Bad incentives created the housing crisis

This is a fascinating video that clearly points out some of the myths surrounding the housing bubble in the USA, describing the role that Federal Reserve policy played in creating the bubble, they created a set of incentives which were badly aligned with long term aims. We have long felt that the role of monetary policy and regulation have been central to the problems in both the US and Europe, the full video of the conference is below.

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Fast Track Repossessions, what does it mean?

There has been an interesting development in the area of repossessions in recent weeks in which a property can be taken back (repossessed) without a full court procedure having taken place. Today we will consider how this will work.

First of all, there are several things which tie in together in 2009 and they form part of reason behind the new ruling. The use of circuit courts to repossess a home used to be commonplace because the decision was set in a court depending on the ‘rateable value’, but the domestic rates system was discontinued in 1978, thus, the hearings started to default into the higher echelons of judicial decision making and today the common court for repossession hearings is the High Court.

The new rule means that a Registrar will decide what is seen or not by the court and a side effect of this is that a house can be repossessed without actually going before a judge. It is important to note that a registrar is not merely a …

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Will Specialist or Sub-Prime lenders be better off?

With the news coming out daily about prime lenders facing higher and higher impairment charges it begs the question of who will do better during a downturn, specialist/sub prime lenders or prime high street banks?

Banks stated that they feel impairments of up to 90 basis points were likely, some have revised this figure higher several times with NIB predicting impairment of upwards of 300 basis points. Sub-prime lenders on the other hand start off with predictions of high impairment and they price and gauge the risk accordingly from the outset. Given that starting point, could it be a case that Irish specialist lenders may come out the other side of the liquidity crisis with an overall book that fares proportionately on margins than other prime lenders?

To answer this question we must first consider margins, with many banks typical margin is from 1% to 1.5% on average, however, with many prime lenders this margin is  lower because of low margin trackers that were a point of heavy competition between …

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