A NAMA for ordinary people not developers.

SkepticOne

I was listening to the the radio this morning and a developer was on complaining about the length of time it would take to get NAMA up and running and that the government should start helping developers now as they needed the money to complete projects and so on.

But the banks are in a bad way not simply because developers who took huge risks and lost are now holding the country to ransom. The banks are also in trouble because many ordinary people took out loans fully intending to pay them back, not with a view to great profits but simply for a place to live. These people are a problem for the banks because many of them are losing their jobs through no fault of their own and will not be able pay back their loans.

Why not have NAMA buy the mortgages from the idiot banks and instead of borrowing further money to help the developers, use that money to help these people who have lost their jobs retrain in industries that are likely to be of benefit to the country in the future.

Advantages:
1. We are not keeping people in development jobs that are ultimately doomed.

2. We don't need any more housing estates in the middle of nowhere that will be worth next to nothing even when they are completed.
3. We will create genuine value in the economy through having a skilled workforce rather than throw people on the scrap heap.
4. The banks may well buy back those mortgages once people are back in jobs.

Sand

It will never happen to be honest, for pretty much the same reason as the why the bank bailout shouldnt go ahead - moral hazard, cost, difficulty in managing the loans and so on. And on top of all that the banks and the developers have good links with Fianna Fail, whereas faceless nobodies locked into some housing estate 20 miles outside Mullingar do not.

Somehow relieving the impact of negative equity on hundreds of thousands of consumers would do more to improve Irelands economic prospects (one of the major threats to Ireland in the next two years is rising ECB interest rates - it will murder us), but the banks are the priority, above any other consideration. And I stress the banks, seperate to the economy.

jdivision

who's going to pay for the Nama for individuals? The people who showed fiscal responsibility while all around them put money on credit cards, bought houses they shouldn't have and generally lived beyond their names. It's bad enough the bailouts we have coming now, I'm not in favour of bailing out individuals who made bad choices. And believe me I have plenty of problems with both nama and not nationalising the banks

Villain

OP, you do realise that the Developers will still owe the FULL amount after NAMA buys the loans at discounted values?

Nordie Loyalist

Villain wrote: »

OP, you do realise that the Developers will still owe the FULL amount after NAMA buys the loans at discounted values?

Very true but will they have to actually pay it or their personal guarantees envoked to help with the payments?

Seems unlikely. :mad:

Sand

4th poster you do indeed realise that the taxpayer will be the proud owner of worthless debts from these developers who will simply declare bankruptcy if they are pushed to repay?

Villain

Of course Sand and I don't like the plan at all but its just a lot of people seem to think that loans are been reduced by NAMA, i.e. the owner's debt is reduced which isn't the case.

SkepticOne

Thanks for the responses. I will try to deal with each of them.

Sand wrote:

It will never happen to be honest, for pretty much the same reason as the why the bank bailout shouldnt go ahead - moral hazard, cost, difficulty in managing the loans and so on. And on top of all that the banks and the developers have good links with Fianna Fail, whereas faceless nobodies locked into some housing estate 20 miles outside Mullingar do not.

Somehow relieving the impact of negative equity on hundreds of thousands of consumers would do more to improve Ireland's economic prospects (one of the major threats to Ireland in the next two years is rising ECB interest rates - it will murder us), but the banks are the priority, above any other consideration. And I stress the banks, seperate to the economy.

To be honest, I would rather neither scheme went ahead. I agree that a lot of the same problems apply to both.

But if it was a choice between what I am suggesting or the existing developer bailout then even from a pure value for money basis for the tax payer, what I'm suggesting should win.

As to moral hazard, I would not offer this scheme without strings attached. They would only get help on condition they retrain. I think very few people would quit (in reality they would have to be made redundant) their jobs in order to go on a training course. They would be helped with their mortgage but their overall income would be reduced.

who's going to pay for the Nama for individuals? The people who showed fiscal responsibility while all around them put money on credit cards, bought houses they shouldn't have and generally lived beyond their names. It's bad enough the bailouts we have coming now, I'm not in favour of bailing out individuals who made bad choices. And believe me I have plenty of problems with both nama and not nationalising the banks

This is also true. But for the most part, although there may be some greed involved, people were just looking for a home. Very different from developers who were hoping to make millions if not billions from their deals. Also again, in pure terms of getting some sort of return, a loan belonging to someone who's being retrained is worth more than someone who is simply vegetating on the dole and if they fail to find a job, their house is dumped on the market and a loss is realised. Better to help that person find another job and for the most part they will continue to pay that mortgage even in the depressed market.

OP, you do realise that the Developers will still owe the FULL amount after NAMA buys the loans at discounted values?

This has already been answered, but I would also argue that one of the goals of NAMA is to help developers with finance (note I did not say free money). By that I mean not foreclosing on developers that are having trouble paying, and in some cases raising further money to lend to them. What I am suggesting here is that this sort of help be extended to ordinary people. For the most part they would still owe their loans but they would not be turfed out while they are retraining in skills deemed necessary for future prosperity.

SkepticOne

Villain wrote: »

OP, you do realise that the Developers will still owe the FULL amount after NAMA buys the loans at discounted values?

Yes, I have always been aware of this. But I think you will agree that developers will get a much better deal out of NAMA than they would on a purely commercial basis. As such they are being helped and we, the taxpayer, are paying. Our money would be better invested elsewhere.

Sand

Of course Sand and I don't like the plan at all but its just a lot of people seem to think that loans are been reduced by NAMA, i.e. the owner's debt is reduced which isn't the case.

All other things being equal, would you prefer to have a massive mortgage owed to heartless, bloodsucking monster ( a bank) or would you like it better if you owed the money to a mate who wasnt too bothered if you paid it back or not? Whats a few quid between mates? And its not even your mates money in the first place? He stole it off some ****ing idiots. Win win right?

This is a bailout of the developers. It isnt as blatant or measureable as the bank bailout, but it is a bailout.

dresden8

Villain wrote: »

OP, you do realise that the Developers will still owe the FULL amount after NAMA buys the loans at discounted values?

I think you will find that NAMA will not be in the business of bankrupting developers and fncking them out of their houses, the way the little people will be fncked out of their houses by the banks.

Rest assured they will not be in need of a soup-run from the Simon Community, unlike a lot of people who are contributing to NAMA et al.

P. Breathnach

NAMA is not being set up to help developers, as Villain indicated. It is being set up to rescue the banks.

Sand

NAMA is not being set up to help developers, as Villain indicated. It is being set up to rescue the banks.

Its primarily set up to help banks. Its set up to help developers too - providing them with finance when no one else would, not forclosing even when they cant and will never be able to repay the loan and so on.

Why do you think all the talk of developers sinking NAMA with lawsuits has stopped? They know NAMA will be good for them. Theyve been called aside by the boys and it was let known that all the tough talk was just for the plebs.

Why do you think Fianna Fail and the banks and all their mates are throwing everything including the kitchen sink to try and stop Liam Carroll being declared bankrupt? NAMA is the biggest scam ever perpetuated on the Irish people, especially this nonsense that the developers are fearing the dreaded call from NAMA.

If NAMA goes through, you can be sure the developers will celebrate with delight along with the banks and Fianna Fail.

Carawaystick

SkepticOne wrote: »

But the banks are in a bad way not simply because developers who took huge risks and lost are now holding the country to ransom. The banks are also in trouble because many ordinary people took out loans fully intending to pay them back, not with a view to great profits but simply for a place to live. These people are a problem for the banks because many of them are losing their jobs through no fault of their own and will not be able pay back their loans.

Evidence of this?

AlekSmart

Its primarily set up to help banks. Its set up to help developers too - providing them with finance when no one else would, not forclosing even when they cant and will never be able to repay the loan and so on.

It looks like Sand astutely spots the rather uniquely Irish element to the Depression (as Gailge)....the reality that in Modern Ireland Mainstream Banking and Property Developing/Speculating had become one....:o

Two divine persons in the one God.....and that God is PROPERTY .....or at least the totally unsustainable notion that every post pubescent Irish person MUST own a bit of an oul house.....or they are doomed to burn in hell !

Even now,after all that has been revealed about the mess we`ve engineered,a major element of the Government`s "rescue" package is getting the Property "Market" restarted.......FFS.

Not so much as a peep about using Governmental Policy to realign the Irish housing market to at least establish RENTAL as a viable,sustainable and desirable means of setting up a home environment...thus allowing the RENTER to divert their money into other areas of existance....such as enjoying life !!!!

amacca

SkepticOne wrote: »

This is also true. But for the most part, although there may be some greed involved, people were just looking for a home.

I think there was some greed involved and definitely a hell of a lot of reckless irresponsibility with some of these borrowers.

I know of one couple, wife in her thirties. who bought house (with 100%) mortgage and then borrowed from credit union and on multiple credit cards to have the house fully furnished before they moved in......and I'm not talking bare minimum here, eg 3 large flat panel tvs (massive one in sitting room, one in bedroom, fully fitted kitchen complete with american style fridge freezer, marble top counters, 2 bathrooms fully fitted une avec jacuzzi etc etc (you get the picture)....all on a carers pay and the husband who works/worked in construction.

Cant help feeling that something like this is not as isolated as some believe given the levels of personal debt out there.

Call it begrudgery...and maybe it is, but I think that reckless borrowers like the above should not get any bailouts.....they wanted everything immediately...they should accept the risk that comes with this attitude and someone who tried to live within their means should not have to contribute to this type of bailout either....Its hard to know with NAMA, think Im not in favour of it at all after reading posts in other forums and articles in the national newspapers...would think that temporary nationalisation and recapitalisation is the way to go and would find it sickening too if borrowers like the above were bailed out in some sort of nama like scheme for household debt....

Im not saying crucify the buyer who bought out of necessity or near necessity or because they were herded like lemmings over a cliff into buying by all sorts of commentators but I am saying crucify the ones that clearly turned into credit junkies and had completely unsustainable in the extreme household finances (these borrowers should get a harsh dose of reality) .....and then the problem becomes how to distinguish between who deserves help from NAMA lite and who does not, cue massive administration costs, sleveen politicians arguing for certain people to be granted aid etc sounds like a nightmare, cant see it happening and Im not sure it should, when you borrow you sign a contract and you take a certain risk its up to you to ensure you have reasonable prospects to service the debt and a reserves to fall back on in hard times.

Seems to me the only two ways to ensure people approach borrowing with respect and a bit of cop on are.. 1) is if there are consequences to bad borrowing, I would never be in favour of removing or diluting these, if you as a borrower mess up badly then you should clean up after yourself and dont be expecting someone else to do it for you (not a get out of jail free card or even get temporary release) 2) if there was more financial education of some sort..so you have some basic level of understanding of the financial products out there and the consequences for misusing them but in fairness youre supposed to be an adult when you're taking out mortgages etc and presumably you can read the terms and conditions + factor in at least some sort of prospect of interest rate rising + wages declining and give yourself a cushion, too many people did not do this it seems.

Unfortunately it is a whole other story for those who borrowed within their means and through unfortunate circumstances find that both incomes are gone etc and they had no reasonable way of knowing this was going to happen or factoring this into their calculations but its hard to know how to go about identifying these unfortuante people without massive costs and political chicanery intervening.

SkepticOne

Carawaystick wrote: »

Evidence of this?

I think it is fairly well established that there's large numbers of people losing their jobs. It is also well established that houses have lost a lot of value since the peak and still a lot further to go. We can infer why the combination of these two things might be a problem for the banks.

SkepticOne

amacca wrote: »

Seems to me the only two ways to ensure people approach borrowing with respect and a bit of cop on are.. 1) is if there are consequences to bad borrowing, I would never be in favour of removing or diluting these, if you as a borrower mess up badly then you should clean up after yourself and dont be expecting someone else to do it for you (not a get out of jail free card or even get temporary release) 2) if there was more financial education of some sort..so you have some basic level of understanding of the financial products out there and the consequences for misusing them but in fairness youre supposed to be an adult when you're taking out mortgages etc and presumably you can read the terms and conditions + factor in at least some sort of prospect of interest rate rising + wages declining and give yourself a cushion, too many people did not do this it seems.

Unfortunately it is a whole other story for those who borrowed within their means and through unfortunate circumstances find that both incomes are gone etc and they had no reasonable way of knowing this was going to happen or factoring this into their calculations but its hard to know how to go about identifying these unfortuante people without massive costs and political chicanery intervening.

I would fully accept that the downside of a NAMA for ordinary borrowers is that a certain moral hazard is introduced (though of course a huge one is removed from developers). We are talking about easing the burden on those who have lost their job while helping them reskill appropriately. But like I said earlier, a) this moral hazard is probably much less than it would be for developers and b) if someone is financially ruined, what is the good (either for that person or the country) of learning from their mistakes? They may never get to put that learning into practice.

The key question here is whether a bailout of distressed borrowers is better than a bailout of developers from a) a social point of view and b) from the point of view of getting a return for the taxpayer.

I think most people responding here are against bailouts in general. What I'd like to hear from is someone who believes that it has to be a developer bailout over any other sort.

transylman

If you want to know who the taxpayers money is going to help just read this article.

http://www.irishtimes.com/newspaper/opinion/2009/0818/1224252768992.html

Massive tax evasion, bribery, lying under oath, and good friends of FF of course.

Villain

transylman wrote: »

If you want to know who the taxpayers money is going to help just read this article.

http://www.irishtimes.com/newspaper/opinion/2009/0818/1224252768992.html

Massive tax evasion, bribery, lying under oath, and good friends of FF of course.

Everyone seems to forget that its the electorate that voted FF though

Boskowski

So basically what you're saying is that the taxpayers should continue to pay the mortgages for a) the people who were foolish enough to buy houses they couldn't afford b) people who lost employment and can no longer afford their mortgages.

I think (b) is already happening to a certain extent. (a) is outright ridiculous and also (b) has to stop at some point.

And don't get me wrong. I also think the 'real' NAMA shouldn't happen in the first place. It's the biggest scam in history right before our eyes.

But I also believe your logic is flawed, I think you believe this should be an escape hatch for people who are about to lose their homes. But these people would still owe the money and they would still be at risk to lose their homes. It's just taking more risk off the banks which doesn't make sense.

I also think you believe that the developers are provided an escape hatch with NAMA. I think that holds true only to a certain extent. It's mostly an escape hatch for the banks. For the developers it will be one because they will have the ability throw a bunch of lawyers at the entire process.

Thats why I believe this is such a scam.
The banks are bailed out full stop. Which is ridiculous. It's the principle of privatizing profits and socializing losses on the highest order. Wrapped in pink curtains and justified with some rabble about the entire country is going to down the swanny if we don't. Just put some legalese & economese around this core message and eventually enough stupid people will repeat it in the news, press and on forums like this and the plebs will buy it. How convenient that economy is such a thing where there isn't a real truth and even the experts differ on things. Perfect. When in fact it's all rather simple. We're being scammed. And on top this should be perfect to cream more of the top for 'the boys' in terms of legal battles, tribunals and all sorts of professional services that will be required around that quagmire that's going to unfold. It's actually a stroke of genius.

But back to your proposal. It's as stupid as the real thing, the actual NAMA. And for sure, it ain't going to happen because that would go against the eternal principle of (see above) privatizing profits and socializing losses. Escape hatches only for people with money for lawyers. Not for you and me.

SkepticOne

realcam wrote: »

I also think you believe that the developers are provided an escape hatch with NAMA. I think that holds true only to a certain extent. It's mostly an escape hatch for the banks. For the developers it will be one because they will have the ability throw a bunch of lawyers at the entire process.

The reason I think NAMA will be going easy on developers is not simply that the developers have lawyers, which they do and will be using, but also because to go hard on them would be to go against the flawed logic upon which NAMA is based in the first place.

Unfortunately there is very little discussion about this. Most commentary centres around the price the banks will be paid for the distressed assets. But the insidious thing and the thing that will do the most damage to the economy, is the real work of NAMA as an asset management agency over the next 15 to 20 years, the assets being the loans themselves and the underlying security.

What has been happening with the banks is that they have grossly overlent to the extent that any attempt to call in loans and force half built developments onto the market will bring the whole house of cards down. So they have been forced to roll over interest into the loans of developments that the banks themselves know are doomed.

The taxpayer in the form of NAMA will be taking over that role of keeping developers going when they should be allowed to fail. If a developer still fails despite this, then NAMA will take over the underlying security, but will refrain from putting it on the market. NAMA can't afford to have a half-built shopping centre in the middle of nowhere attract no bidders thus valuing it (and by extension a whole class of assets owned by NAMA and their developers) at zero.

Developers themselves know that their companies ultimately are doomed, but sure why not get as much out of the taxpayer as possible. It is as easy not to pay back 10 billion as it is not to pay back 1 billion.

Of course it is all doomed to failure, but Brian Lenihan, Cowen and the likes will be long gone and drawing their ministerial pension. The rest of us will still be there to pick up the pieces.

Boskowski

SkepticOne wrote: »

The reason I think NAMA will be going easy on developers is ... the flawed logic upon which NAMA is based in the first place.

I couldn't agree more with what you say. Just another aspect of it. It's just going to work out perfectly for a certain clientele. Funny how they don't seem to be able to tell their nose from their arse when it comes to actually running a country, but they always get the 'screwing the working people' thing right.

amacca

SkepticOne wrote: »

I would fully accept that the downside of a NAMA for ordinary borrowers is that a certain moral hazard is introduced (though of course a huge one is removed from developers). We are talking about easing the burden on those who have lost their job while helping them reskill appropriately. But like I said earlier, a) this moral hazard is probably much less than it would be for developers

I suppose that's where we differ. My gut instinct is that this moral hazard is not much less because it applies to such a large number of people when you start bailing out individual borrowers.

People lost the run of themselves entirely during our bubble and borrowed very recklessly (and I believe its a significantly large amount of people in this boat) start removing or ameliorating consequences and you will have more reckless behaviour in the future as people could start to view housebuying as a gamble...ah sure ill take a punt and if it doesn't work out they'll have to bail me out sure thats what happened before.....I think its a slippery slope.

I take your point though that having individuals who are broke and jobless and houseless are not much use from an economic point of view to the country, I just think that any benefit you gain from supporting them results in an even bigger negative economic consequences down the line. Although maybe the posters over in the economics forum would have something to say about that.

Also when these borrowers re skill I believe that there is high likelihood of no job presenting itself for a significantly large percentage of them in the medium term meaning the this NAMA for individuals might not be worth it from an economic point of view...no job, no repayment, borrowings pile up even more, repossession delayed, market kept artificially high etc unless this scheme proposes to ease the burden by reducing the individuals borrowings for good? ----now that is something I would object to as strenuously as bailing out our developers.

If you take a risk you should be free to enjoy the rewards or you should have to put up with the pain afterward. Certain people need to develop a spine, stand on their own two feet and put some thought into important decisions like taking out a mortgage and imo when you start removing consequences all you seem to get in this life is more childish behaviour rather than gratitude and efforts being made not to make the same mistake twice/improve the system.

Drumpot

I agree with the principle behind alot of whats being said here. The idea of bailing out banks is gut wrenching, letting developers off the hook is criminal and the thought of the average Joe having to Schtum up for this all is simply horrifying.

Ive argued with people over the phrase "bailing out developers or banks" as its certainly not that simple.

I am one of the biggest cynics I know. I dont doubt that people in politics and high positions look out for each other. Afterall this is capitalism and money makes the world go round.. .

That said, for all the complaints and theories on why exactly the government are doing what they are doing , I have never read a better alternative . .

The idea behind NAMA is sound (irrespective of the intricate details of the body itself). Its sole purpose is not to simply "bail out the banks" to save FF's buddys or developers. Its to release money into the economy for business to continue.

What are everybody else in the world doing ?

As part of the EU, what do our brothers in Brussels think of NAMA ?

Why have they not suggested a better alternative ?

If we let the banks go under (which I believe in principle should of happened) I honestly dont know how it would affect our country (as I am not an economist). I do wonder how we would trade and import goods (without money). I also wonder how such a small country would recover from such a radical Collapse (again I will be corrected on this by more educated economists).

Irrespective of whether or not there are other alternatives, I really find it grossly ignorant to say that FF are mainly doing NAMA to Bail out their mates. I also find it disgusting that 25% of people still voted for FF in the local elections, despite their obvious failings.

Questions should be asked about NAMA (none of this bailing out mates crap), but I fear our opposition partys are no better then the guys in power.

We have voted in T.D's that mirror its electorate. Reactive, not proactive. Short term goals, looking for quick solutions to long term problems. Out for themselves, all about what we can get from the country at the expense of collective prosperity.

As much as we despise the developers that mugged the country or the Banks that geared us all out of existance, the truth is that we voted for everything. I never voted for FF, but I didnt march on the streets when I felt they were pissing away the nations wealth. But a simple pensions levy will get thousands up in arms, ready to stop the city for their cause.

If you didnt demand more from the government and kept quiet while the times were good, you have no real moral ground to take in this debate.

SkepticOne

Drumpot wrote: »

Ive argued with people over the phrase "bailing out developers or banks" as its certainly not that simple.

It is not a simple straight bailout and a bailout is certainly not the official stated aim, but I think it is fairly easy to see that that is what it will effectively end up as, and this is even without factoring in cronyism and corruption.

Drumpot

SkepticOne wrote: »

It is not a simple straight bailout and a bailout is certainly not the official stated aim, but I think it is fairly easy to see that that is what it will effectively end up as, and this is even without factoring in cronyism and corruption.

Im not dismissing the theory that there is an element of that going on.

While I wouldnt put anything past any government we have had (particularly a FF govt) I believe that this is just too big a gamble to take "for the sake of your mates".

the way they have handled the public service and their own wages, bonuses etc is cronyism and corruption of the highest order. The way they havent made people accountable for whats happened is unforgivable.

But I honestly dont believe NAMA is in anyway about protecting their mates. I really believe that there are many things that the govt are doing thats morally corrupt, but I do not believe that NAMA is intentionally one of them. Thats just my opinion of course, but i find it difficult to see so many foreign investors snapping up our Government Bond issues so quickly if they felt that our government was completely inept and looking after their own interests. Anytime we have issued bonds recently they have been gobbled up. Sometimes people outside of the country can see your government and economy for what it is.

SkepticOne

Drumpot wrote: »

Im not dismissing the theory that there is an element of that going on.

While I wouldnt put anything past any government we have had (particularly a FF govt) I believe that this is just too big a gamble to take "for the sake of your mates".

the way they have handled the public service and their own wages, bonuses etc is cronyism and corruption of the highest order. The way they havent made people accountable for whats happened is unforgivable.

But I honestly dont believe NAMA is in anyway about protecting their mates. I really believe that there are many things that the govt are doing thats morally corrupt, but I do not believe that NAMA is intentionally one of them.

Note that I haven't argued cronyism or corruption in my posts. My main argument here is that it is based on flawed reasoning, the same flawed reasoning and lack of understanding of the market that led to the current problems. For the most part the problems will be caused by people thinking they are acting in the public interest.

Drumpot

SkepticOne wrote: »

Note that I haven't argued cronyism or corruption in my posts. My main argument here is that it is based on flawed reasoning, the same flawed reasoning and lack of understanding of the market that led to the current problems. For the most part the problems will be caused by people thinking they are acting in the public interest.

With that , I agree . .:(

Rybka

From my point of view the worst thing about Nama is the attempt to keep property prices artificially high.

The people who suffer most are the ones who saw the bubble for what it was and kept well away - but were still hit with exorbitant rents- they will now be taxed excessicely for that prudence. The next generation of buyers will also be kept of the 'ladder'. People who bought during the bubble should (unhapily) face the consequence of their own decision.

Nama in its current form where we buy loans at a valuation based on future (potential) values is a rip off to every taxpayer. We should take the the hit - even if it means the banks have to be nationalised and our pensions lose even more.

Drumpot

Rybka wrote: »

From my point of view the worst thing about Nama is the attempt to keep property prices artificially high.

The people who suffer most are the ones who saw the bubble for what it was and kept well away - but were still hit with exorbitant rents- they will now be taxed excessicely for that prudence. The next generation of buyers will also be kept of the 'ladder'. People who bought during the bubble should (unhapily) face the consequence of their own decision.

Nama in its current form where we buy loans at a valuation based on future (potential) values is a rip off to every taxpayer. We should take the the hit - even if it means the banks have to be nationalised and our pensions lose even more.

I agree and disagree with some of your statements.

People should be held accountable for their decisions. Im in negative equity and I am quite happy to service loans that I take out at any stage.

The problem people are having with the Idea behind NAMA is it looks like its taking accountability and the worries of dealing with the problem off the Banks and Builders hands.

To suggest that many people were prudent by renting is laughable to be honest. I dont know one person who can honestly say they didnt buy because they saw a crash down the road (and I know alot of people). They simply couldnt afford to.