Year of the great smash and grab raid — by the banks…

IF THERE is one thing you can bank on, it is that 2010 will go down as the year of the great bank robbery.

Usually the raiders take money from the bank. But in the case of this bank job, the ones who have had their cash torn away from them in an audacious smash and grab raid are consumers.

Banking was once a byword for trust, but today’s Irish bankers are a sorry lot. They now have their hands out, begging for a bail-out.

Unfortunately, we have no choice other than to stump up and fund their losses from lunatic loans that were advanced with abandon to developers and others during the boom.

We are set to learn today exactly how many billions of euro will be required to be pumped into the banks in order to bring them back to health.

But it is almost certain that the State will end up as the majority owner of AIB and Irish Nationwide, along with significant stakes in Bank of Ireland and EBS Building Society.

And these banks and building societies will return the compliment by hitting consumers with higher mortgage, credit-card and loan rates, along with a string of other hikes in banking charges.

AIB chose to get its bad news on mortgages out of the way yesterday in the hope that by today the news agenda will have moved on to the size of this latest bail-out.

It is hard not to be cynical about AIB’s decision to hit existing mortgage holders with interest rises just hours ahead of the expected announcement of the nationalisation of the bank and its latest recapitalisation.

Existing customers will have to pay 0.5pc more for their mortgages, a move that will add €65 a month to repayments on a €250,000 mortgage.

AIB is also hiking its fixed rates from the start of business today. The bank had the lowest fixed- and variable-rate mortgages before the rises.

The bank has also told the European Commission that it will hike its mortgage rates again until they have gone up by a total of 1.5pc by the end of this year.

Yesterday’s rises will hit AIB customers who have standard variable-rate mortgages.

A homeowner who borrowed more than 80pc of value of their home will see their interest rate rise from 2.65pc to 2.99pc, an increase of €80 a month or almost €1,000 a year in repayments on a €300,000 mortgage

The bank’s best-value standard variable rate has gone up from 2.25pc to 2.75pc, which will increase monthly repayments by €25 on every €100,000 borrowed.

AIB’s fixed rates, which were the most competitive in the market, are all rising. Its three-year rate goes from 3.19pc to 3.65pc, with effect from today.

THE changes will have no impact on those who have tracker mortgages or existing fixed-rate deals. But few, if any, customers of banks and building societies will escape some form of financial punishment.

Bank of Ireland has already announced rises in interest rates on credit cards, personal loans, overdrafts and student loans. AIB has said it is increasing its credit-card rates.

Expect all the others to follow suit with higher charges, interest rates and other charges as banks and building societies desperately scramble to get back to profitability.

And do not expect the Department of Finance to stand in the way of this bank charges hike frenzy.

Either the State continues to drip-feed the banks with more taxpayers’ money to repair their blown-out balance sheets or the banks help themselves by pushing up interest and charges.

The situation is so bad that both of these unpalatable options have to be taken, as the Department of Finance sees it.

So get set for Bank of Ireland, EBS and Irish Nationwide to follow Permanent TSB and AIB by hiking their standard-variable mortgages and their fixed rates.

Both these types of home loans are likely to rise by at least 1pc before the end of the year.

Credit-card rates and the fees for the likes of a late payment will also continue to go up.

There will be fewer banks and building societies operating in this market.

From a situation where a typical Irish town had up to 11 banks, it now seems that more than half of these will be gone by the end of the year.

AIB, Bank of Ireland, Ulster Bank and the ‘Third Force’ of EBS, Irish Nationwide and Permanent TSB will now be the most likely banks left competing in the average town.

And savers, who are enjoying higher interest rates at the moment, are likely to see what they are earning on their nest eggs falling back.

All consumers can do is make sure they are getting the very best deposit rate they can at the moment, lock in to a decent fixed rate on their mortgage — if their lender still offers one — and keep on side with their credit union.

Because the bad news for consumers is that it will get worse before it gets better.

Report by Charlie Weston – Irish Independent.

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Year of the great smash and grab raid — by the banks…

IF THERE is one thing you can bank on, it is that 2010 will go down as the year of the great bank robbery.

Usually the raiders take money from the bank. But in the case of this bank job, the ones who have had their cash torn away from them in an audacious smash and grab raid are consumers.

Banking was once a byword for trust, but today’s Irish bankers are a sorry lot. They now have their hands out, begging for a bail-out.

Unfortunately, we have no choice other than to stump up and fund their losses from lunatic loans that were advanced with abandon to developers and others during the boom.

We are set to learn today exactly how many billions of euro will be required to be pumped into the banks in order to bring them back to health.

But it is almost certain that the State will end up as the majority owner of AIB and Irish Nationwide, along with significant stakes in Bank of Ireland and EBS Building Society.

And these banks and building societies will return the compliment by hitting consumers with higher mortgage, credit-card and loan rates, along with a string of other hikes in banking charges.

AIB chose to get its bad news on mortgages out of the way yesterday in the hope that by today the news agenda will have moved on to the size of this latest bail-out.

It is hard not to be cynical about AIB’s decision to hit existing mortgage holders with interest rises just hours ahead of the expected announcement of the nationalisation of the bank and its latest recapitalisation.

Existing customers will have to pay 0.5pc more for their mortgages, a move that will add €65 a month to repayments on a €250,000 mortgage.

AIB is also hiking its fixed rates from the start of business today. The bank had the lowest fixed- and variable-rate mortgages before the rises.

The bank has also told the European Commission that it will hike its mortgage rates again until they have gone up by a total of 1.5pc by the end of this year.

Yesterday’s rises will hit AIB customers who have standard variable-rate mortgages.

A homeowner who borrowed more than 80pc of value of their home will see their interest rate rise from 2.65pc to 2.99pc, an increase of €80 a month or almost €1,000 a year in repayments on a €300,000 mortgage

The bank’s best-value standard variable rate has gone up from 2.25pc to 2.75pc, which will increase monthly repayments by €25 on every €100,000 borrowed.

AIB’s fixed rates, which were the most competitive in the market, are all rising. Its three-year rate goes from 3.19pc to 3.65pc, with effect from today.

THE changes will have no impact on those who have tracker mortgages or existing fixed-rate deals. But few, if any, customers of banks and building societies will escape some form of financial punishment.

Bank of Ireland has already announced rises in interest rates on credit cards, personal loans, overdrafts and student loans. AIB has said it is increasing its credit-card rates.

Expect all the others to follow suit with higher charges, interest rates and other charges as banks and building societies desperately scramble to get back to profitability.

And do not expect the Department of Finance to stand in the way of this bank charges hike frenzy.

Either the State continues to drip-feed the banks with more taxpayers’ money to repair their blown-out balance sheets or the banks help themselves by pushing up interest and charges.

The situation is so bad that both of these unpalatable options have to be taken, as the Department of Finance sees it.

So get set for Bank of Ireland, EBS and Irish Nationwide to follow Permanent TSB and AIB by hiking their standard-variable mortgages and their fixed rates.

Both these types of home loans are likely to rise by at least 1pc before the end of the year.

Credit-card rates and the fees for the likes of a late payment will also continue to go up.

There will be fewer banks and building societies operating in this market.

From a situation where a typical Irish town had up to 11 banks, it now seems that more than half of these will be gone by the end of the year.

AIB, Bank of Ireland, Ulster Bank and the ‘Third Force’ of EBS, Irish Nationwide and Permanent TSB will now be the most likely banks left competing in the average town.

And savers, who are enjoying higher interest rates at the moment, are likely to see what they are earning on their nest eggs falling back.

All consumers can do is make sure they are getting the very best deposit rate they can at the moment, lock in to a decent fixed rate on their mortgage — if their lender still offers one — and keep on side with their credit union.

Because the bad news for consumers is that it will get worse before it gets better.

Report by Charlie Weston – Irish Independent.

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Our economy has ‘fallen off a cliff’…

Ireland’s economy has “fallen off a cliff” and is in the grip of the worst recession in its history as new figures reveal it has shrunk by almost 25 per cent from its peak.

A loss of nearly one-quarter of the country’s domestic trade in such a short period of time is seen as a catastrophe.

The domestic economy, the day-to-day business of trading, has been decimated and business leaders have called on Finance Minister Brian Lenihan to follow the lead of the British, who put small businesses at the heart of their economic recovery plan.

According to the new figures, since the peak of Ireland’s economic wealth creation in the first quarter of 2007, Ireland’s economy has reduced by a frightening 24.27 per cent, far higher than previously thought.

While the main political agenda was last week dominated by Taoiseach Brian Cowen’s reshuffle, focus will next week return to the state of the country’s finances, with Mr Lenihan to announce in the Dail the future of Nama.

Also, as a result of a collapse of all tax revenues since the peak of late 2006 and early 2007, the Irish exchequer has also reached another worrying milestone. The State has posted 25 consecutive monthly exchequer deficits since January 2008.

Since then, Ireland’s national debt has doubled to €75bn, and is set to double again to €150bn by 2014. The first quarterly figures for 2010 are to be released next Friday and so far the exchequer is showing a deficit of €2.4bn for this year.

Mr Lenihan’s Budget Day comments that the worst is over were based on a reported minor return to growth, driven by multinational profits, but this was an error and in fact the pace of decline actually increased toward the end of last year.

Yesterday Mr Lenihan, through his spokesman, said that he stands over his comments because he said GDP is a far better indicator in terms of economic activity and jobs. GDP has been running higher than expected since Budget Day, he said. In total, the domestic economy fell by 11.3 per cent during 2009, the largest-single decrease in wealth ever recorded.

Labour’s finance spokeswoman Joan Burton said that Ireland “has fallen off a cliff” and that behind these stark figures is a world of pain for regular Irish families.

“Records are being set for all the wrong reasons as the Government’s scorched-earth Budget and banking policies continue to take their toll on our fragile economy,” she said.

Mark Fielding of the Irish Small and Medium Enterprises Association said the majority of the pain is being felt by small businesses, which have been abandoned by the State.

“There is no economic leadership coming from the Government at all. Look at Alistair Darling doing a huge amount for small businesses, telling Lloyds to give half their money to small companies.

“We need that here but our members are frightened by the uncertainty coming from Government. We need a radical new approach,” he said.

To illustrate the true devastation of the recession on the private sector, 127 companies a week, or 12,049 in total, have been forced to close since Mr Cowen became Taoiseach.

Shocking new figures from the Revenue Commissioners also reveal that since 2008, 40,758 individuals have officially ceased trading.

If 127 companies have closed for each of the 97 weeks Mr Cowen has been Taoiseach, it works out as 18 a day.

Fine Gael’s finance spokesman Richard Bruton said Ireland is in the grip of its worst-ever recession. “What we are going through is worse than what happened in the 1950s or the 1930s.

“This country needs a new focus and the ‘batten down the hatches’ tactics of this Government clearly are not working. These figures are simply disastrous.”

Labour’s Ms Burton added: “The economy may technically return to modest growth this year, but real recovery won’t come until we get the country back to work. Any growth this year is likely to be modest and jobless.”

DANIEL McCONNELL – Sunday Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

A perfect opportunity coupled by supporting strong assets.

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Ireland needs a new publicly owned bank modelled on a lender that helped rebuild Germany after the Second World War, it was claimed today.

Labour leader Eamon Gilmore said a state bank was necessary to inject much-needed cash into struggling smaller firms and business start-ups.

A Strategic Investment Bank – based on Germany’s KfW bank, which was set up under the post-war Marshall Plan to rebuild a devastated Europe – would also raise money for public projects, he claimed.

“Businesses need money to start up and keep going,” he said.

“At the moment and certainly for the foreseeable future there does not appear to be any prospect that the existing banking system is going to provide that finance.”

Mr Gilmore said the proposed bank would be set up with €2bn taken from the national pension fund, with another €18bn raised from international money markets.

Under the Labour plan, it would have a small number of branches and, while state-owned, would be run independently of Government.

As well as supporting smaller businesses, it would provide funding for major public projects such as broadband, transport and renewable energy.

“It is absolutely necessary – we have gridlock in the Irish economy,” insisted Mr Gilmore.

“On the one hand the Government is paring back on expenditure and on the public capital programme and on the other hand the private banking system is simply not lending to businesses.”

Labour deputy leader Joan Burton said Ireland was suffering from “complete market failure”.

Unless jobs are created through new investment, tens of thousands of young people will be devastated by the “utterly corrosive effects” of long-term unemployment, she added.

Press Association – Irish Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

House prices ‘set for further 10pc fall’ says leading economist…

House prices will fall by another 10pc before the market hits rock bottom next year, a leading economist predicted today.

Jim Power, chief economist of Friends First, believes while the recession is likely to end around the middle of this year, consumer confidence and spending will continue to be undermined by wage cuts, an uncertain labour market and further reductions in state spending.

The finance house revealed six out of 10 consumers are not confident in the Government’s ability to revive the economy, with a third backing a Fine Gael/Labour coalition to do the job.

Mr Power said it was difficult to be convinced the economic situation will improve considerably in the near future.

“The Irish economy is going through an extremely difficult adjustment and the situation remains precarious. It is way too early to sound the all clear,” he warned.

“A fundamental reform of taxation and spending is required.

“The most economically efficient tax system is one based on relatively low marginal rates but spread broadly – the notion that the problem can be solved by increasing taxes on the so-called ‘better off’ is naïve and would go nowhere towards solving the problem.”

In its quarterly economic outlook, Friends First examined the views of 1,000 Irish people on the current and future economic situation.

It found 86pc of those surveyed believe creating jobs is the biggest challenge facing the Government, followed closely by reducing Government borrowing (51pc) and enabling the banks to lend again (45pc).

The research also showed confidence in the Government remains low with with a third believing the economy will not return to growth until after 2012.

Some six out of 10 are not confident in the ability of Irish banks and NAMA to stimulate the economy.

Mr Power said he found it difficult to see where meaningful job creation might come from and predicted further job losses in construction, retail, hotel and restaurant, financial services and the public sector.

House prices, which he said had plunged by at least 50pc since a 2007 high, will drop another 10pc before bottoming out in 2011.

Mr Power also said it was critical that the cost of doing business and the cost of living in Ireland be further reduced to reap the benefits of a global economic recovery.

“This is the major challenge for Irish policy makers – to ensure that as the external environment improves the Irish economy is in a position to exploit it,” he added.

Press Association – Irish Independent.

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Single family home inventory falls as the market shifts into several developing trends.

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A Short Sale From The Loss Mitigators and Banks Perspective

In this series we will focus on the short sale, but more from the banks and loss mitigators perspective.  Many of the insights and perspectives are from a former loss mitigator. 

A short sale is when a property owner is selling a property and has debt  of more then the property is worth and the owner is unable to sell the property for at least the amount to satisfy the debt.

The bank, or mortgagor in cooperation with the note holder may allow the owner of the property to sell the home for less then the outstanding obligation, but the obligation may or may not be forgiven.

The intent of the bank is to recoup as much of the money as possible and that may include a short sale or a foreclosure or they many ask the seller to sign a note to pay back the difference or part of the difference between the value of the note and the amount settled upon through the short sale.

You must realize that the bank has sold off the loan or originated it using other entities money and just as the home buyer has an obligation to pay back the debt, so does the bank to the investor. 

As a home owner you don’t see the entire loss because it is not your money, but the bank does realize the actual loss, unless there is insurance involved.

The gist of it is that you have an obligation to pay back the debt just as much as the bank has an obligation to pay back the debt to  the investor.  We get into some moral an ethical dilemmas here and I don’t want to get into it in this post, but in Arizona borrowers, for the most part, have non-recourse loans and as borrowers we pay more for that privilege.  What it basically means is that we pay a higher rate and often pay mortgage insurance because the banks only recourse is the property, that is unless you refinanced or got an equity line of credit. 

Even if you don’t pay the debt the bank is responsible for the debt to the investor so when the property owner defaults it puts the obligation upon the bank.  So what happens when the homeowner defaults?

The bank cannot meet the obligation of the debt to the investor.  The bank has a contractual obligation to the investor and will have to pay the debt from other funds or assets.  The bank may elect to purchase default insurance on the loan, this is insurance on the back end which many of you don’t know about, but it influenced the bank how they will take back the debt, via short sale or foreclosure. 

The bank may also request that the borrower pay back the funds even after the sale though a separate note: and there are many instances where people agree to this.

Come back for further installments in the series.  The next one is, ‘How the homeowners is impacted upon default’ followed  by ‘the role of loss mitigation’ then other posts.

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29 property suicides leave State unmoved…

Families torn apart by cash crisis

Twenty-nine deaths by suicide can be directly linked to the turmoil in the construction and property sector but dozens more deaths among small investors, homeowners and construction industry workers linked to financial despair have gone unreported.

David Mellon, of the Irish Property Council believes the human misery inflicted by the collapse in the property and construction industry is incalculable and the Government is doing nothing to protect the sanctity of the family home.

He predicted that by the time the economy recovers, hundreds will have taken their own lives because they have been plunged into a financial abyss from which they can see no way out.

“We are talking about people who invested in property, people who earned their livelihood from it in many forms; builders, plasterers, plumbers, developers and large and small investors.

“They are now facing financial disaster, bankruptcy and destitution.there are teachers, gardai, lawyers all caught in the crossfire. They are in a suffocating despair.”

He says that the seven-person board of the Irish Property Council had personal knowledge and the names of 29 suicide victims that can be directly attributed to turmoil in the property and construction sector.

“I was talking to one family who lost a husband and a brother and they have been simply torn apart. It’s hard for people to talk about, to go public about what has happened. They want to protect their children and some are simply too shocked. They haven’t come to terms with it.”

He has personal experience of the human cost of the disintegration of the construction industry. He lost a friend to suicide a year ago while another had to be talked out of taking his own life.

“There are other cases too. I was having a pint with a friend of mine and he got a text from an employee. My friend was in shock and he showed me the message. It read: ‘I cannot come into work tonight. My brother killed himself today. He had no work for his trucks.’ This man wasn’t an investor. He wasn’t a speculator. He wasn’t anything other than a man trying to make a living,” said Mr Mellon.

Property developer and suicide campaigner Noel Smyth has revealed that a 24-hour helpline set up by suicide charities three months ago is now receiving between 2,500 and 3,000 calls a month — many of them from people being ruthlessly pursued for money.

“They would be classified as high-risk calls, in other words someone who already has a suicide ideation or they may have actually planned a suicide,” Mr Smyth told the Sunday Independent.

“Definitely the age profile of people with suicidal thoughts is changing and that is a reflection of financial worries. Many are in difficulties with property, with bank loans, with the Revenue.”

Meanwhile, a financial tsunami is heading toward thousands of first-time buyers and investors who took out “interest-only” loans at the height of the property boom.

Thousands of these loans will now revert to capital repayment loans and are on properties already deep in negative equity.

Around 14 per cent of the 158,098 mortgages approved in 2007 were for interest-only products. Many lenders offered “interest-only” holidays of two or three years.

Similarly 15 per cent of the 110,300 loans approved in 2008 were also interest only.

It means tens of thousands of people, particularly first-time buyers, will have severe difficulties meeting repayments when the interest-only period comes to an end before the end of the year.

Respond, the housing agency, told the Sunday Independent they have received calls from many distressed homeowners whose mental health is being affected.

Aoife Walsh of Respond said: “There is a crisis out there which is taking a human toll. The Irish Banking Federation have renegotiated the mortgages of 30,000 householders. We are very fearful for a lot of people out there.

“I have been receiving from [calls] people in difficulty who are at the end of their tether fearing their home will be repossessed. They are displaying worrying depressive tendencies. Their mental health is being put under pressure and there are immense pressures on families.

“It is having an impact on marriages which is not being taken into account. The social implications are enormous. The screw is being turned on marriages and the family unit and that is going to have far reaching consequences for Irish society for years to come,” Ms Walsh said.

Developer Noel Smyth said he has been shocked at the huge number of calls received by a free 24-hour helpline (1800 247100) set up by his organisation Turning the Tide of Suicide in conjunction with the suicide charity Console.

“Unfortunately the people who are putting them under pressure, whether it is the banks or whatever, have no understanding, no training. When they come across an uptight client they treat them as a normal tough guy or woman — and as a result of all that, they are unaware that they are potentially driving someone over the top,” he advised.

“People caught up in this are nearly afraid to be seen complaining or to actually voice that they are in a lot of trouble.

“They fear that they are going to be told that ‘It’s your own fault. you were greedy, you were grabby’ and that means there is no support for people out there.

“This Government is treating suicide like they treat the poor. Their view is that ‘the problem will always be there so therefore we can ignore it,’” Mr Smyth added.

Report by JEROME REILLY – Sunday Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Decent homes in great neighbohrood and a good return.

There is a reason we pick certain areas of the west valley as strong markets for investment properties.  They contain many of the characteristics investors should and do look for, namely:

1.  Strong rental pool:  well pricked and prepared properties lease in under one month.

2.  Low cost beautiful housing:  you get great value.

3.  Developing local economy:  not everyone has to drive far to get to work.

4.  Vibrant city activity:  smart government that’s working toward a solid economic future.

5.  Growth prospects for the near and long future.

6.  Decent transportation:  developing freeway network.

7.  Well kept neighborhoods with attractive features:  green wide streets.

8.  Stability.

9.  Good schools, lots of shopping and entertainment.

There are of course different methods and strategies.  Some focus on short term rental investments that allow them to rent properties for short terms in popular vacation spots like Scottsdale, others take the condo route which can work well, while others prefer top rated properties, or little gems, in central Phoenix where population density is increasing as is the median price and median income: actually I can go on for a while on the investment strategies, but the focus here is the bread and butter hands off type of investing that will provide a good return: this is the type of investing closest to paper investing, you buy, hold and manage with little to think about.

The properties.