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The state owns the loans on the assets, not the assets, as long as the loans are performing or they come to arrangements with the asset owners?
by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 05:19:02 AM EST
[ Parent ]
Actually, the thing I'm most afraid of is that NAMA will be used to punish asset holders by acting hyper-aggressively against business sense in order to make it look as if the nasty developers are being held to account and thus to make the government look better, despite that fact that this may not maximise the value of the loans for the state.
by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 05:21:41 AM EST
[ Parent ]
Wait, if the loans are performing and interest rates are down, how can the market value be down 30%

Are we talking about impaired loans, about impaired collateral, or about illiquid assets when we talk about the NAMA "assets"?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:24:08 AM EST
[ Parent ]
Only 40% of the loans are currently performing.  Watch this go down... - especially when owners know the Government is getting their money for 1.5% and they are paying 8% or whatever...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:27:49 AM EST
[ Parent ]
So when NAMA buys a "non-performing loan" from a bank, what are they  buying?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:30:27 AM EST
[ Parent ]
9 of the 54 Billion is actually interest due but not paid.  So it isn't buying any additional assets at all in those cases

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:32:12 AM EST
[ Parent ]
Yes, and so long as the asset owners have :
  1. the ability to pay the interest, and
  2. are not in negative equity
those asset guarantees will not be called in.

But it is the market perception that is important here.  As "market" prices continue to fall, more asset owners either can't or don't want to service debts on property now worth less than the loan - so they hand back the keys to the property.  And the more that do this, the further prices fall, and the more people hand back their keys...

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:25:01 AM EST
[ Parent ]
Frank Schnittger:
As "market" prices continue to fall, more asset owners either can't or don't want to service debts on property now worth less than the loan - so they hand back the keys to the property.
Do you have Jingle Mail in Ireland, too? In Spain bankruptcy is a much more serious proposition than in the US - all your assets are on the line, a judge can seize your income and give you a living allowance while he pays your creditors from the rest.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:26:54 AM EST
[ Parent ]
Limited liability...unless personal guarantees have been given.. and personal assets haven't been transferred to the wife ... and the assets aren't located offshore... and the law takes its course... ten years later...when there will be a general amnesty...and the Govewrnment decides its has to re-invigoate the market by giving incentives to investors...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:30:53 AM EST
[ Parent ]
Oh, we're talking about loans to businesses, not to individuals?

Or have Irish banks been giving mortgages to "limited liability" wrappers around individuals?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:32:27 AM EST
[ Parent ]
This is all about a very few "developers" owing Billions.  We haven't even started on the private homeowners defaulting on mortgages bit...  They will be screwed by the banks which is why the government doesn't want to own the banks because then the government will be directly doing the screwing...

Didn't you know that financiers have "discovered" that most people are actually honest and want to pay their debts even at enormous sacrifice to themselves.

This is why it is always the little man who gets screwed...

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:37:14 AM EST
[ Parent ]
See LQD: The Poor are Honest by ChrisCook on February 12th, 2009.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:39:43 AM EST
[ Parent ]
Thanks - I knew I'd read it somewhere but am terrible on remembering sources - we will have to appoint you ET librarian and links keeper

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 06:00:52 AM EST
[ Parent ]
It's mostly about some really insane speculative lending, especially for unzoned landbanks and residential developments that may never be worth anything.
by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 05:44:51 AM EST
[ Parent ]

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