NAMA Deferred Payment Initiative

This really is a shocking mistake by NAMA. I am really surprised that Finance or Europe did not stop it. I can only assume that they reckon that 115 houses won't do much damage.

I have a full summary of the scheme as it was then proposed here.

Just to summarise my criticisms

Criticisms of the proposal

  • A state funded agency is grossly interfering in the market
  • It provides an artificial floor to prices and just means it will take the market longer to find the bottom. This delays the eventual economic recovery as well.
  • Potential purchasers could not possibly work out the correct price of a property.
  • It makes it impossible to find the correct price in the market
  • It creates market uncertainty. If NAMA does this for 750 houses initially, potential purchasers of other NAMA property will hold off purchasing in the expectation that the scheme will be extended.
  • Taxpayers’ money is being used to favour NAMA sellers to the disadvantage of all other sellers – why would anyone buy a property in the open market when they can buy a NAMA property with a 20% price guarantee?
  • It creates a very odd situation in that falling house prices would suit the buyers of NAMA homes. After 5 years, they would have a lower mortgage if prices fall.
  • There are many criticisms of this scheme but worst of all, is that there may be other serious effects which are unknowable at this stage.
 
It creates market uncertainty. If NAMA does this for 115 houses initially, potential purchasers of other NAMA property will hold off purchasing in the expectation that the scheme will be extended.
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To me this is the most serious. NAMA will claim that this is a success when the 115 houses are sold.

But one would be crazy to buy a house or apartment owned by NAMA now. One should wait until the "successful" pilot is rolled out to other homes.

And of course, competing developments are now much less attractive. The non NAMA banks must be furious.

Brendan
 
Not one extra house will be sold in Ireland as a result of this initiative. These loans are going to customers who are loan approved anyway.

It does not increase the supply of credit into the housing market which is the main problem.

Brendan
 
Brendan Burgess said:
This really is a shocking mistake by NAMA. I am really surprised that Finance or Europe did not stop it.
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As far as I know, the EU haven't given approval for the scheme yet. Perhaps this is Nama trying to force a decision either way.

I'd be very interested to see how they intend on valuing the properties at the end of the 5 years. Even with the property database, we don't have enough transactions to give realistic values, and I can't see the volume increasing enough over the next 5 years.
 
I'd be very interested to see how they intend on valuing the properties at the end of the 5 years.
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It will have to be done on some form of index. Otherwise, there will be litigatin on it.
 
400k for a 4 bed detached house in the Naul, with no land.... not in a million years......this is a joke of a disposal.

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That property is worth about 300k if even in today's market.
 
Folks

The ban on house price speculation is still in force.

So opinions on the future prices are not allowed.

It is absolutely fine to say that "This house is not worth €400k in today's market compared to other houses in the vicinity"

It is not ok to say "I expect that house prices will fall 20% further"

It is ok to say "if house prices fall by 20%, then..." or "If house prices rise by 20%, then..."
 
coolhandluke said:
400k for a 4 bed detached house in the Naul, with no land.... not in a million years......this is a joke of a disposal.

[broken link removed]

That property is worth about 300k if even in today's market.
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Something has to be up with the Delvin Banks development. It has been mostly empty for ages and they keep running different promotions to get people to buy. Latest one was getting your mortgage paid for a year.

It'll be very interesting to see at what price these actually sell given the prices are the same today as they were over a year ago.
 
Saw some houses advertised in Carrickmines Dublin for 300K range dont think they are worth it as it is but that my opinion.
 
Know someone who lives in Delvin Banks. Nothing wrong with the houses. In fact they are well built. Just a developer who has an inflated sense of what the houses are worth.
 
northsideboy said:
Know someone who lives in Delvin Banks. Nothing wrong with the houses. In fact they are well built. Just a developer who has an inflated sense of what the houses are worth.
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I actually think that is a nice little estate and the houses do look well built, but it doesn't take away from the fact that imho they are at least 25% over valued in todays market.....so where does that leave Nama and it's 20% guarantee ?
 
This scheme sparked my interest for two reasons;

1. One of the developments has been a focus of ours for a few years, however knowing the price would fall we held off
2. We would be First time buyers

I've read all the information on nama.ie, but one thing I need to confirm. Say, for example, the property we purchase tomorrow through this scheme is 200K. We would pay 20k deposit, and draw down a 70% mortgage.

But what happens in year 5, with the deferred Mortgage Installment? It would be 40K if the value of the property purchased above increases. Does that mean that in year 5 the buyer would be expected to make a large payment of 40k? Or does the mortgage repayment amount simply increase for the remainder of the mortgage term from year 5 once the property has been valued?
 
dmos87 said:
This scheme sparked my interest for two reasons;

1. One of the developments has been a focus of ours for a few years, however knowing the price would fall we held off
2. We would be First time buyers

I've read all the information on nama.ie, but one thing I need to confirm. Say, for example, the property we purchase tomorrow through this scheme is 200K. We would pay 20k deposit, and draw down a 70% mortgage.

But what happens in year 5, with the deferred Mortgage Installment? It would be 40K if the value of the property purchased above increases. Does that mean that in year 5 the buyer would be expected to make a large payment of 40k? Or does the mortgage repayment amount simply increase for the remainder of the mortgage term from year 5 once the property has been valued?
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My understanding is you would be drawing down 90% not 70%, if the property has fallen 20% over the 5 years your mortgage is then reduced by the 20% that nama is supposed to redeem at that stage. If it rises it's yours, nama is giving the bank an insurance policy from what i can see.
 
coolhandluke said:
My understanding is you would be drawing down 90% not 70%, if the property has fallen 20% over the 5 years your mortgage is then reduced by the 20% that nama is supposed to redeem at that stage. If it rises it's yours, nama is giving the bank an insurance policy from what i can see.
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This is not correct.

House price |€200k
10% paid by buyer|€20k
70% mortgage drawn down and paid to seller|€140k
If property does not fall below 200k, bank increases mortgage by|€40k

The bank pays the €40k to the seller in 5 after 5 years.

You make your initial repayments based on a mortgage of €180k which means that by the end of year 5, you will have paid off more of the capital than if you had actually paid €180k for it.

If €200k is a fair price in the market for the property now, then this is a good deal. Hard to value the deal, but it's worth somewhere between €8k and €48k.

If the property remains worth exactly €200k, you will be paying €160k now and €40k after 5 years. The interest on €40k over 5 years would be around €8k.
 
Brendan Burgess said:
You make your initial repayments based on a mortgage of €180k which means that by year 5, you will have paid off more of the capital than if you had actually paid €180k for it.
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Thank you Brendan, makes sense now.

In terms of the property prices now listed, are they now "Set" prices under this scheme, or can you still make an offer that you feel is the true value of the premises?

In terms of TRS - I am aware of a change in TRS for any buyers after 2012 (please correct me if this has changed). What kind of effect will this scheme have on TRS if we were to purchase before the end of the year?

And a further question - what if you wished to sell the property and move on within the initial 5 years?
 
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Brendan Burgess said:
This is not correct.

House price |€200k
10% paid by buyer|€20k
70% mortgage drawn down and paid to seller|€140k
If property does not fall below 200k, bank increases mortgage by|€40k
The bank pays the €40k to the seller in 5 after 5 years.

You make your initial repayments based on a mortgage of €180k which means that by the end of year 5, you will have paid off more of the capital than if you had actually paid €180k for it.

If €200k is a fair price in the market for the property now, then this is a good deal. Hard to value the deal, but it's worth somewhere between €8k and €48k.

If the property remains worth exactly €200k, you will be paying €160k now and €40k after 5 years. The interest on €40k over 5 years would be around €8k.
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Eh, if you are paying payments on a mortgage of 180k, then you might as well say you have drawn down 90%. If the house does not fall below the current market value in 5 years, then your repayments will stay the same, no ?

By the way the ones i pointed out yesterday have now dropped in price, by a fair whack...

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I mean could they not even get the right prices up for the launch of their big fanfare, typical irish professionals.
 
coolhandluke said:
By the way the ones i pointed out yesterday have now dropped in price, by a fair whack...

[broken link removed]

I mean could they not even get the right prices up for the launch of their big fanfare, typical irish professionals.
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405 to 315!. That is some drop alright.

@dmos87, nama were quoted as saying the properties were priced as is. i.e. no offers, however I can see that changing should they have trouble selling them.

Anyone know how this will work for TRS?
 
coolhandluke said:
Eh, if you are paying payments on a mortgage of 180k, then you might as well say you have drawn down 90%. If the house does not fall below the current market value in 5 years, then your repayments will stay the same, no ?
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No.

Mortgage amount|€180k
Repayments over 20 years at 4%|€1090
Balance after 5 years|€147,000|
If you pay €1,090 per month on a €140,000 mortgage, you will owe €98,700 at the end of year 5. Add €40,000 extra mortgage, and the balance outstanding will be €138,700 which is €8,300 less than if you had borrowed the full €180,000 up front.

So the minimum value of this arrangement is around 4% of the value of the house. Of course, if you overpay for the property in the first place, you lose that.
 
Presumably the houses in this scheme were funded by the banks that will now give mortgages to potential purchasers. And it will be 'easy' to get a mortgage from them for these particular properties.

In the small print there I noticed that the banks might decide that the customer does not pay the mortgage on the full amount (at banks discretion) therefore increasing 'affordability' at the beginning.

If I had a house next to one being sold I would be hopping mad if I were selling as I'd have to reduce my price to 20% below the Nama price. Wonder does that have constitutional implications in relation to property rights.

All kinds of potential problems if one dies or separates in the first 5 years. Lawyers must be rubbing their hands in glee. Never mind all the people getting their pounds worth. Nama valuers fee now, the valuation fee when you purchase with the banks valuer, plus apparently a valuation by NAMA again to see they agree and a further one at 5 years. It's a great country.
 
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