monumental fuckup which they now want to land on the shoulders of the people at the bottom of the ladder with the backing of the Courts, we lucky that we have Judges who will act if given the tools/law to do so, no sense in looking for a moral compass in the Four Courts it doesn’t live there but fairness & equity does when the case is presented properly…thank god.

          • Joe R

            No. It was never central to anything.

            It is not even part of the contract.

            Securitization did not build residential units in Ireland at a rate of 70-90,000 per year from 2003 – 2007 when the requirement was 40,000 at most.

            It not sell the units, it not hype up the situation to the Irish public, it did not provide the incentive for ordinary people to speculate en mass.

      • 5Fingers

        There is an argument here that needs fleshing out. If there is impropriety here by banks it makes sense to look for a discount in line with the real debt owed particularly as loans are all recourse based. This is all about getting a fair deal rather than a bland write-off.

        • Grey Fox

          5Fingers, what we have are a mixture to people,
          we have people in trouble with mortgages who are trying desparately to pay what they can, who are being told by Bank that’s not good enough.
          we have people who know for a fact that the bank sold their loan but yet are hauling them through the Courts on behalf of some unknown entity who allegedly now owns the loan.
          we have people who the Banks have sold and repurchased their loan, sold at a premium over the principle outstanding and bought back at a discount yet they still pursue the borrower for full repayment.
          we have Judges who are making decisions in Courts to repossess homes who haven’t got the first idea about Banking and Securitisation etc…
          we have Government who simply do not want to know.
          we have media who distribute news that suits their advertising base.
          and yes there is a degree of strategic default, it cannot be quantified, anybody who says it can is lying, it requires 100% honesty from borrowers who haven’t even been canvassed yet, the level of SD’s is being overstated because it suits the Banks/Gov/Media to do so and they know there statements cannot be positively disputed for the same reasons they CANNOT BE PROVEN.
          History will be very unkind to all concerned for sitting by and allowing the injustices perpetrated by the Banks and supported by Government to have taken place, unfortunately this will be of no benefit to the tens of thousands of households, men women and children who are sitting in states of terrifying fear tonight, it is of no benefit to the broken families or the families that are without a father or mother due to suicide. No price can be put on a human life, although it appears to happen every day and let us not forget, INSATIABLE GREED IS AT THE ROOT OF THIS ISSUE.

        • Joe R

          5 Fingers,

          BOI I think have engaged in restructuring/write-offs of loans so unless you can track the two and make a fair assessment of what their total operation has got up to ( and that would be hard ) this is all really just one sided finger-pointing. Perhaps they have passed on the gains?

          Plus what is the problem of the other party booking a loss on all of this? They were in it to gain. The loss here fell outside Ireland.

  37. Ryu Hayabusa

    Hi there,

    Within this podcast Bill Black and the speaker discuss amongst other things the anglo tapes, mouths agog…

    Plus the snippet circa 18.00 mins about HSBC and their valued customers, mexican drug cartels tailoring exact box dimensions to fit the teller’s window while making their ‘lodgements’ to speed up the process!
    Ah sure no time to wait in line… poor fellas. :O
    It’d be priceless if it wasn’t so serious.

    The tide is going out on the global banking system and the majority of participants seem to be ‘sans shorts’

    Utterances and pithy soundbites about restoring Ireland’s reputation from this diabolical administration and then acting to the complete contrary is beyond ludicrous!

    Bill Black: The Banks have Blood on their Hands

  38. redriversix

    To Clarify

    Their are no research ,facts or any evidence to substantiate the term or actions of alleged “Strategic Defaulters”

    Media repeated this term which has been used by banks to turn people against each other.

    and its working very well as is evident by all the posts above me.

    Well done Financial Sector,Clearing House and Department of Finance.

    Barry Callaghan

    • Eireannach

      So the sun shines out the Ares of people who over borrowed and pushed up the price of houses with their property rat-race.


    • Joe R

      There are loads of facts for Ireland available and they clearly point to strategic default.

      CSO / census is one unbiased. Do any maths for the boom period and it nbecomes clear. Houses prices outstripped wage increases hugely year on year this is speculation.
      Up to 2/3 thirds of all mortgages from 2003-2007 were speculative/investment.

      Spain had a similar boom and has the same overall rate as Ireland for property related loans going bad close to 30%, BUT just a 4% arrears rate on residential mortgages. Unemployment rates are far higher there. Go figure!

      But they have larger scale repossessions.

  39. redriversix

    Be Advised

    “To the posters who don’t want to bail out their Neighbour”

    You are already bailing out Failed Banks,Insurance Companies and our Government.

    Whether you wish to acknowledge this fact is irrelevant.

    Trying to practice Humility,Compassion & understanding is a difficult task and one which should be practised every day.


    • joe hack

      “Trying to practice Humility,Compassion & understanding is a difficult task and one which should be practised every day.”


      I agree and I also with Clare Leonard below:

      “The problem is not whether the borrower has a 4 X 4 in their front garden.
      Grow up and deal with the sick reality of the unethical and immoral banking.”
      Clare Leonard

      No one I know asked that the banks be bailed, the two different issues above are related, you not been logical.

      A family in trouble with “home” mortgaged is not the same a speculative investor who bought to rent. There is little deference between the small and the big investor the only difference is the size the wallet or the size of risk, they both gambled with other peoples hard work and futures.

      You appear to be suggesting that because we were forced to bail out the banks we should bail out all, instead of putting a stop to the bailout mentality and rescinding the bank bailouts.

      The moral hazard started when the banks were bailed the hole the bucket must fixed dear Barry otherwise a blood red-river will run through it.

      • redriversix

        I am only interested in people who are in difficulty with personal mortgages and loans.

        People with “Buy to let” mortgages or investments..if not performing should let them go and move on..shit happens.

        Nobody is supporting people who are deliberately and intentionally trying to abdicate their responsibilities.

        Strategic defaulters will be found out very quickly in the Courts system or even before that.

        I still maintain they are in the minority and do not have the “impairment effect” on Banks loan books as they and media would have you believe.

        I,grey fox & Claire Leonard would see and have lengthy experience at this stage with dealing with Banks and the Court System on a regular basis.

        The facts on the ground are far different from what you think actually happens.

        Their is a huge amount of injustice done to people who have and are still trying to deal with Banks and or the Court System.

        Judges are not as dismissive towards us or people like us as they used to be,however,we are not winning much..except time..its not much but its a start.

        Time has become a very valuable commodity in which for people to try and get information and assistance in their circumstances.

        There is not much point in going in to further detail here as , at the end of the day, this is just a blog.

        We have seen business closed down or put in to receivership wrongly so I will be sympathetic to those people,these are people who are working every day to try and rescue their business,the jobs they created,their own families.

        Banks are still acting fraudulently

        Banks are probably more powerful now than any other time.

        Government and the Department of finance have the Banks at the top of their priority list , not the citizens of this Country.

        I have never come across anyone like Grey fox who works hard for people ,for no reward,just because he wants to help.

        Grey knows whats going on on a daily basis,he is in the Courts ,pounding the books,talking to people and getting some satisfaction for people in real difficulties..I would “listen” to him.

        A lot of opinion and theory on this site…

        Me,Claire and Grey Fox amongst others are dealing with the reality of this Financial war on a daily basis.

        We find out factual real evidence every week of the kind of cover ups that have and continue to happen.

        We have tried numerous times to have our info & facts brought to light,either politically or through the media..but guess what ?

        NOBODY CARES !

        regretfully, not even DMCW.!

        So we will keep doing what were doing,one day at a time..and see what happens.

        This crisis is not going is the new democracy.

        and I believe its wrong.

        So try and practice humility compassion and understanding,even in your personal life…..because life is what happens when your making plans…..


    • Eireannach

      The people who overstretched themselves, and put their parents, children and especially grand children in such a difficult position of indebtedness should apologize to the rest of us, Barry.

      At least the banks say ‘sorry’ even if it’s only empty PR rhetoric.

      You, on the other hand, want the arrest of us, even small children, to have sympathy for people who propelled the boom.

      You have it back to front Barry. You’re feeling sympathy for the people who created the problem, without an apology from them first for creating the problem.

      • 5Fingers

        Supposing the bank knew it was all overblown and were shorting the whole thing in the background to reduce exposure. You could say the banks themselves were strategically defaulting well ahead in a planned manner.

        And let’s look at the inequality surrounding the contract. Did people really know what they were walking into. Yes, people were stupid. But in a psychologically leveraged setup where parents (say) were rushed (bullied) into commitments, I think it is not that clear cut on where responsibility lies.

        it looks like the banks knew the securities were worth far less and yet cut the documents to say otherwise. That’s a very odd way of trading.

        • redriversix

          AIB “strategically defaulted” a couple of weeks ago..

          “Gave” the State worthless shares in lieu of a 3.5 billion euro loan due back to the Irish Government.

          AIB has been bailed out 4 times since its inception

          But..hey ! who cares……..?

  40. joe hack

    Old Woman of the Road

    O, to have a little house!
    To own the hearth and stool and all!
    The heaped up sods against the fire,
    The pile of turf against the wall!
    To have a clock with weights and chains
    And pendulum swinging up and down!
    A dresser filled with shining delph,
    Speckled and white and blue and brown! ……

    By Padraic Colum

    O, to have YOUR little house… The mission statement of every bank investor

    • Robert Louis Stevenson

      “My House, I Say….”

      My house, I say. But hark to the sunny doves
      That make my roof the arena of their loves,
      That gyre about the gable all day long
      And fill the chimneys with their murmurous song:
      Our house, they say; and mine, the cat declares
      And spreads his golden fleece upon the chairs;
      And mine the dog, and rises stiff with wrath
      If any alien foot profance the path.
      So, too, the buck that trimmed my terraces,
      Our whilom gardener, called the garden his;
      Who now, deposed, surveys my plain abode
      And his late kingdom, only from the road.

  41. Grey Fox

    Joe R,
    I take your point on securitisation but the fact is, Securitization facilitated the building of residential units in Ireland at a rate of 70-90,000 per year from 2003 – 2007, they loaned the money, sold the loans, loaned the money, sold the loans…again and again, in doing so they took responsible lending out of the equation and got drunk on their own success, killed the goose and the Irish economy in the process and these are the people/companies who put themselves out there as the consummate financial professional, as pillar banks, they had a duty of care to Irish society and the economy to act responsibly, it is what it is, a ponzi scheme which was subscribed to by all the consummate professionals, public, financial, legal etc… and now they want the last rung on the ladder to pay the price, that would be ok if they had honestly described the scheme as a ponzi from the outset and all who partook were aware of what they were getting into, that is not the case, they gambled with peoples lives, family security and futures and they have lost, now they want somebody else to pay for it, anybody who is willing to pay for their home at what ever level is affordable should be allowed to do so and protected from the Banks regardless of how long it takes, that is just punishment for the banks and they still get paid, in fact, interest should be deleted and principle only should be paid back maybe then the Banks might think twice in the future and act accordingly if they want to be held out as the professionals they would have us believe they are, cause and effect, crime and punishment.

    • Joe R

      No, they didn´t they are two sets of loans that you are talking about.

      Loans for financing property deals and mortgages.

      You are mixing everything up just to support your point.

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