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Never EVER take this sort of offer. Banks made similar offers after Katrina. We seriously considered it, having just bought a house in New Orleans which we coul

Never EVER take this sort of offer. Banks made similar offers after Katrina. We seriously considered it, having just bought a house in New Orleans which we could no longer occupy. A quick call with the bank made it clear they weren't forgiving anything. Interest would continue to accrue and recapitalize. Four years later, we had made all our payments and sold at the expected profit. The lender then admitted many people had taken the offer and now found themselves with significant negative value on their homes simply through compound interest. Avoid these offers like the plague.

apexalpha 7y ago
This is horrible advice. This isn't a private (American) bank making a free offer. It's done by the Italian government. Besides that consumer protection laws in Europe are much stronger anyway.
lukeqsee 7y ago
Based on the article, I’m not sure there’s enough information to even determine if this is a deferred payment scheme (interest continues to accrue) or a postponement without additional interest accrual. Certainly, if this affects you, check with the bank to determine what it actually means. I think directly comparing US and Italian banking is quite misleading, given the relatively large differences in typical consumer protections. Maybe it’s a bum deal, or maybe it’s actually going to be very helpful for the consumer.
- woofie11 7y ago
  Suspending mortgages and interest is absolutely the economically right way to handle this sort of crisis. You essentially want the economy on hold for 6 months, and then to come back at the end as if nothing happened.
  - wjnc 7y ago
    Tbh suspending interest payments as well would kill already struggling Italian banks. For those countries with the appropriate finances, subsidizing this in the long run would indeed be a good way to handle this. Europe would probably allow it even though it's state subsidy of banks (unless some other mechanism is enacted). But the Italian government isn't in that sort of financial situation. I expect a future upward interest shock since the country will lose capacity driving their debt to GDP even higher.
    - 6510 7y ago
      Kicking people out of their home to save the banks has been tried.
    - misja111 7y ago
      Many Italian banks were being kept alive by the government already, so this is effectively the Italian government sponsoring house owners.
  - mrec 7y ago
    No word on similar relief for renters though, which makes me a bit suspicious about their motivation.
onetimemanytime 7y ago
>>Avoid these offers like the plague ...---if you can. In Italy everything is shut down, but basic industries that are need to feed and care for the people. So, no paychecks and no friend or family can loan you money for mortgages
- 6510 7y ago
  Its funny how some people who don't work and don't contribute think their entitlements should just continue after their victims lose their income. Here a 50 year old on minimum wage earned less over his career as a land lord owning a single medium size building. We can argue good investment should be rewarding but someone has to do the work. We cant all be investors. (at least not at this technological state, watch this space :P)
Mvandenbergh 7y ago
It is bad advice to simply say, "never take a repayment moratorium" based on anecdotal advice from one very particular set of circumstances. First of all, many people simply do not have the liquid assets (or any assets) to pay their mortgage while not receiving income. Many Italians who are not able to earn money during this period simply would not have been paying their mortgage regardless of a repayment suspension. So banks may as well get out in front of that rather than waste time sending hundreds of thousands of notices to people who are not able to pay. This is not a choice. Obviously if you can continue to pay your mortgage you should do so. Second, there is a big difference between temporarily suspending repayment for 2? 3? months and what happened after Katrina where many people had stopped paying for many months or years. There is no way that a few months repayment holiday, even if interest does accrue during that period is going to push many mortgages into negative equity. Third, Italian mortgages are absolutely capped at 80% LTV and many banks are more comfortable at 60% or even less. This is unheard of by American or UK standards but a consequence is that it would take years of repayment suspension and interest accrual to push into negative equity. Fourth, negative equity is only relevant if you want to sell. Italians tend not to be super mobile anyway, so even if some people do spend some time in negative equity, only a subset of those people will be "stuck" and prevented from making a move they would otherwise make.
- fortran77 7y ago
  Also, with Katrina, houses were damaged and many lost a lot of value. Here, the houses are fine.
- tialaramex 7y ago
  The UK essentially got rid of crazy 100% mortgages. You can still get a 95% mortgage, which is pretty desperate, but the rates on them are punishing, I haven't seen anybody say "Oh I saved 5% for my deposit now I can buy a house". If you need a 100% mortgage now, all the big banks will tell you either to go away or talk to a specialist. The specialist will explain that there's basically no legal way to sell you a product on which obviously if anything goes wrong you default and lose everything but if you can find a guarantor that'll eat the risk that's an option. The guarantor puts up capital (maybe your parents offer the home they've paid off) and if the mortgage fails that capital will pay for it. So you essentially don't have a 100% mortgage, you've got an 80% (or better) mortgage against two properties, but if things do go badly wrong you aren't going to ever talk to your parents again. 75% mortgages are pretty common here. 80% is definitely more common than 60% but things are much better than they were when idiots thought prices could only go up.
KorematsuFred 7y ago
This is Europe so I would expect tax payers to foot the bill.
- celticninja 7y ago
  As opposed to the US or Russia China or Africa where the bill is footed by... Oh yes the taxpayer
  - 6510 7y ago
    But in the EU we generally don't have someone making epic profits off the process. (Epic profits are against the rules.)
- fennecfoxen 7y ago
  This is Italy, so the taxpayers who will foot the bill are probably German.
  - stefano 7y ago
    That has never happened in history and I don't see why you think it will this time.
    - fennecfoxen 7y ago
      The European bailout of the Euro in May 2010 was a Germany-led bailout of Greek banks, with Germany borrowing the money and German taxpayers shouldering the risk (and following up with subsequent bailout rounds). (They may have made a little money off the operation on net, yes, but that little accounting profit is a lot less impressive when you consider the risk of loss to which the German taxpayer was exposed.)
      - stefano 7y ago
        I don't see how that has to do with Germany paying italian debt, since Italy participated in the bailout of Greek banks.
jwr 7y ago
The difference is that this is not an offer, it's an action by a government in Europe, where people are generally treated like human beings and governments act like governments of some of the richest countries in the world.
baq 7y ago
this is the US you're talking about. Italy isn't US. Make sure you read the rules and the fine print before you agree to such terms.
akvadrako 7y ago
> now found themselves with significant negative value on their homes simply through compound interest. Sounds just like taking out a second mortgage - you increase your principle and get money (or avoid paying money) in the short-term. That's a perfectly normal thing to want; I wish I could do it right now.
lm28469 7y ago
It might be surprising to Americans but there are countries in the world with sane regulations.
- throwaway0a5e 7y ago
  Please don't make flame bait comments like this.
  - lm28469 7y ago
    It's factually true though. You can't extrapolate how the US handles these things to other countries. They're literally the worst example in any first world countries. Europe is not the wild west.
asjw 7y ago
This is for Italy, Italy is not in the US and has different laws and guarantees for bank customers

apexalpha 7y ago

This is horrible advice. This isn't a private (American) bank making a free offer. It's done by the Italian government. Besides that consumer protection laws in Europe are much stronger anyway.

lukeqsee 7y ago

Based on the article, I’m not sure there’s enough information to even determine if this is a deferred payment scheme (interest continues to accrue) or a postponement without additional interest accrual. Certainly, if this affects you, check with the bank to determine what it actually means. I think directly comparing US and Italian banking is quite misleading, given the relatively large differences in typical consumer protections. Maybe it’s a bum deal, or maybe it’s actually going to be very helpful for the consumer.

woofie11 7y ago
Suspending mortgages and interest is absolutely the economically right way to handle this sort of crisis. You essentially want the economy on hold for 6 months, and then to come back at the end as if nothing happened.
- wjnc 7y ago
  Tbh suspending interest payments as well would kill already struggling Italian banks. For those countries with the appropriate finances, subsidizing this in the long run would indeed be a good way to handle this. Europe would probably allow it even though it's state subsidy of banks (unless some other mechanism is enacted). But the Italian government isn't in that sort of financial situation. I expect a future upward interest shock since the country will lose capacity driving their debt to GDP even higher.
  - 6510 7y ago
    Kicking people out of their home to save the banks has been tried.
  - misja111 7y ago
    Many Italian banks were being kept alive by the government already, so this is effectively the Italian government sponsoring house owners.
- mrec 7y ago
  No word on similar relief for renters though, which makes me a bit suspicious about their motivation.

onetimemanytime 7y ago

>>Avoid these offers like the plague ...---if you can. In Italy everything is shut down, but basic industries that are need to feed and care for the people. So, no paychecks and no friend or family can loan you money for mortgages

6510 7y ago
Its funny how some people who don't work and don't contribute think their entitlements should just continue after their victims lose their income. Here a 50 year old on minimum wage earned less over his career as a land lord owning a single medium size building. We can argue good investment should be rewarding but someone has to do the work. We cant all be investors. (at least not at this technological state, watch this space :P)

Mvandenbergh 7y ago

It is bad advice to simply say, "never take a repayment moratorium" based on anecdotal advice from one very particular set of circumstances. First of all, many people simply do not have the liquid assets (or any assets) to pay their mortgage while not receiving income. Many Italians who are not able to earn money during this period simply would not have been paying their mortgage regardless of a repayment suspension. So banks may as well get out in front of that rather than waste time sending hundreds of thousands of notices to people who are not able to pay. This is not a choice. Obviously if you can continue to pay your mortgage you should do so. Second, there is a big difference between temporarily suspending repayment for 2? 3? months and what happened after Katrina where many people had stopped paying for many months or years. There is no way that a few months repayment holiday, even if interest does accrue during that period is going to push many mortgages into negative equity. Third, Italian mortgages are absolutely capped at 80% LTV and many banks are more comfortable at 60% or even less. This is unheard of by American or UK standards but a consequence is that it would take years of repayment suspension and interest accrual to push into negative equity. Fourth, negative equity is only relevant if you want to sell. Italians tend not to be super mobile anyway, so even if some people do spend some time in negative equity, only a subset of those people will be "stuck" and prevented from making a move they would otherwise make.

fortran77 7y ago
Also, with Katrina, houses were damaged and many lost a lot of value. Here, the houses are fine.
tialaramex 7y ago
The UK essentially got rid of crazy 100% mortgages. You can still get a 95% mortgage, which is pretty desperate, but the rates on them are punishing, I haven't seen anybody say "Oh I saved 5% for my deposit now I can buy a house". If you need a 100% mortgage now, all the big banks will tell you either to go away or talk to a specialist. The specialist will explain that there's basically no legal way to sell you a product on which obviously if anything goes wrong you default and lose everything but if you can find a guarantor that'll eat the risk that's an option. The guarantor puts up capital (maybe your parents offer the home they've paid off) and if the mortgage fails that capital will pay for it. So you essentially don't have a 100% mortgage, you've got an 80% (or better) mortgage against two properties, but if things do go badly wrong you aren't going to ever talk to your parents again. 75% mortgages are pretty common here. 80% is definitely more common than 60% but things are much better than they were when idiots thought prices could only go up.

KorematsuFred 7y ago

This is Europe so I would expect tax payers to foot the bill.

celticninja 7y ago
As opposed to the US or Russia China or Africa where the bill is footed by... Oh yes the taxpayer
- 6510 7y ago
  But in the EU we generally don't have someone making epic profits off the process. (Epic profits are against the rules.)
fennecfoxen 7y ago
This is Italy, so the taxpayers who will foot the bill are probably German.
- stefano 7y ago
  That has never happened in history and I don't see why you think it will this time.
  - fennecfoxen 7y ago
    The European bailout of the Euro in May 2010 was a Germany-led bailout of Greek banks, with Germany borrowing the money and German taxpayers shouldering the risk (and following up with subsequent bailout rounds). (They may have made a little money off the operation on net, yes, but that little accounting profit is a lot less impressive when you consider the risk of loss to which the German taxpayer was exposed.)
    - stefano 7y ago
      I don't see how that has to do with Germany paying italian debt, since Italy participated in the bailout of Greek banks.

jwr 7y ago

The difference is that this is not an offer, it's an action by a government in Europe, where people are generally treated like human beings and governments act like governments of some of the richest countries in the world.

baq 7y ago

this is the US you're talking about. Italy isn't US. Make sure you read the rules and the fine print before you agree to such terms.

akvadrako 7y ago

> now found themselves with significant negative value on their homes simply through compound interest. Sounds just like taking out a second mortgage - you increase your principle and get money (or avoid paying money) in the short-term. That's a perfectly normal thing to want; I wish I could do it right now.

lm28469 7y ago

It might be surprising to Americans but there are countries in the world with sane regulations.

throwaway0a5e 7y ago
Please don't make flame bait comments like this.
- lm28469 7y ago
  It's factually true though. You can't extrapolate how the US handles these things to other countries. They're literally the worst example in any first world countries. Europe is not the wild west.

asjw 7y ago

This is for Italy, Italy is not in the US and has different laws and guarantees for bank customers