Nama to underwrite the property market???

MadsL

Nama unveils purchase plan
BARRY ROCHE, Southern Correspondent

Nama plans to unveil a product for purchasers of residential properties in the autumn that will help stimulate activity in the market by offering purchasers protection against the risk of negative equity in the future, Nama Chairman, Frank Daly revealed today.

According to Mr Daly, 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 in the current market.

Mr Daly 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 the both AIB Bank 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.

Mr Daly said such a 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".

Speaking at a Cork Chamber breakfast briefing sponsored by the Irish Examiner, Mr Daly also outlined a proposal from Nama aimed at stimulating activity in the commercial property market through what is known as "vendor/staple financing".

Mr Daly explained the initiative is aimed at "providing debt finance to purchasers of commercial property which is either under the control of Nama debtors or receivers engaged either directly or indirectly by the agency".

Vendor/staple financing would involve the purchaser injecting "equity capital of 25-30 per cent" of the purchase price upfront and then entering a loan agreement with Nama to repay the outstanding balance of the purchase price over five or seven years, he said.

Mr Daly said such financing arrangements are widely used internationally and that Nama would expect that it would typically engage with sovereign wealth funds, pension funds, insurance companies and private equity firms in reaching such arrangements.

The advantage of such a mechanism is that it would encourage purchasers to buy in a distressed market and thereby set a floor for the market with both parties sharing the risk on the purchase over the lifetime of the loan.

Mr Daly told the gathering of around 300 business people that the mechanism is typically used to finance commercial investment type assets that are income producing such as offices and shopping centres rather than land or unfinished building.

Tentative evidence suggests Ireland may be close to the bottom of the cycle in terms of commercial prices that are envisaged to under a slight fall this years before recording slight increases in both 2012 and 2013, he said.

Over much of the past decade, commercial property prices had accelerated well ahead of GDP growth, but they have now corrected to levels where they would have typically expected to be had the property price bubble not taken place, he said.

Mr Daly said that Nama's remit was first and foremost to recover for the taxpayer what it has paid for acquired assets plus any additional project funding, working capital and other costs and while it may be an obvious point, it had far reaching implications.

"What Nama is not, as some commentators seem to think it should be, is some form of national financial freezer into which troubled loans can be deposited in the hope of future cryogenic salvation," he said.

"Nor is Nama a resting home to enable debtors to take time out from the consequences of their borrowing," he said, adding that in a minority of cases, business difficulties have been compounded by a failure by debtors to engage with Nama.

"A number of debtors appear to be trapped in the old mindset whereby it is they and not the lender who sets the terms on which business is done.

It is akin to falling overboard and then complaining to your rescuer about the colour of the lifebuoy that he is about to throw you."

"Some of them have difficulty surrendering the grandiose lifestyles that they seem to regard as their continued entitlement even if the rest of us are expected to pay for it through higher taxes and cuts to services in our schools and hospitals.

"If the taxpayer is being asked to keep a debtor in business, it would seem to be a matter of common sense that that debtor does not seek to maintain a lifestyle that is beyond his means - the taxpayer does not owe the debtor a living and certainly doesn't owe any debtor an unrealistic lifestyle especially if that debtor cannot repay his debts."

However Mr Daly cautioned against "demonising" developers and banks and said that the banks apart from an aberration in recent years had served Ireland well and that developers and banks would be needed to ensure Ireland can continue to grow and develop successfully.

Is it me, or is this bonkers?? Intervention to effectively provide a floor for property prices in a free market surely cannot be within the remit of NAMA. Is this not the thin end of some kind of pseudo communist state intervention in the markets?

If not, could I have a similar product from AIB/Bank of Ireland that ensures that my pension fund loses no further value??? :mad:

20Cent

NAMA is bonkers.
Heard a spokesman on the radio earlier if I heard it correctly he was saying they could sell properties, give a loan for the property and then if the property goes into negative equity they could refund the buyer. Madness!!!!!

dan_d

It seems....off.

Do people think that their purchase may go into NE if prices fall further (which could happen in any market), or may go into NE due to NAMA? There seems to be a fundamental missing pieces there..

They'd be better off to encourage banks to stop giving 100% mortgages over 4 years (yes, I know many are no longer doing that, but I don't think there's any reason for them not to do it again...there's nothing stopping them).

The whole thing seems bizarre.

macannrb

so the government is taking money away from pensions, life insurance funds and giving it to the Banks/nama to prop up property prices by giving out loans to people because they can't afford to pay for the assets in the first place.

thankfully since its the government, there is no chance of preferential threatment for a few closely connected individuals

sounds good to me! Where do I vote for this?

waffleman

However Mr Daly cautioned against "demonising" developers and banks and said that the banks apart from an aberration in recent years had served Ireland well and that developers and banks would be needed to ensure Ireland can continue to grow and develop successfully.

WOW this is the kind of crap that gets me going. It's a bit late for the "hey look at our track record please forgive us and buy more houses" card at this stage. The country is f*cked and this kind of drivvle is still being offered up. If you'd let the market correct itself maybe we'd listen.

Dob74

NAMA's new name should be Anglo Irish 2.

Wasnt nama supposed to be a holding company that would weather the storm so the banks could go back lending?
I guess that Bullsh;t wouldnt fly so now nama will be just another lender to the property market.
This joke is on the taxpayer again.

Sand

I was deeply pessimistic about NAMA from the start.

Everything thats emerged from this deeply secretive politically controlled cash cow for insiders has indicated to me that I wasnt nearly pessimistic enough. That they can seriously fly kites for a scheme as derranged as this is deeply worrying. If NAMA starts taking on effectively open ended liabilities (afterall, whose going to say how far prices will fall until property starts clearing?) in a collapsing property market then it seems to contradict this statement:

Mr Daly said that Nama's remit was first and foremost to recover for the taxpayer what it has paid for acquired assets plus any additional project funding, working capital and other costs and while it may be an obvious point, it had far reaching implications.

Selling now at false prices and writing up large contingent liabilites to the taxpayer on the assumption "Shure property never loses value!" does not serve a remit that intends to represent the taxpayer first and foremost. Its simply to generate transactions so the lawyers and property valuers can extract fees, with the taxpayer being left to carry the can when things fall apart again.

Its bitterly amusing too when I recall how we were told that we didnt need to worry about NAMA having to make a profit on property as it was buying property backed loans, not property. I guess people who made those arguments are now grasping why critics of NAMA were talking about property. When loans are defaulted on, whats backing the loans becomes the bottom line.

I am deeply, deeply worried by the sort of stupidity that seems to be going on at a high level in NAMA. I think as a priority Noonan and Kenny need to demand a review of the NAMA project, especially its objectives, and the mindset thats looming large behind their public pronouncements. The deeper worry is that NAMA is trying to respond to political pressure from the government to "Get credit flowing again".

Count Dooku

20Cent wrote: »

NAMA is bonkers.
Heard a spokesman on the radio earlier if I heard it correctly he was saying they could sell properties, give a loan for the property and then if the property goes into negative equity they could refund the buyer. Madness!!!!!

and after then we will realise that those property were sold to NAMA developers:mad:

ascanbe

Yes, this is utterly insane; and, as such, is entirely in keeping with every other decision that has been made by those in power in this country over the last few years.

WalterMitty

They should stick apartments/houses/office up for sale without reserve untill the bottom is reached. Call it a firesale or whatever but they are only delaying things, increasing costs and making things uncertain . They do it right in america and things get back on track sooner.

Treehouse72

I predict this will either never happen, or get negligible take-up if it does, or be struck down by the EU in its current form. DOA IMO.

hinault

http://www.rte.ie/player/#v=1098798

@37.50.

Frank Daly "not to intentionally create or boost the (property market). What we want to do is to try to bring some stability to the market".
What a load of rubbish, Frank.

Fool me once, shame on you.
Fool me twice, shame on me.

MadsL

Browsing the propertypin on this I loved this quote;

Cannot make up my mind whether this is an artificial market support operation, a form of Ponzi Scheme or plain old-fashioned mission creep.

Had to wipe the screen after reading that alright...

Amhran Nua

Sand wrote: »

I think as a priority Noonan and Kenny need to demand a review of the NAMA project, especially its objectives, and the mindset thats looming large behind their public pronouncements.

The writing on the wall was clear enough from the outset. NAMA needs to be dismantled wholesale and put on the junkpile.

macannrb

too true Amhran Nua

but i have a fear, its something that they/we may not be able to unwind. I fear the beast may have become too big to unwind.

The aim of NAMA is to put a floor under property prices as stated by Brian Lenihan:


45 seconds in

https://www.youtube.com/watch?v=pWlz1IKWfw4

This is insane

Sand

Re Lennys video on NAMA

The most interesting comment is his one just after a minute in where he proclaims that clear, objective market indicators are showing that property is close to the trough. He then goes on to state that "We really do need to banish our [something incomprehensible] that I referred to earlier, this suggestion that we've further to go down and further and further. And thats part of the problem here."

This was posted in September 2009. 18 months ago. The market didnt reach a trough 18 months ago. Lenny was talking bollocks with his chat about clear, objective market indicators.

It betrays many issues:

1 - The officials always claim to have identified the problem, fully and comprehensively.
2 - Anyone disagreeing with the official view is part of the problem
3 - The officials lie and lie and lie.

I think this is important to stress, because even today, many people still consider that the officially released figures from the DoF are the baseline, and divergence from them has to be justified and defended by those crazed loonies who dont implictly trust the DoF to call it right. However, experience has taught us that its the officially released figures that need to be considered highly suspect, understating both risk and liabilities and overstating assets and gains.

NAMA itself is loose, with a vague mission statement, no oversight worthy of the name and a lot of parasites in the legal and property professions to feed. And you can be absolutely, 100% certain that of all the winners from NAMA, the taxpayers will not be amongst them.

YouBuyLocal

Here is the thing. The current government must implicitly support NAMA. It is very likely that they would have done everything in exactly the same way as FF, although they may have been better negociators with the EU/IMF.

But as far as the electorate is concerned FG/Lab could now force NAMA to start selling off assets much faster, making a much bigger loss on said assets than FF had envisioned (hoped, prayed, whatever) and they could blame it all on the previous government. Even though it wouldn't happen overnight, it would draw a line under the sand far quicker and get the property market moving again (not that I care, but it seems like you have to end on a mantra like that).

Would that cause serious problems for the governments balance sheet? It wouldn't hurt the banks surely.

I know I am out of my depth, but I can understand when some crowd is artificially propping up the market. It will only result in a lack of trust in property valuations, as people can deal with natural fluctuations, but when it is plainly obvious that there is a massive institution made up of agenda driven people messing with valuations it scares buyers off completely.

The government really must be completely spineless not to realise that they have to take serious chances now. The path of least political and economic pain is no longer open to them. The right path is the path that goes straight through the flames and not up and down for a while looking for an opening where nobody gets burnt. They just have to jump it and pick up the torch on the other side (Sorry to throw around mixed metaphors, couldn't help myself)

lmimmfn

Are people forgetting? the ECB/IMF run the country.

hmmm

This sounds like an excellent idea. People with cash get to buy property as a one way bet, and the taxpayer picks up any of their losses. It's bribing people to take part in the ponzi scheme.

ascanbe

Sand wrote: »

Re Lennys video on NAMA

The most interesting comment is his one just after a minute in where he proclaims that clear, objective market indicators are showing that property is close to the trough. He then goes on to state that "We really do need to banish our [something incomprehensible] that I referred to earlier, this suggestion that we've further to go down and further and further. And thats part of the problem here."

This was posted in September 2009. 18 months ago. The market didnt reach a trough 18 months ago. Lenny was talking bollocks with his chat about clear, objective market indicators.

It betrays many issues:

1 - The officials always claim to have identified the problem, fully and comprehensively.
2 - Anyone disagreeing with the official view is part of the problem
3 - The officials lie and lie and lie.

I think this is important to stress, because even today, many people still consider that the officially released figures from the DoF are the baseline, and divergence from them has to be justified and defended by those crazed loonies who dont implictly trust the DoF to call it right. However, experience has taught us that its the officially released figures that need to be considered highly suspect, understating both risk and liabilities and overstating assets and gains.

NAMA itself is loose, with a vague mission statement, no oversight worthy of the name and a lot of parasites in the legal and property professions to feed. And you can be absolutely, 100% certain that of all the winners from NAMA, the taxpayers will not be amongst them.

That goes without saying.