NAMA developers to make profits on loss making loans

Slideshowbob

http://www.independent.ie/opinion/analysis/so-it-was-a-builders-bailout-after-all-2835970.html

This makes me sick.

These guys have failed yet could still be rewarded.

Where is the justice??

Cookie_Monster

http://www.independent.ie/opinion/analysis/so-it-was-a-builders-bailout-after-all-2835970.html

linked

That is ridiculous, how on earth is it being allowed?

RichardAnd

Cookie_Monster wrote: »

http://www.independent.ie/opinion/analysis/so-it-was-a-builders-bailout-after-all-2835970.html

linked

That is ridiculous, how on earth is it being allowed?

It's the Irish independent, for all we know it could be made up and even if it isn't, the article is written in a sensationalist manner that a good journalist shouldn't use.

SBWife

Did you actually read the article.

If there's any profit made based on the price NAMA paid for the bank loans NAMA gets 90% of it. In order to provide an incentive to maximise the value of the associated properties the developer could potentially get 10% of any profit.

Slideshowbob

SBWife wrote: »

Did you actually read the article.

If there's any profit made based on the price NAMA paid for the bank loans NAMA gets 90% of it. In order to provide an incentive to maximise the value of the associated properties the developer could potentially get 10% of any profit.

Read it yes

Why should these failed developers ever have potential to realise profit on already discounted loans which they in their wisdom signed up to?

If they play ball they get their 200k a year which as it stands is already disgraceful

SBWife

If it means that the state/NAMA losses are reduced I've no problem with the type of incentives proposed. Negotiators with some skin in the game as is the case here with the 90/10 split are normally more effective and cut better deals than those purely working for a salary.

I do however think that €200k for managing ones own distressed property portfolio is excessive.

Slideshowbob

SBWife wrote: »

If it means that the state/NAMA losses are reduced I've no problem with the type of incentives proposed. Negotiators with some skin in the game as is the case here with the 90/10 split are normally more effective and cut better deals than those purely working for a salary.

I do however think that €200k for managing ones own distressed property portfolio is excessive.

So you have no problem with NAMA as it stands apart from the 200k salaries? The whole thing is making me sick at this stage. It's as if most people don't understand what is happening and/or don't care otherwise there would surely be revolt by now or am I missing something!?!

These are failed negotiators and their acumen has already proven to be flawed, yet it's carry on regardless and try again lads. Only this time they have Daly and McDonagh to oversee their failings.

McDonagh - the guy who was laughing on the news this week as he read out the various listings of graded hotels which NAMA has in its clutches, again all backed by the taxpayer. So funny Brendan innit!?!

sollar

Their incentive should be that they might carry less debt and maybe won't get thrown out of their mansions.

They really should be taken to the cleaners and end up on social housing.

I know someone in NAMA and their lifestyle hasn't changed at all.... bar less use of a helicopter.

SBWife

Where did I say I'd no problem with NAMA?

I've significant problems with NAMA. Its funding, the fact that the duration of its loan portfolio and that of the bonds by which its financed are significantly mismatched. I think the procurement process used should be clearer. I've issues with many of the receivers being associated with accounting firms which signed off an the audited statements of the banks and property companies during the boom with no disclosure of the obvious risks being taken.

My issues are however a little bit more complex (and potentially wouldn't sell the volume of newspapers) than those highlighted by the Sindo.

What I have said is that I've no issue with a 90/10 split for an incentive payment.

Slideshowbob

SBWife wrote: »

Where did I say I'd no problem with NAMA?

I've significant problems with NAMA. It's funding, the fact that the duration of it's loan portfolio and that of the bonds by which it's financed are significantly mismatched. I think the procurement process used should be clearer. I've issues with many of the receivers being associated with accounting firms which signed off an the audited statements of the banks and property companies during the boom with no disclosure of the obvious risks being taken.

My issues are however a little bit more complex (and potentially wouldn't sell the volume of newspapers) than those highlighted by the Sindo.

What I have said is that I've no issue with a 90/10 split for an incentive payment.

ok thanks for clarifying - Labour - the great social justice party seem to be on holidays today ............

Monty Burnz

NAMA was a scam from day one. It's going to lose the taxpayer a fortune. There was a good post about it on The Property Pin the other day:

All of these moves by NAMA - selling apartments to Cluid, providing loans, guaranteeing NE - are all just ways of disguising the losses the taxpayer is being made to pay, breaking it up into chunks so that the appalling truth is less apparent.

Take the supposed '200k apartment'. NAMA probably reckon the value is really 170k now and will end up much lower eventually. They are economists, they understand supply and demand. But how much has it really cost the taxpayer? For me the important thing to note is that we really bought these apartments when we bailed out the banks - whatever loans the developer had against them and can't pay back were transferred to public ownership, leading to ultimate foreclosure and takeover of the assets. Everything that's happened since is just softening the blow in a slow and expensive process

Example with very rounded off figures:
The developer has 50 apartments that were asking 500k at the top of the bubble. Now say the developer expected to make 25% markup on those, so we can assume the cost was 400k each. They are now worth allegedly 200k. Really, in a fire sale in a market with no credit, they would struggle to make 150k each.

So, if there was no NAMA, no Clúid, no HFA, no rent allowance, or no market distortion of any sort, and the now state-owned bank was to take these apartments and put them on the market in one fell swoop, what would happen?

The developer loan of 20 million (400k cost x 50 apartments) would realise a return of 7.5 million (150k x 50 units). An immediate and visible loss of 12.5 million for the bank aka the state aka the taxpayer.

Instead of doing that, part of the 12.5 million loss is booked at the bank, part of the loss is booked at NAMA, part of it at Clúid, part of it in covering NE losses. Of course the process is so convoluted and expensive to administer that the losses will in reality be much more than 12.5 million. All the while, the cost of living in Ireland is artificially high, damaging our competitiveness and recovery, because property values are being propped up.

Am I alone is seeing it this way, or is it self-evident?

http://www.thepropertypin.com/viewtopic.php?f=4&t=39778&start=15

rodento

Have to say the whole thing stinks, the whole cash back in five years thing is complete madness.

See an apartment for 200,000 and offer 20% off if the value falls in five years...

Why not sell the property at current rock bottom prices and save on the cost of the staff that will value the properties and managing the process

Sounds almost as bad as the un-afordable housing schemes

SBWife

rodento wrote: »

Why not sell the property at current rock bottom prices and save on the cost of the staff that will value the properties and managing the process

Two reasons:

It would wipe out all of the equity in NAMA and leave the body immediately insolvent.

It would ensure that all recovery gains (from firesale prices) would go to the buyers of the properties and non to NAMA and the taxpayer.

rodento

And whats the cost to the Irish Ecomany as the whole system stalls because no one will buy at the current over inflated market value

Monty Burnz

SBWife wrote: »

It would ensure that all recovery gains (from firesale prices) would go to the buyers of the properties and non to NAMA and the taxpayer.

What recovery gains?

Do you propose that NAMA sits on these properties for a decade or 15 years? There will be no 'recovery' in property prices. The bubble isn't coming back.

rodento

Also how much extra will we have to pay to cover maintenance and security of these properties

As Nama provides a list of all its properties it wants to sell, that list can be used by squatters and the like:rolleyes:

SBWife

Normally a firesale will result in properties being sold below the price they would achieve in an orderly market (see Resolution Trust Corp. the UK sales of foreclosed properties in the early 1990s etc.) following a firesale, prices in theory should start to increase at what would be a normal rate based on historical evidence. The rate I'm talking about is 2-3% a year a rate normally supported by GDP and population growth nothing like the crazy froth during the boom years.

So for your much discussed €200k apartment if I'm to release 50,000 units into the market in one fell swoop (aka a firesale) the market clearing price is maybe €120,000. But once these are sold and the inflow onto the market slows with fewer properties available the price hits an equilibrium of say €150,000 (initial gain has in the past happened very rapidly and provided a windfall to those who had the ability/financing to buy and flip) and starts to recover in 10 years at 3% it's back to €200k. Using a firesale the full €80k is a loss to the tax payer and a gain to the buyer but attempting to be more orderly should in theory retain some of this value for the tax payer.

SBWife

rodento wrote: »

Also how much extra will we have to pay to cover maintenance and security of these properties

As Nama provides a list of all its properties it wants to sell, that list can be used by squatters and the like:rolleyes:

Many properties on that list are occupied, also squatters are more likely to find a property by rolling up outside rather than downloading government documents from the web and searching out the address.

rodento

Also would love to know how the hell does Nama think it'll shift around 100,000 living units over 10 years without dropping the price cause you have to factor in all the house's/apartments currently in default that will have to be added to the market at some stage...

TheLoneRanger

Nama was always set up to rape the tax payer as are most of the departments that are given free reign from government. Nama got 1 billion in last year for the excheqer this is without costs which amount to over 400 million and these were discounted prices. Rent allowances and supplements cost the taxpayer nearly 1 billion per annum in the social protection budget which in turn is almost 40% of our total yearly budget. Im no genuis but in the census it stated that there are over 290,000 vacant dwellings in Ireland right now surely to God they can see that there is potentualy a 1 billion save to the budget right there also by handing out these homes it would create up to 50,000 new jobs and stablise the property market . But alais there is a bigger deciept behind the smoke screen of illusion of caring and its "Greed" same as it always was.The speech all those years ago that JFK made "the one that really got him killed" about the danger in society that the"illumaniti" was a lot closer to the truth than we care to believe

Monty Burnz

TheLoneRanger wrote: »

The speech all those years ago that JFK made "the one that really got him killed" about the danger in society that the"illumaniti" was a lot closer to the truth than we care to believe

Amusing that someone could listen to that speech and think he was referring to 'illuminati' and not the threat of the Soviet Union. :rolleyes:

sunshinediver

Monty Burnz wrote: »

What recovery gains?

Do you propose that NAMA sits on these properties for a decade or 15 years? There will be no 'recovery' in property prices. The bubble isn't coming back.

Well they will recover in value at some point in the future but not a the rate witenssed in previous years.

Effectively NAMA is the developers version of the bank bail out.

A firesale of unwanted apartments today would result in a loss for the taxpayer as the state now owns these apartments (most would probably achieve prices significantly less than the "haircut" value they were bought for) In much the same a a "burning of bank bond holders" results in a loss for the state as we own/are backing the banks via the guarantee.

In each case the onus of liability for wrecklessness has been removed from the private sector and placed on the taxpayer. It's actually quite a clever stitch up when you think about it. Capitalist failure backed by socialism.

TheLoneRanger

Monty Burnz wrote: »

Amusing that someone could listen to that speech and think he was referring to 'illuminati' and not the threat of the Soviet Union. :rolleyes:

Hi go to you tube and have a listin there is no doubt to whom he is refearing too and the soviets would not hae had him killed as they already backd down on the cuba missile affair there ws no way on earth they would have assinated him for fear of retalation (this is my personal opinon but I hae studied this in great depth)

Liam Byrne

sunshinediver wrote: »

Well they will recover in value at some point in the future but not a the rate witenssed in previous years.

They HAVE recovered. FROM the cloud-cuckoo-land overpricing. The political establishment and their cronies failed to acknowledge this back in 2008 and saddled us with a ridiculous and expensive scheme to save their interests.