Despite the delays with its introduction, I think NAMA deserves credit for its “negative equity mortgage” or the “80:20 deferred payment initiative” as NAMA calls it. The 80:20 deferred payment initiative is also known as the “negative equity mortgage” and protects buyers of such property against further declines of up to 20% over five years.
Since its introduction in May 2012, NAMA has (a) generated a lot of interest and column inches in its “for sale” portfolio and (b) it has sold 120 homes and generated €22m in sales. The downside to NAMA is limited, though it should be remembered that prices have declined by 3.3% in the past 12 months, and NAMA is on the hook for this. But fair play to NAMA for the initiative and the sales it has generated on the back of it. NAMA has recently expanded the scheme and now has 265 homes for sale with the negative equity mortgage (after taking into account the 120 that it has to date sold).
It emerged in the Dail last week that four in every 10 of the homes were sold to cash buyers. That’s not a failure from NAMA’s point of view, it means that NAMA hasn’t picked up a contingent liability for these sales. It does demonstrate the power of promotion though, and it remains a disappointment that NAMA’s foreclosure list is still an error-ridden database that looks almost design to flummox people who might want to buy NAMA assets. It also emerged that just one of the three banks offering the negative equity mortgage, Bank of Ireland, EBS or Permanent TSB had provided mortgages on the other six out of every 10 properties sold. The bank providing the mortgages wasn’t identified, but it does beg further questions as to whether all Irish banks are really open for new mortgage business.
The information on the negative equity mortgage arose in a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty to the Minister for Finance Michael Noonan. This is the full parliamentary question and response.
Deputy Pearse Doherty: asked the Minister for Finance further to the recent statement by the National Asset Management Agency that it had sold €22m of Irish residential property with its 80:20 deferred payment initiative, if he will confirm the overall value of the 80:20 mortgages that have been extended to buyers of such property and the overall value of sales which have not involved the 80:20 mortgage.
Minister for Finance, Michael Noonan: As the Deputy will be aware the mortgages under the 80/20 Deferred Payment Initiative are provided by Bank of Ireland, AIB through its subsidiary EBS, and Permanent TSB the details of which are not made available to NAMA. However, I am advised by NAMA that of the houses available under the scheme 60% were acquired using the deferred payment mortgage through one of the participating banks the balance were acquired mainly by cash buyers.