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:

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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”...


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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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