Anecdotes From Our Future? – “They gave us 500K even though we only had a combined income of 55K”; “I would gladly hand back the keys of both houses”

Here follow personal stories from the Irish RE crash and debt debacle [from The Irish Times, 5 Sept 2011] that, unfortunately, might as well be from Vancouver’s future.
Unfair comparison? Similarities? Differences?

SIOBHÁN “Sometimes we just think these are supposed to be our best years and the stress is killing us”
“We have a mortgage with the EBS and when the rates started to go up on an almost monthly basis I was eight months pregnant, so we had additional costs related to the birth.
Things were starting to get tight so we contacted the EBS and asked about the mortgage break/ holiday. We were told that is not a service that it offers.
Then we asked about interest-only so they sent us out the forms but the guy on the phone warned that they don’t usually do it. Sure enough, they refused us, even though we only have about €70 left after paying bills each month.
The interest rates have continued to go up. Our mortgage has gone up by €450 a month since January 1st. We are a family of five who had two incomes and now only one. We spend €90 a week on grocery shopping while 50 per cent of my husband’s salary goes on the mortgage.
I know there are people out there worse off but sometimes we just think these are supposed to be our best years and the stress is killing us.”

CLAIRE “I’ve almost been made to feel guilty by the bank for getting pregnant”
“We bought a house in the southeast in 2004 for €175,000 and took out a mortgage with Permanent TSB. Then we got married and took out a second mortgage to build a house. We tried to sell our first house but couldn’t. We work full-time and our little girl is in a creche four days a week.
We are expecting our second baby in January and I will not be working during my maternity leave so we will have no money.
I’ve almost been made to feel guilty by the bank for getting pregnant. All we are looking for is a break while we get ourselves sorted. We have never missed a payment or never not paid a bill in our lives. We have the house rented now but it still doesn’t cover the mortgage.
Why are we being shot down at every turn?”

ANNETTE “They gave us €500,000 even though we only had a combined income of €55,000”
“We’ve tried selling my husband’s first home on three occasions over the past five years with no luck.
We’ve had various people rent the house and have been left holding large bills when some tenants left unannounced. It’s been difficult to rent and has felt like a noose around our necks.
Any time we get our heads above water something will come up with that house and we end up back in the red.
About six months ago, the bank took us off interest-only and we have now gone into arrears as we can’t afford the full payment. We had diligently kept up the mortgage repayments before this change. The bank, Permanent TSB, were completely inflexible and the pressure of all the mounting bills has made my husband leave the country to work abroad.
He is now away for two out of every three months and is out of contact most of the time over those two months. It is very hard, especially as we have a new baby and don’t live close to any of our family.
My husband is missing out on so much of our son growing up and when he comes home our son doesn’t know who his daddy is. This is not the vision we had for our married life.
We feel that the bank is completely ignoring its responsibility in all this. At the time of issuing the mortgages they gave us approx €500,000 even though we only had a combined income of €55,000 and also they only stress-tested our ability to repay the loan on my husband’s home on an interest-only basis. Now they’ve moved the goalposts on that.”

MARY “I said surely there is something you can do to allow me sell the house and we can come to an arrangement where I will repay the difference? The guy said no”
“I have a property which was my home until I got married. We then bought a family home and so I have tried to rent out my original house. I managed, but as time has gone on, the rent I have been able to get has fallen and for the past year we have been putting €500 a month from our reduced salaries to supplement the mortgage.
When the tenant moved out I was left with an empty house so I decided to try and sell. The asking price was €175,000 and the mortgage outstanding was €182,000. We received an offer of €165,000. I rang EBS to say I was finding paying the mortgage difficult. I told them I was managing but would not be able to continue forever.
I explained that I had an offer on the house of €165,000 and asked could I take the offer and then seek a personal loan from EBS for the difference which I could then pay off?
It seemed to me to be a reasonable proposition as it would instantly pay off a significant amount of the mortgage, leaving a more manageable amount for me to pay.
The EBS’s answer was that they do not give personal loans. They said I should borrow the difference from family or friends. When I said I was having trouble getting someone to rent the house they said ‘the house is rented? Then you are on the wrong interest rate. You should be on a higher rate’.
When I said ‘surely there is something you can do to allow me sell the house and we can come to an arrangement where I will repay the difference?’ the guy said ‘no, there is nothing I can do, I’m not trying to be cold or harsh, we just don’t do it’.”

NUALA “We had an auctioneer take a look at our house and he reckons we would be lucky to get €250,000. We got a mortgage for €415,000”
“My husband is self-employed and has been stung for tens of thousands of euro for jobs he completed and never got paid for. We used our savings to bail out the business. We have three children, the eldest is four.
I had to give up work after I had my first child as we simply could not afford childcare. My husband is now still self-employed and struggling to make between €100 and €200 a week. I am trying to get back to work and at the moment am receiving Job Seeker’s Allowance of €170 a week. On average we have €270 coming into our house and that’s a good week.
As it stands we are €35,000 in arrears with our mortgage. Our ESB bill is €1,400 and we have just received a letter to say they are going to disconnect us if it is not paid in full.
We have no oil in our tank and we are in debt with credit cards and personal loans. We are dealing with MABS and I have to say they have been excellent. They have given us a lifeline.
After months and months of talking about what the hell we are going to do, we have decided to move to Australia. My husband has gotten a job out there and he will go in the next six weeks or so and I will stay behind until next year.
My main problem now is what to do with the house. I need to be able to stay in it up until we are ready to go as we have nowhere else to stay. But we are not making any repayments at the moment and don’t know how long more this will continue for.
We had an auctioneer take a look at our house and he reckons we would be lucky to get €250,000 for it. We got a mortgage for €415,000.”

SUZANNE “We no longer have any disposable income”
“I can’t say that we are struggling to pay the mortgage currently but I reckon by the end of January we definitely will be, as we no longer have any disposable income following the recent increases by EBS to the standard variable rates of interest.
We are in a lucky position as we got an affordable house for €235,000 in 2007. Unfortunately for us though, we could only get a mortgage for €205,000 from the EBS and had to get the balance from our credit union to be repaid over 10 years. This works out at around €450 per month.
Luckily, the credit union has allowed us to reduce our payments to €200 per month as we had paid more off initially and we are still on target to clear the loan within 10 years, so that’s not the problem.
The problem for us is that we did not get off the variable rate and fix earlier this year because when we looked into it, we could not meet the fixed repayments. We cannot fix now as EBS have removed that option. Mortgage payments, tax payable, water charges and the rest are all going to eat into our money.”

GEMMA “I would gladly hand back the keys of both houses”
“I bought a house in 2000 and when I went to sell it and move, I was advised to release equity and keep it as an investment property. I would never have done such a thing if the financial advisor had not suggested what a good idea it was.
So we bought our second house and now have a combined mortgage of €420,000 for two properties. I have a job and my husband works as well and we have no children. I am going to have to move from the midlands to Galway for work. So I own two houses in Mullingar with monthly repayments of €1,800 plus all the added costs and have to find somewhere to rent in Galway.
My husband might struggle to find work so we will have to live on my wages of €2,500 per month. I would gladly hand back the keys of both houses.
I have never missed a payment on a mortgage or important bill in my life and recently cashed in a savings bond 3 years early to pay off my credit card which has supplemented our income for the last year.”

NIAMH “The mortgage is €330,000. The asking price for an apartment in the complex is €185,000 so we are €145,000 in negative equity”
“I purchased a nice two-bed apartment in south Dublin with great views in a small, well-kept, complex in 2005 and took out a mortgage with KBC Homeloans. I lived in it for three years.
At the time I was working in Dublin, had a good salary and was able to service the loan. It was a joint mortgage with my now husband but I always serviced the loan myself.
In September 2008, I moved city and we got married. I can’t afford the entire mortgage repayment (which is €1,900 per month) so for approximately two years now, KBC has agreed to let me make interest-only repayments which are €1,300 per month.
They have just agreed to extend this interest-free period for 12 months. The apartment is rented at €1,000 per month.
We don’t have any personal loans. We have made all the household savings that we think possible, such as discontinuing a phone line, recycling, not using the tumble dryer etc. We don’t go out to restaurants, we go to the library instead of buying books, we borrowed all the baby gear from friends and our cars are ancient.
I have to find €500 per month for the apartment at the moment between the mortgage, service charge on the apartment, the annual NPPR charge etc. and it seems that I am paying an awful lot per month just for the privilege of servicing a loan that I can’t afford to reduce at the moment.
Even if I knew I was able to scratch away at the principal it wouldn’t be so bad.
The mortgage is stuck at €330,000. The average asking price for an apartment in the complex at the moment is €185,000, so we are €145,000 in negative equity.
We have our heads above water, but only just. I know that at least we don’t have to eat cardboard but I feel like I’m running to stand still whereas at least if I felt I was moving forward, however minutely, it wouldn’t be so depressing.”

SEÁN “We thought Bank of Ireland might do a deal with us. Under no circumstances would they do any kind of deal”
“We have our house for sale in Cork for the past four years with a couple of sales falling through for different reasons.
Just six weeks ago a young couple put in a final offer of €180,000. We needed €187,000 to clear off our mortgage, and pay the auctioneer’s fees and solicitor’s fees but we felt it was the best price we were going to get for our house.
Since we’re on a tracker rate and have never missed a payment, we thought Bank of Ireland might do a deal with us. I’m only working two and a half days per week and my wife works week on/week off. Under no circumstances would they do any kind of deal. We tried other ways to raise the difference (family, credit union) but the buyers got fed up waiting and called off the purchase. We were devastated but in no way could I blame the couple.
While my wife’s job is fairly secure, mine is not and it is a real worry with three young kids. I am so p**sed off with the banks right now. I roughly estimate that over our mortgage lifetime, with us on a tracker rate, they will lose between €15,000 and €20,000 but they don’t care because we’ll bail them out regardless”.

BRIAN “I did go hungry to meet my mortgage several times, but I have come to the conclusion that this is pointless”
“I am a public servant, and in the past four months I have had to make the choice between eating or paying my mortgage. I chose to eat. I am struggling to survive on a wage that is only slightly above social welfare rates.
I joined the public service from the private sector, incurring a large cut in my wages. I own a three bed, semi-detached house and used my savings to pay my mortgage while I was training, on a wage of €150 per week.
I got a job far from where I owned my house. I couldn’t sell, so I rented it out. The rent covers far less than half my mortgage and I pay rent in the town where I now live. As time went on, my debts rose as I borrowed to pay my mortgage each month.
I have now hit a wall. I cannot borrow any more money. I did go hungry to meet my mortgage several times, but I have come to the conclusion that this is pointless. Losing my house is now inevitable. People constantly allude to the fact that I am lucky to be a public servant. I am not lucky. I am at the end of my tether.
At least my shame is my own. I don’t have a wife or child, and there isn’t a day that goes by that I don’t thank God for that.”

18 responses to “Anecdotes From Our Future? – “They gave us 500K even though we only had a combined income of 55K”; “I would gladly hand back the keys of both houses”

  1. This is a great article, I see many of these scenarios happening in Vancouver. When we went looking for a place to rent, we found a lot of young couples just like this-those who were upgrading to a newer, bigger home upon marriage, while one person decided it was a “good investment” to keep their first home-a smaller condo or townhouse and rent it out. I guess when prices are up people think holding lots of real estate is a great investment, but when prices go down, all it is is a noose around the neck. Whatever happened to selling the first house (if you can) and plowing that money into the upgrade? Seems to be quite passe in this economy, nobody wants to cash out until it’s too late.

  2. This one was posted by BPOM at VCI

    Today Las Vegas real estate prices are down 59%, but 5 years ago as the bubble was peaking they were using familiar arguments for skyrocketing prices and even predicted that they would keep rising.
    “Everybody wants to come here” and yes, even “lack of land”

    http://www.macrobusiness.com.au/2011/09/how-las-vegas-gambled-and-lost/?source=patrick.net

    An article published in late 2006 in USA Today explains the supply situation in Las Vegas nicely:

    LAS VEGAS — Flying into this desert metropolis is as deceiving as a mirage. From 10,000 feet you see empty land in all directions and swear the pace of suburban sprawl could go on unchecked.

    You’d swear no end’s in sight to subdivisions stretching for miles beyond the Strip, enclaves of single-family houses that draw thousands of Californians and other migrants a year.

    Look again. The valley that Las Vegas and 1.8 million residents call home is nearly built out. Mountains, national parks, military bases, an Indian community and a critter called the desert tortoise have Sin City hemmed in. At the current building pace in the USA’s fastest-growing major metro area, available acreage will be gone in less than a decade, developers and real estate analysts say.

    Yet growth pressure and housing demand won’t abate. Greater Las Vegas will add 1 million residents in the next 10 years, state estimates say, and hit 3 million by 2020.

    “You hear anywhere from a seven to 10 years supply at our growth rates and the valley’s full,” says developer Kenneth Smith of Glen, Smith and Glen…

    A scarcity of land — or just as important, says Hal Rothman, a University of Nevada-Las Vegas history professor, the perception that it’s scarce — is driving prices skyward. “The result was a rush,” he says. “The situation is making a new valley around us, one that will be more crowded and expensive.”

    Developers who 15 years ago paid less than $40,000 an acre are paying more than $300,000 today. In an auction of public land that went on the market last year, a developer paid $639 million for 2,655 acres…

    Developers are leapfrogging over BLM land with plans for big projects, such as 42,000-acre Coyote Springs 50 miles north of here. That’s “drive until you qualify” territory for home buyers seeking affordable mortgages. But costs of building roads, sewers and utilities “are incredible,” says Steve Bottfeld, senior analyst of Marketing Solutions, a local research firm. “Don’t look for it to happen in 10 years”…

    Developers don’t expect land prices to fall. They’re packing houses in traditional subdivisions so close together neighbors can practically shake hands out their windows. Economics are moving developers toward a slow embrace of trends familiar elsewhere…

    Same idiotic argument that Vancouver bulls use today were used in Las Vegas in late 2006

  3. This is exactly what’s awaiting Vancouverites in the near future, except that the scale will be even greater, with people being 500k or more in negative equity. Lots of personal bankruptcies will hit BC economy big time, lots of people will be migrating out of the Province like the Irish did. Unfortunately, everybody will be a loser when that happens, nobody will benefit from a crashing economy due to the RE burst.

  4. Boohoo for the few that blame the bank for lending them “too much” based on their income. Did the bank force them to take the loan? Probably not. Absolutely no sympathy for the idiotic life destroying decisions THEY made. Same goes for the future idiots in Van that will find themselves in the same situation.

    • I agree with your sentiment but I think many people are financially illiterate and bankers seeking to hit their short term quarterly goals for the sake of collecting huge bonuses take advantage of that financial illiteracy its wrong and I want to see bankers suffer by having to pay back their bonuses.

      • Totally agree, the knife is supposed to cut both ways. For those that have lost out because of borrowing too much, and the banks who were supposed to lose out for making bad bets.

  5. ps. keep up the great work VREAA. =)

  6. @Bob couldn’t agree with you more. I feel no sympathy to all these idiots losing their shirts after this house of cards crashes. Especially the chinese lemmings who piled up on this boom.

  7. My family is from Ireland and what happened there is no different from what is happening here in Vancouver, in that the psychology of real estate has permeated everything. In both cases, greed has taken over, with people bidding up insane prices for houses that have no instrinsic worth. Platitudes such as “the land is what you’re buying” and “real estate is a great investment” overwhelm any rational discussion of what someone needs for shelter actually are. It’s all about ‘investment.’

    Most of my cousins have left Ireland for points beyond. Only a couple of them bought, and paid an obscene amount for a Dublin flat…I’m certain they’re way underwater on it. The others have bolted the country and the few that are left are having a really hard go of it.

  8. The negative equity is what gets you. It ties you to the place and your only choices are to keep pumping in money or bancruptcy. Most people will spend down their savings and any other wealth they have while holding out for someting to improve somehow.

    The human toll is very sad. I agree with Bob and bullymarket that some of these people have strange expectations (“why did the bank lend me $500k?” “Why won’t they just let me skip some payments”). But I think it’s a sign of the sheer desperation that sets in. Very sad.

    If you’re still sitting on some “million dollar” BC real estate, sell now and stick it in the bank. Better to get out too early with something than too late with nothing.

  9. The sad thing about Ireland is that an entire generation of highly-skilled, young, disenfranchised, and underemployed workers will be leaving for “greener pastures” elsewhere. That will be a tragedy that will last at least a generation.

    It will be a mighty bitter pill to swallow when the province’s prudent realise how much the government will be bailing out the “ship of fools”.

  10. Reading the stories breaks your heart – kids and family life is tough enough. Mortgage fraudsters using guilt and intimidation to keep the monthly payments rolling in is brutal. However, I can’t help feeling some of the clowns we all meet here in Vanhatten deserve such an end. The smugness of local subprime CMHC-sponsored borrowers who bought property in this city 5-10 years ago is suffocating.

  11. “I agree with your sentiment but I think many people are financially illiterate and bankers seeking to hit their short term quarterly goals for the sake of collecting huge bonuses take advantage of that financial illiteracy its wrong and I want to see bankers suffer by having to pay back their bonuses.”

    Agreed. In the banks and investors were bailed out by the government. People who bought homes were not.

  12. I’ve rented to several Irish economic refugees in the last year.

    Yes the people are responsible for the mortgage problem are everybody involved, it becomes endemic. The lenders relax their standards, the truth gets stretched, The borrowers get lottery thinking. on counsel from family and friends they stretch themselves, There is no one person.responsible for the problem. Yet the poor fool who went along with the dog and pony show gets to pay.

  13. Change the town and city names and this is what awaits Vancouver (and many Australian cities).

    A few of us have been screaming for people to get out and save yourselves, and have been attacked ruthlessly for it. The pain and desperation will be massive.

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