How the new lending scheme will work
Published 28/07/2011 | 05:00
NAMA's new lending scheme -- to be introduced in early autumn -- will involve the agency teaming up with AIB, Bank of Ireland and Irish Life & Permanent (IL&P) to lend money for the purchase of hundreds of apartments it owns.
The final sign-off from the Government is still awaited, but chairman Frank Daly says foreign lenders like Ulster Bank have also been asked to take a look at the idea.
The scheme applies to NAMA-owned apartments and houses, not to the market generally. The majority of the loan will be given to a house buyer by the bank, with NAMA adding another portion and the buyer themselves putting some of their own money into the deal.
Taking a typical apartment worth €200,000, the bank will lend €140,000, the buyer will come up with €20,000, with NAMA coming up with the final €40,000.
After five years, if the property has fallen in value from the price paid for it in 2011, NAMA will not seek to have its €40,000 repaid. But equally, if the value of the property rises, NAMA will expect the borrower to pay back the full €40,000 in the normal way.
NAMA describes the scheme as insurance against negative equity.
It will effectively be taking a stake in the property.
Independent valuers would be used to value the properties after five years.
NAMA describes the scheme as a "controlled gamble". Mr Daly says it is designed to take away the fear, and expectation, that prices will keep on tumbling.
Mr Daly also said that it was important to get the property market moving as NAMA was paying a "carrying cost" by having so many apartments on its books.
This includes vacant properties that have to be secured and maintained. Unless they are rented out in the meantime, income is also lost.
"An apartment complex that is dead, with weeds that are growing, is just depressing," says Daly.
The agency has also pledged €3m to provide essential repairs to ghost estates it is involved with.