NAMA Guaranteeing Negative Equity Portions of Home Loans


We won’t really know until we see these things up for sale. If these things are selling at 2008/2009 prices, then people obviously won’t touch them with a barge pole, even with a 20% NAMA discount. If these gaffs are selling at 2011 prices, but with a 20% NAMA discount, I can see interest.


With the greatest of respect, where is the 200K figure coming from? You can get a 1 bedroom apartment in the docklands right now for 90K beside Facebook and Google. You can get a 2 bedroom for 145K.


It’s a good interpretation on it but I don’t think its fully right.

They’re looking for interest payments on the 40k and hoping for capital repayments eventually.


One would assume it’s a theoretical example.


The primary objective of any organisation is too make money… that includes NAMA…

In order to do this NAMA need to offload the properties at inflated prices…

They are hoping that this achieves that objective…



Only a goon could spout that shite. … ing61.html


Eddie Hobbs on Newstalk around 5.30pm going on about the banks not lending the bold boys as if that was the root of the problem

If the banks lent to small businesses and property buyers BEFORE we make an 18 BILLION adjustment to the economy then we would end up in a Sept 2008 situation again very quickly (its going to happen again anyway just be alot worse)

How is it fair that NAMA uses peoples own tax money against them, if you sell on a negative equity property you still owe money yet these new buyers wont have to courtesy of the first person. How can people selling property compete with NAMA???

The country would drive you mad if you thought about it too much!! Fighting the natural equilibrium of everything from the labour market to property prices - it only serves to draw out this miserable economic patch in our history longer.


Meanwhile in the real world it is happening.


I’m going to take my cue from yoganmahew and risk repeating a previous post of mine …

And from todays article


This has already had an airing, and a bashing, on Irisheconomy a few weeks ago… … nt-scheme/
Gregory Connor points out that this is Nama getting into Derivatives buying bull call spreads from the homeowner to be… I do love the bit st the end re the potential accounting treatment…
"In options terminology the scheme is simple. Nama has sold the house for €100,000 and, linked to this, Nama has purchased a bull spread from the homeowner. A bull spread is long a call at a lower exercise price (82,000) and short a call at a higher exercise price (100,000). Nama has paid €18,000 for this bull spread; the five-year payoff on the option spread is €18,000 or less, so in all cases Nama has overpaid for the bull spread valued separately. The market value of the mortgage enhancement scheme to the purchaser is always positive, so the “true” sales price of the property is always less than the stated €100,000 sales price.

It is easy enough to value such a sales package using the Black-Scholes model. Nama receives €100,000 for the property, pays €18,000 in its mortgage contribution, and owns a Bull spread with low/high exercise prices of 82,000/100,000. The value of the package depends upon the underlying market price of the house. Here is the “true” sales price of the package, for a range of true cash market prices of the house (and other parameters*):

Cash Market Price Stated Sales Price True Sales Price

€80,000 €100,000 €84,139

€87,231 €100,000 €87,231

€90,000 €100,000 €88,635

€100,000 €100,000 €93,213

Note that while Nama records that it has sold the property under such a scheme for €100,00, the true market-clearing cash price (taking account of the bull spread) is actually €87,231. This could lead to distortions and potential deceptions in the housing market. Suppose Nama is trying to sell two identical properties, flats 3B and 3G in the same development. First Nama sells Flat 3G under the scheme for a stated price of €100,000. Then, Nama’s real estate agent tells a potential cash-purchaser of Flat 3B that an identical flat was recently purchased for €100,000, not mentioning or downplaying that the other flat purchaser utilized the mortgage enhancement scheme. If the cash buyer does not adjust carefully for this, they could be tricked into overpaying.

How will Nama account for the transaction? There is a potential for “evergreening” or accounting chicanery with such a scheme. Suppose that Nama purchased the loans underlying the flat for 99,000. Will Nama record the €100,000 sales transaction as a €1,000 profit, or a €11,679 loss, or something in between? The transaction might look very good from the short-term perspective of a Nama senior manager, concerned with massaging earnings over the next few years, and willing to spend cash to improve short-term Nama profits. On the other hand, it is not clear to me that Nama’s risk capital providers (Irish taxpayers) want to take on potentially large, speculative positions betting on Irish property market price increases."


Are these NAMA properties for sale going to be in the same blocks as other NAMA properties that the government has bought for social housing?? Won’t that push down the prices even more?? This idea is bonkers. This is going to have the complete opposite effect that these guys want, with everyone else having to drop their asking prices to compete. Great news really, but when you think how much these NAMA guys are getting paid and how clueless they really are, it’s pretty depressing. Also, If they are putting up 8000 properties, and the total amount sold this year is looking like 11,000, then that’s pretty big interference in my book.


So, let me see if I understand how this NAMA scheme is supposed to work. I’m working from The Irish Times explanation … ing61.html

A potential FTB, worried about falling into negative equity, can purchase a NAMA held property by going to one of the two State owned “Pillar” banks, securing funding and along with that put down a deposit of 10%. After 5 years should the property then fall in value by up to 20% from the purchase price NAMA will defer up to that 20% of the price and the loan is then adjusted to reflect the new lower valuation. If the value does not fall, no adjustment is made.

It is only the loan that’s covered by the scheme, not the savings/deposit used.

So, in that case, why would an FTB worried about negative equity not just wait and save themselves the difference between the price NAMA is now seeking and the potential savings (plus the associated variable rate interest fees being charged by the two bailed out banks) of sitting on their hands and simply following the market down?

An ill thought out scheme from an ill thought out entity.

Blue Horseshoe


I think this is a good idea and should be adopted by the entire market.
In the longer term it should provide price stability.

For somebody who is trading up they will provide a loan to the buyer for 5 years.
In turn when they purchase their new house they receive a loan from the seller.
Thus both buyer and seller are protected from falls in the price of property.
Remembering that any mortgage is stressed tested against the full value of the loan.


Good times so.


The trader uppers have to sell to someone don’t they?
I.e. If NAMA is encouraging FTBs to buy NAMA properties won’t that make it even more difficult for the trader uppers to shift their own non-NAMA property?
In fact isn’t the whole point of this scheme to give NAMA an advantage over existing home owners in selling their property?

Also, if NAMA does succeed in getting significant numbers of FTBs to take up on this scheme, that will be a headwind for the rental market. Currently the rental market is being supported by the lack of FTB movement into home ownership.


I’ve been trying to work that out too.

Assuming 180k mortgage at an average of 5% over 25 years starting in January 2012
Over 5 years, €42,580.07 interest will be paid, with €20,275.53 capital paid off.

So if the scheme is to protect from 40k of negative equity (a price fall of 20% from purchase price of 200k), I don’t see how NAMA can lose - the deposit of 20k and the capital repayments of 20+k mean that the remaining mortgage will always be less than a 20% fall.

Meanwhile NAMA will have made roughly 3k in interest (very roughly speaking the 20k not covered by interest reducing by the amount paid off each year).

It can’t possibly work this way, can it?


In addition, there will be no second-hand market as there will be no new entrants to second-hand homes and so no trader-uppers. NAMA will suck all the available capital out of the system.


More madcap BS from the madcap state.

As someone already noted: “How would a complaint to the EU competition authority work out, it is clearly a market distortion.”

And: “How can it be legal for there to be artificial State support in selling properties which are in direct competition with un-supported private sellers across the road?”

How do we petition the EU to stop this distortion?


Yup, that is part what I was getting at.