Saturday, 21 May 2011

Nama wants "no negative equity" mortgages to keep prices high

Bloody wi-fi.  I've just spent most of the day at the (rented) holiday pool - with the car's thermometer reading 31.5 out the front.  Then in I come, only to read the latest from the old sods, and start frothing at the mouth again... and not just from the beer.

 Look at this extract from an aritcle in yesterday's Irish Times:


Nama plans protection for house purchasers
BARRY ROCHE in Cork and SIMON CARSWELL Fri, May 20, 2011, Irish Times.

NAMA PLANS to launch a product for purchasers of residential properties in the autumn that will offer protection against the risk of negative equity in the future, the agency’s chairman, Frank Daly, said.
It is hoped that the initiative will help stimulate activity in the market.

Mr Daly said Nama has identified concerns among debtors that house prices could continue to fall after they purchase a property as one of the “key impediments” to the sale of houses and apartments.

He said that Nama, conscious that house purchasers could find themselves in “negative equity for a long time to come”, has engaged in preliminary discussions with both AIB and Bank of Ireland to see if they can provide financial support to purchasers.

Nama expects to have “a more detailed engagement” with the two banks on this issue over the coming weeks and the product which it hopes to unveil in the autumn will be designed to generate sales of properties controlled by Nama debtors or by receivers, he said.

Plans under examination would involve Nama debtors – or receivers appointed by the agency – selling properties to buyers supported by bank loans for prices conditional on a market recovery

For residential properties, Nama would waive 20 per cent of the purchase price if there was no recovery in the market. The remaining 80 per cent would be covered by a 10 per cent cash deposit and a 70 per cent loan from one of the two banks.

If the market recovered, the borrower would agree under the purchase agreement to draw a further 20 per cent and pay this to Nama after about five years.

Mr Daly said the move would also seek to provide an incentive to purchasers to invest at current prices “in the knowledge that there will be a mechanism in place which will offer them protection against the risk of negative equity in the future”...


Nama, of course, was set up to keep property prices artifcially high in support of Fianna Fail's bank guarantee.  It bought the bad developers' loans from the banks with taxpayers' money, for way more than they were worth.  A price it envisaged they might reach in the future. 

Basically Nama is all about denying market reality - the free market, that supposed meritocracy that separates the "winners" from the "losers", as its adherents say when things are going well for them.

Nama pays failed developers whose bad loans are on its books through the public purse, when really they should be on their arse in the street.  They would be in Boston, and even in Berlin. 

Now, Nama claims people don't want to buy because they are afraid of negative equity.  Is that the reason? Where is Nama's evidence?   Maybe people do not want to buy because they feel vendors are still, in many cases, looking for more than their properties are worth?  Maybe they are still concerned about the increasing mortgage defaults to the banks?  Maybe they are thinking about the inordinate number of investment properties, many empty, still in the housing stock?

Nama first took taxpayers' money, without their having a say, to cushion the economic impact of bad speculative decisions by the developers and shore up the loans the banks gave them to speculate with.  Now they hope to make taxpayers pay artificifially high prices with some dodgy plan not dissimilar to the Home Choice Scheme that Lenihan introduced.

Of course, we have a different Government now, but that means nothing - they will go along with this nonsense.  Someone has to pay for this, and when it comes to Joe and Josephine Bloggs and the Irish "elite", there is no choice.

As the plan would apply to Nama properties, or those for which it appointed a receiver; it would be interesting to see the impact of such a scheme on second-hand, private-sale, properties.  

Have they not learned the lessons of past market interference?

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Anonymous said...

what a nation o chimps depending on fictional real property prices to keep the pyrmid going its all boollicks irish style cheeeerioo BH

The Gombeen Man said...

Yep, BH. And someone has to pay for it... and no insurance company could take on the risk of such a "guarantee", unless it contained so many conditions that it was just a scam (and came at extra cost to the buyer).

Or are they looking to back it up with more State money?

anna said...

Dear GM man, hear , hear!!!
I rarely heard the whole bank guarantee or NAMA So well and succinctly described- didn't a Nobel winning economics laureate describe NAMA as a 'pyramid scheme??'
But DO get back to sun bathing and relaxing-
REST assured that even if you DO miss some major Gombeen scheme by the brainless leprechaun chancers who run this country, they'll have come up with Loads and Loads more by the time you get back ...oops..was that the right thing to say ..Anyway!!! Post some holiday pics and some nice comments about France, I lived 20 miles off the coast of France for 5 yrs in Guernsey and got over as often as I's reckoned to have great health services at almost no cost ..and the people are Genuinely patriotic and really angry if they think their politicians show them up: my 22 yr old French lodger Pierre was really angry when Sarkozy married Carla, saying he was a w****r and making France look so bad ..and that Carla had known a lot of guys( to paraphrase slightly)..and that is Nothing to what our own dear TDs get up to....
Anyway!Sorry about that - Breathe slowly and deeply, Keep repeating 'Vive La France', and Do post some more pics- I love France and might go back later this summer.

Anonymous said...

HI THERE MR GM-I WAS wondering if i could post aletter directly to barrack on your award winning blog please and thanks.DEAR BARRACK i hope you recieved the BRADFORD PADDY rare time piece i sent you for your return to the auldsod, like myself you are gone a long time and have picked up quite a tan and accent buta lot happens in 150yrs,the lads at your local will hardly recognise you some will pretend they never heard of or remember you so many celtictiger types with hectic lifestyles building ghost estates etc afew rounds forthe house works you know dem auld german banks have utterly banjaxed our once booming economy when you are speaking to ANGIE perhaps you could fib a little and tell her the russians are very concerned about this irish problem and are considering an invasion of germany as only the russians scare the shit out the jerrys,this may convince her to send more money to our homeland.i see the republican congress men are givig you a hard time over the price of oil and spuds why dont you tell them to flock off and resigne come over and run our little paradise island your pay will double to bertie and biffo levels a nice gombeen chariot made in stuggart no more detriot plastic crap hard to beat--ACARA -BH

The Gombeen Man said...

@ Anna. Thanks for your kind words. As far as holiday "snaps" go, I was out today and forgot the mobile, missing a chance to picture a 1970s Renault 4 and a building in Damazon constructed in 1450. Obviously Zoe Developments were not involved.

@ BH. That is a splendid idea. I am sure President Obama will be delighted with his Spirit of Ireland watch. I am proud of my own small role in bringing it to your attention through the blog.