LTEV, 30% discount on loan value, release of documents upgrading the LTEV for land on Christmas Eve, NAMA breaking even.
Are we looking at the wrong thing? Is there a massive double-bluff going on?
Look at it this way. For NAMA to break even, what’s the quickest way to get the 60% of non-performing loans back to performing? Why, offer them a 30, 40, 50% discount (as per the original discount on the purchase price from the banks) for immediate settlement.
Who does this benefit? Not the banks, they have taken their loss. Not the taxpayer, we’ve already stumped up that loss in new capital for the banks. It benefits only the delinquent borrowers. They get a major discount on their debt which they can repay with a combination of assets and new loans from the now willing banks. They end up not being busted, NAMA gets its money back and all appears above board. And appears is the crucial word here.
The timing of the release of documents is a massive double-bluff. Everyone is looking for bad news being buried:
Government: we’re being tough on the banks.
Everyone else: no you’re not, you’re giving a bigger LTEV for some loans.
Government: oh yeah, sorry, we’ll reverse that snigger
Everyone else: phew, good thing we’re on the ball
The result? The taxpayer stumps up more in recapitalisation, the breakeven amount for NAMA is way reduced.
NAMA will still take massive losses on the big loans to the developers, but on the ‘other’ category (which is 20something% of loans?) my bet is they will make a slight profit with many of those loans being modified to just above purchase price (on average) and repaid.
Am I unspeakably paranoid?