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 Post subject: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:21 am 
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Of Systemic Importance

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Quote:
NAMA in plan to kickstart property market

To counter this, the scheme will work along the following lines on an apartment worth €200,000:

?The bank will loan €140,000, NAMA will contribute €40,000 and the buyer will put down a deposit of €20,000.

?If the property rises in value in five years' time, repayments on the combined bank/NAMA €180,000 loan will continue as normal.

?But if the property falls in value, following an independent valuation, NAMA will not seek repayment for up to €40,000. This will lower the repayments and crucially cushion the buyer from any negative equity built up over the five years.
This is huge guys, I think it deserves its own thread here so people know just what NAMA are getting us into. We basically have the Irish government guaranteeing buyers (this could be FTB'ers, or even investors by the sound of it) that the Irish tax payer will absorb their negative equity. Buyers are essentially going to be given a free option. Prices go up, they win; prices go down, they don't lose money.


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:27 am 
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Planning Tribunal Attendee

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Snap HouseBuyer, just posted the very same over on the Noonan orders NAMA to start selling thread. This is a massive distortion of the market and will fall once anyone challenges it in Europe, which they surely will. Frank Daly should sit down and have a serious chat with himself and try to come up with something better. How's that business plan looking now?


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:28 am 
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Under CAB Investigation

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Location: I like Dalkey
HouseBuyer wrote:
We basically have the Irish government guaranteeing buyers that the Irish tax payer will absorb their negative equity.
:evil:

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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:31 am 
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Joined: May 2, 2008
Posts: 1612
Location: Ireland
Simple English.

The taxpayer will loan you 180K to buy a 200K Apartment owned by the taxpayer.

But you only have to pay back 140K (assuming prices keep falling).


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:37 am 
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Quote:
To counter this, the scheme will work along the following lines on an apartment worth €200,000:

The bank will loan €140,000, NAMA will contribute €40,000 and the buyer will put down a deposit of €20,000.

If the property rises in value in five years' time, repayments on the combined bank/NAMA €180,000 loan will continue as normal.


What that tells me is the buyer will be in immediate negative equity to the tune of €40,000.

Without the NAMA loan, the property would sell for €160,000.
Consequently, some schmuck will be paying €200,000 for a property they would have paid €160,000 for, had the NAMA loan not existed.


The reason why they are doing this :
Quote:
He said NAMA needed a rise of 10pc in property prices or it was unlikely to be profitable in the long run.


Translation - At current market prices, NAMA is looking at serious losses !


Quote:
"The slowness in property is certainly not helping us,'' Mr Daly said.


Yes ... it's almost like property prices are being prevented from falling to the market clearing level !

XX


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:37 am 
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Single Home Owner

Joined: Apr 16, 2010
Posts: 123
Quote:
He said NAMA needed a rise of 10pc in property prices or it was unlikely to be profitable in the long run.


I.e. NAMA will start coming to the taxpayer looking for money in a couple of years.

What happens when NAMA doesn't have the cash to pay back these negative equity guarantees?

Quote:
"I know some people will be concerned that if somebody has a house for sale, they will be saying, my property is never going to shift now that Nama is assisting the shifting of these other properties, I can understand that, but what do we do? All sit back and do nothing?"


Sounds distinctly like Brian Lenihan's (RIP) mantra of "we had to do something" to get credit moving again. So they guaranteed debts they couldn't afford and set up NAMA, which a slow motion disaster.

They should just say "NAMA in plan to kick property market".

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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:40 am 
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Of Systemic Importance

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Another question, if the value of the property falls, who is in the line to take losses first? Is the buyers 20k burned first, or will NAMA's 40k take the hit? That article seems to suggest that NAMA is first in line?


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:42 am 
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Location: Ireland
Hold on, so I can only get this loan for apartments sold by the government.

Is this not anti competitive? Does the EU have a role here?


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:51 am 
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Am I missing something here - how is it a 'Property Market" if these props of taxpayers money are in place to compensate for big bad NE - the fear of which seems to be greater than fear itself?
The only way normality - relative to the general economic times so it'll be a shadow of former glory days - will finally appear is surely the removal of all such artificial supports, subsidies etc and the creation of a true supply/demand based situation.
A market in short!


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 10:52 am 
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Old Time Landlord

Joined: Aug 27, 2009
Posts: 397
Does it really matter? NAMA is a two way bet with both bets covered. If house prices continue to collapse, the costs (to cover NAMA and additional banking losses) will fall heavier on current generation taxpayer pockets. Particularly on people currently invested in property. But if they succeed in their aims and manage to prop up house prices, it will come out of our kids' pockets through their having to pay higher house prices, and through their society's capital resources being diverted there.


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 11:10 am 
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Single Home Owner

Joined: Jan 13, 2009
Posts: 177
HouseBuyer wrote:
Another question, if the value of the property falls, who is in the line to take losses first? Is the buyers 20k burned first, or will NAMA's 40k take the hit? That article seems to suggest that NAMA is first in line?


Our never ending attempts to control market forces never cease to surprise me. Having looked at NAMA's website this morning I think they need some IT staff in there if they are to use it as a vehicle for peddling their dastardly scheme..


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 11:13 am 
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Too Big to Fail

Joined: Jun 20, 2010
Posts: 3052
mr_anderson wrote:
Quote:
To counter this, the scheme will work along the following lines on an apartment worth €200,000:

The bank will loan €140,000, NAMA will contribute €40,000 and the buyer will put down a deposit of €20,000.

If the property rises in value in five years' time, repayments on the combined bank/NAMA €180,000 loan will continue as normal.


What that tells me is the buyer will be in immediate negative equity to the tune of €40,000.

Without the NAMA loan, the property would sell for €160,000.
Consequently, some schmuck will be paying €200,000 for a property they would have paid €160,000 for, had the NAMA loan not existed.


The reason why they are doing this :
Quote:
He said NAMA needed a rise of 10pc in property prices or it was unlikely to be profitable in the long run.


Translation - At current market prices, NAMA is looking at serious losses !


Quote:
"The slowness in property is certainly not helping us,'' Mr Daly said.


Yes ... it's almost like property prices are being prevented from falling to the market clearing level !

XX



I think this is a good idea :nin
No one wants to buy an apartment any more and they are responding. Frank Daly knows all about property incentives :nin

I wouldn't buy an apartment in a NAMA development at today's market price without them underwriting a chunk of the purchase price. They have too much power in the market.

With a proper 20 year annuity mortgage this takes the risk out of apartment buying if you want to live in an apartment for the next 5 years.

But is it legal?


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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 11:16 am 
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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 11:16 am 
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Planning Tribunal Attendee

Joined: Sep 12, 2006
Posts: 1388
mr_anderson wrote:
What that tells me is the buyer will be in immediate negative equity to the tune of €40,000.

Without the NAMA loan, the property would sell for €160,000.
Consequently, some schmuck will be paying €200,000 for a property they would have paid €160,000 for, had the NAMA loan not existed.


The reason why they are doing this :
Quote:
He said NAMA needed a rise of 10pc in property prices or it was unlikely to be profitable in the long run.


Translation - At current market prices, NAMA is looking at serious losses !



+1

Like any confidence trick, you are undone by what you assume to be true.....i.e. £200k valuation.

If you tried to sell the apartment after buying it from NAMA at £200k....What would you get? 160K by any chance?

This cannot work and will only push prices lower in my opinion. Imagine you are trying to sell a £200k apartment and NAMA was offering the same with £40k guaranteed against loss. You can't compete with that. You'd have to drop your price.

NAMA is sitting on so much property and must be really sh*ting itself to come up with a "scheme" like this...simply a crude attempt prop up the balance sheet value of the assets it has charge over....And it won't work.

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 Post subject: Re: NAMA Guaranteeing Negative Equity Portions of Home Loans
PostPosted: Thu Jul 28, 2011 11:17 am 
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Of Systemic Importance

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Posts: 5188
Another thought, what if you buy one of these gaffs, then wait 5 years and then get the "independent" valuer in. You slip him a brown envelope, he declares the value of the property has fallen by about €40k, NAMA write-off the €40k, but you sell the property at the full price and pocket the €40k.


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