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Archive for March 1st, 2010

Today, David McWilliams, prominent arch critic of NAMA reviews the Commission’s Statement giving approval to NAMA. It would appear that David isn’t yet aware of the full content of the Decision, publication of which may take months according to sources, which would mean we wouldn’t see the (possibly redacted) Decision until after NAMA had bought the majority of the loans. In brief David asserts that the EU are more protective of taxpayers’ money than our own Government and also that regardless of the haircut, the overall amount of taxpayer money to be paid to the banks will be the same. Take a look at the blog entry on 7th February  for an entry with a similar theme.

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The Sunday Tribune yesterday reported that the Central Bank would shortly release figures on mortgage arrears but criticizes the approach taken as the statistics will exclude mortgages that have been restructured (a term which encompasses payment holidays, payment of interest only, deferred reduced payments). What the statistics do show is that we are storing up a huge problem for the near future (after NAMA acquires loans) from people who are struggling with existing wages (forecast to reduce according to the Govt and Central Bank) or employment (unemployment forecast to increase by 100,000 before coming down by 20,000 next year and 45,000 per year thereafter). Preventing 60,000 homes coming onto the market as distressed assets no doubt helps prop up existing home values – handy when you’re a bank selling loans to NAMA.

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First it was the Irish Auctioners and Valuers Institute to call for homes to be bulldozed to protect existing prices and create demand. Now comes the turn of the Irish Hotel Federation who today call for similar treatment for what they claim to be 15,000 excess rooms in the State.  Whilst we wait to hear from Retail Excellence Ireland and the Restaurants Association, we might perhaps ponder the Long Term Economic Value of properties that will be acquired by NAMA and eventually bulldozed – €10,000 or so an acre for agricultural use.

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NAMA exceeds budget already

The Irish Times today reports that NAMA has already exceeded its legal budget. In the absence of any governmental scrutiny (like an all-party select committee) we must depend on the IT for its accuracy. To what extent is NAMA patronising some service companies and maintaining very high fees? Who knows?

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Well we’re now all at sea. The captain (Brian Lenihan) says he will not produce another overall estimate of NAMA’s loans, haircut and Long Term Economic Valuation after last Friday’s green light from the EU. Enter the speculators.

The Sunday Business Post yesterday suggested commercial property is now down 55% (from what? the peak?) compared with the 47% estimated by Mr Lenihan (and to remind him claimed to be the bottom of te market) last September 2009. We know that the State’s residential property index of prices (the ESRI/Permanent TSB index) fell by 8.5% in the period Sept-Dec 2009 with a fall of 3.6% in the month of December 2009 alone. God knows what happened in January and February – we will not know until April 2010 when the new quarterly index is published to replace the monthly indices – but it is hard to imagine price rises (pundits at the start of year were estimating a 9% drop this year and that was before the revelation that we had over 300,000 vacant properties in the country). Factoring in these falls the present value of the NAMA property would be €35-40bn instead of €47bn though the Sunday Business Post maintain that the Long Term Economic Value would remain the same at €7bn.

Another approach has been to look at the haircuts that each of the five institutions will suffer when transferring loans to NAMA. The estimates last September 2009 were an average of 30%. Now we understand from “sources” that Anglo is likely to be 50% and the others to be “more than 30%”. Again this points to existing property values of €35-40bn, and an average haircut according to the Post of 35% (though if you apply the haircuts to the now updated estimates of each institutions’ transfers you get closer to 38%.

Mr Lenihan says there will be no new estimate and we will have to wait for the actual loan transfers. The Business Post yesterday estimated that it may take months to get the redacted EU Decision from Friday last. Indeeed the lights have been turned off.

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