Nama’s Mortgage Enhancement Scheme

In today’s Irish Times, Fiona Reddan has an interesting short article about Nama’s planned mortgage-enhancement scheme. The scheme is intended to unload some of Nama’s large inventory of houses and flats without unduly lowering property prices.  The scheme, at least as it has been described so far, will work as follows.  Suppose that Nama wants to sell a particular flat for 100,000.  It will offer a buyer the following deal. The purchaser must put down 10,000 in cash, and take out a mortgage from a bank for 72,000.  Nama will pay (itself) the remaining 18,000 and record the flat as sold at 10,000+72,000+18,000 = 100,000.  If after an initial period, say five years, the fair market value of  the house is more than 82,000 (the amount already paid by the homeowner) than the homeowner must “top up” the difference to a maximum of 18,000.  If the fair-market value of the house is 82,000 or less at this date, the homeowner has no need to pay the remainder.

The same logic works for any sales price scaled up correspondingly, I use a 100,000 flat for illustration. Essentially, the homeowner puts 10% down as cash and gets a 72% mortgage. Nama covers the other 20% of the needed financing (20% of 90% is 18%).  Nama gets back its 18% after five years if the fair-market house price at that date has not declined; the homeowner must be prepared to refinance up to this additional 18% amount at that time.

In options terminology the scheme is simple.  Nama has sold the house for 100,000 and, linked to this, Nama has purchased a bull spread from the homeowner.  A bull spread is long a call at a lower exercise price (82,000) and short a call at a higher exercise price (100,000).  Nama has paid 18,000 for this bull spread; the five-year payoff on the option spread is 18,000 or less, so in all cases Nama has overpaid for the bull spread valued separately. The market value of the mortgage enhancement scheme to the purchaser is always positive, so the “true” sales price of the property is always less than the stated 100,000 sales price.

It is easy enough to value such a sales package using the Black-Scholes model.  Nama receives 100,000 for the property, pays 18,000 in its mortgage contribution, and owns a Bull spread with low/high exercise prices of 82,000/100,000.   The value of the package depends upon the underlying market price of the house.  Here is the “true” sales price of the package, for a range of true cash market prices of the house (and other parameters*):

 Cash Market Price                 Stated Sales Price                  True Sales Price

80,000                                      100,000                                   84,139

€87,231                                      100,000                                   €87,231

€90,000                                      100,000                                   €88,635

100,000                                   100,000                                    €93,213

Note that while Nama records that it has sold the property under such a scheme for 100,00, the true market-clearing cash price (taking account of the bull spread) is actually €87,231.  This could lead to distortions and potential deceptions in the housing market.  Suppose Nama is trying to sell two identical properties, flats 3B and 3G in the same development. First Nama sells Flat 3G under the scheme for a stated price of 100,000.  Then, Nama’s real estate agent tells a potential cash-purchaser of Flat 3B that an identical flat was recently purchased for 100,000, not mentioning or downplaying that the other flat purchaser utilized the mortgage enhancement scheme. If the cash buyer does not adjust carefully for this, they could be tricked into overpaying.

How will Nama account for the transaction?  There is a potential for “evergreening” or accounting chicanery with such a scheme.  Suppose that Nama purchased  the loans underlying the flat for 99,000.  Will Nama record the 100,000 sales transaction as a 1,000 profit, or a €11,679 loss, or something in between? The transaction might look very good from the short-term perspective of a Nama senior manager, concerned with massaging earnings over the next few years, and willing to spend cash to improve short-term Nama profits.  On the other hand, it is not clear to me that Nama’s risk capital providers (Irish taxpayers) want to take on potentially large, speculative positions betting on Irish property market price increases.

    

* riskfree interest rate = 4%, rental yield = 4%, property price volatility = 5%, all per annum.

118 thoughts on “Nama’s Mortgage Enhancement Scheme”

  1. The name NAMA is no coincidence.
    It is just NEMED in a South Dublin accent

    http://www.shee-eire.com/magic&mythology/kings&queens/nemed-third-wave/page1.htm

    Nemed was among the third wave of Invaders to Ireland. He travelled from Scythia near Greece. He travelled towards the right from the mountains of Ural until he came to the Ocean of the North then he turned left towards Europe until he came to Ireland with thirty four ships and thirty persons in each one of them. As he approached Ireland he was attacked by the Fomorians (ECB and IMF) who had already laid claim to the Northern Islands around Ireland. Nemed won three battles over them and sent them back to their homes.

    After they had settled on the northern region of Ireland, Nemed died of a sickness. Then the Fomorians took their revenge and enslaved the people of Nemed and oppressed them greatly. Conaing (Trichet) the Fomorian king had many ships at Tory Island in the north. He forced great tribute upon the children of Nemed, to the extent that two-thirds of their children, and of their corn, and of the milch cows of their region were taken by the Fomorians every year at the feast of Samhain.

    Then the Fomorians put even more pressure on the people of Nemed, they demanded of every household three full measures of the cream of the milk, of the flour of the wheat, and of butter, to be brought to Conaing’s Tower on Tory Island. Liagh the female steward of the Fomorians, enforced this tax throughout Ireland.

  2. The property buying public in Ireland has already exhibited poor judgement in vanilla purchases. Asking them to take note of the intricacies of this scheme, seems misguided to me. If Nama really is that uncertain, it should bring in professional investors, rather than expect retail ones to grapple with this detail.

    Indeed if memory serves, under most MIFID classification schemes, only ‘sophisticated’ investors are allowed to directly invest in derivatives. I wonder what will the Central Bank have to say of this scheme ? after all, they are charged with consumer protection.

  3. Leaving aside the historical record of Ireland’s chronic mismanagement, I still regard this scheme is still the most insane proposal to come out the this entire crisis, foreign and domestic.

    We’ve already seen the consequences of regulatory capture in the property industry, but now it appears we are seeing the results of a “bailout capture” as well. NAMA it seems has been taken over by property developers, speculators and buy-to-let landlords in order to spend even more taxpayers money to prop up that singularly unproductive segment of the economy.

    Starved of credit now that the fire-hoses have been turned off in the Irish banks, developers and speculators have seized on the last institution in the country which still has cash spare–NAMA–and have descended on the Treasury Building like groupies around a young rock star, displaying their talents in the hopes of eliciting credit lines(Does that statue on the side of the building have allegorical meaning?). Apparently they have succeeded.

    NAMAWinelake made the point years ago that NAMA’s very presence was keeping Irish property prices artificially high and by not allowing them to reach their floor(The failed Gpac autions hows they haven’t yet), the recession was being prolonged and the recovery delayed. Now, we have NAMA making this policy official. It is going to deliberately prolong the recession in order to placate the property industry. And yes, we’ll probably have to bail NAMA out when this all goes Irish.

    I hope people have done enough homework to realise that the recent census, although show a net increase for 2006-2011, did show that hundreds of thousands nevertheless left the country over the same period, particularly in the last 2-3 years. The country also has a massive housing surplus, a stagnant economy, a zombie banking system, and is in danger of facing state default and/or a currency crisis in the medium term.

    So before everyone starts patting themselves on the back and visiting showrooms again, try to reflect on what happened when you bet the farm on houses the last time.

  4. By the way, the Treasury Building statue is apparently called Aspiration.

    Also, it’s made of fibre glass, not bronze. I think you could write a whole theatre production with just that.

  5. Why in Gods name must the money supply be tied to housing assets – its the most impressively wasteful concept imaginable.
    We waste our time and energy worrying about saving dead assets when the remaining physical / industrial ecosystem is being degraded at a exponential rate.

    The depression is a indicator of malinvestment you know – just saying like.
    We can continue to share construction bodily fluids if yee like though.
    It seems pleasurable to some for various strange reasons.
    Not my cup of tea – this depletion economics only leads to depressingly dull cull de sacs.
    Money & houses ain’t the same thing unless you want it to be.
    We need to liquidate these consumption sinks so that we can free up what little resourses we have left for constructive & intelligent capital growth.
    We are effectivally still trying to grow spuds instead of carrots 4 years into the blight.
    We ain’t that bright it seems.

  6. We can continue to share construction bodily fluids if yee like though.
    It seems pleasurable to some for various strange reasons.

    Sorry Dork, most people are not going to be invited to this party this time around either. However, once again, we will be the ones expected to pay for it.

    We are effectivally still trying to grow spuds instead of carrots 4 years into the blight.
    We ain’t that bright it seems.

    Actually, to bring up another historical anecdote, Ireland was a net food exporter all throughout the famine. Most (Irish) exporters and landlords effectively refused to acknowledge that there even a famine taking place for several years, and refused to permit their businesses to suffer from any attempt to stabilise the situation. Of course, after the famine, most landlords went bust as their tenants had died or emigrated. Their estates had to be bailed out by the Encumbered Estates Act. The country as a whole eventually “defaulted” if you will, but of course the brunt of the hardship fell on the poorer segments of society. Ireland simply refused to face up to its difficulties until it was forced to.

    Some people still blame Britain for the famine, but the more this crisis unfolds, the less I for one am inclined to point the finger of blame abroad.

  7. What in Gods name will these ejits think up next. Res property is declining at approx -1% (perhaps a bit more) per month. We have a -80% decline* (at min) to reach ‘reversion to mean’ point. We have gone 54 months since Jan ’07, so that leaves 26 months to go. But then we have the ‘dip’ below trend. Good for another 30 months.

    * This assumes mortgage interest rate of 6% (which is real rate at moment). Add another +2% (I’m being charitable here) and we are in bad news territory wrt res property values and prices. Factor in new, and increased charges, insurance etc. and it becomes worse.

    Brian Snr.

  8. ‘However, according to a Nama spokesman, in principle Nama would look at widening the applicability of the scheme, and perhaps partnering up with other developers/banks’

    More property!?

  9. What a shambles.

    The banks need to deleverage by some ? billions.
    Now NAMA needs to deleverage the properties it took over from the banks by starting a bank releveraging process, incentivised by hidden write downs of approx 18%.

    Ireland’s crisis response is about to get worse. Economic policy is now going to be driven by the reincarnation of the ‘man from the East’ in Steinbeck’s ‘Grapes of Wrath’.

    JTO has got many plaudits on this site in recent days and if he would seperate dialectic from diatribe he would get a lot more. But he is definitely correct about one thing.

    We need to reinvigorate the building industry now down to a JTO figure of approx 2.5% of the economy.

    We do not need sales of completed houses or financial engineering on a par with the ‘The Frenck Deception’. We need to get the existing partially houses completed with whatever funds NAMA has available.
    At what point will NAMA get the fact that it should have a very simple policy relating to Irish property.

    1. Lease or rent all finished property in Ireland. Do NOT sell it.
    2. Finish out existing properties in Ireland, thereby providing the economic kick start where it is needed.

    NAMA has now turned into a property bank with just as big a need to deleverage as the Banks had to deleverage their dud loans.

    The government needs to take the economic policy of the country back from both banks and NAMA. Take the economic policy back from these destructive forces by the scruff of the neck, before they both in unison destroy what is left of this now diminished little country.

  10. Thankfully the adults are in charge I cant see the IMF/EU aloowing this nonsense

    All credibility is lost by such outrageous idiocy, even the mere suggestion of such a scheme insults the tax payer and raises false hope, our darkest enemies could not have designed a more complete disaster – shame on you Ireland

  11. You can take a pig, put a NAMA bow on it. Put a lovely NAMA coloured lipstick on it but it is still a pig.

    What do these guys do everyday on their 200k salaries plus bonus. It seems like they are dreaming up schemes to turn a bear into bull and a pig into a unicorn and how to kick a can down the road for another ten years.

    Lehmans were experts at this type of thing, surely they could find a couple of out of work traders in the NY bars willing to package an Albabamha trailer park as an A+ investment.

  12. Thankfully the adults are in charge I cant see the IMF/EU aloowing this nonsense

    Even if they do step in, that won’t help Ireland recuperate the millions in consultancy fees which have been spent on this hair brained scheme to date, let alone what the final bill will turn out to be.

    It would probably have been cheaper to pay, say, seafóid €250,000 a year to sit at a desk in the Treasury building writing about the Fomorians than to finance the planning for the work that has gone into this plan. You’d also have gotten more out of it quite frankly. Unless you were one of the consultants being paid of course.

    This Mortgage Enhancement Scheme is beginning to sound a lot like the Penile Enhancement Schemes seen in spam emails: Shady, expensive, and potentially hazardous to both health and wallet. I could go on, but I think Gavin Kostick would end up writing another post about it.

  13. You are all very melodramatic.I do not think they would be many takers.
    I would be very surprised if many Irishmen are very familiar with the
    Black-Scholes option pricing model ,but I am quite sure that they will rightly smell a trap,which it is.

  14. That is all NAMA was anyway a bull spread that we all supposed to pay for.

    Think about it, it buys the loan books off the publically owned banks at a discount. In the highly unlikely event that they applied the correct discount we all expected to pay for it by “recapitalising” the banks using ECB/IMF funds at 6% that the banks are forced to subsidise tracker mortgages at 2.5%. AT tjhe end of the year the banks will need a couple more billion to subsidise tracker mortgages and NAMA until we run out of rope.

    In the much more likely event that NAMA got their sums wrong and find out the easy public sector way that you cant turn a bear into a bull even of you have a minister to fill the balloon full time with hot air what happens. They all paid bounsues and huge payoffs for making a mistake and all that happened was a few ejjits got paid lottery money and a couple of barristers made a fortune transferring a load of dodgy deeds from one branch of the government then banks to another NAMA.

  15. @Obsessive
    Maybe its time to accept we are just no good at anything but building stuff of little core wealth generation
    Ireland has just plugged into the post war global credit engine and inhaled – it has created nothing of substance and never will.
    Calls to reinvigorate the construction industry confirms this – if we build a Giant Pyramid in the Bog of Allen in might be worth the Tourist revenue alright but will excess tourists exist when the world begins to recapitalise ?

    We are a bit like a drug addict that no longer has the imagination or willpower to see beyond the next fix.
    I reckon if we can’t do something net energy postive it may be best to build a vast pyramidal structure in the geographic centre of Ireland
    Something on the scale of the Paps or larger.

    Geographical Center of Ireland

    Where the 8° Meridian West meets the 53° – 30′ North Latitude in the townland of Carnagh East Co. Roscommon. On the western shore of Lough Ree, opposite the Cribby Islands and 5.5 miles N.N.W of Athlone Town

    “Geoffrey Keating refers in his work Foras Feasa ar Éirinn (c. 1632) to two hills in the territory of Luachair Deaghaidh (Sliabh Luachra) called Dá Chích Danann. The Dictionary of Celtic Mythology gives the name as Dá Chích Anann, ‘the two breasts of Anu’. This goddess, known alternatively as Anu or Danu, was reputedly responsible for the fertility of the whole province of Munster. The summit cairns on both peaks, believed to be prehistoric, resemble nipples on the breasts. Strangely enough, the two peaks have the rounded aspect of a comely maiden’s figure when viewed from the north-west (Killarney) or south-east (Ballyvourney), but have a triangular profile more reminiscent of a war goddess breastplate when seen from the north-east (Rathmore) or south-west (Kenmare).
    The Paps West is the second highest mountain in the Paps/Derrynasaggart area and the 125th highest in Ireland. Our data has reached 80% of the goal for this summit”

  16. You are all very melodramatic.

    The traditional Irish response to circumstances beyond their control, is to write prose. Basically people posting in this thread are furious about this plan, about the fact that it is against almost everyone’s interest, that it will probably end up costing the public even more money, and probably mostly about the fact that they know no matter how much they argue or complain, this plan is going to go ahead anyway.

    I do not think they would be many takers.

    In a country where 25% of all mortgages are buy to let. There’s a probably three divisions of suckers to be had in County Dublin alone. Do not underestimate the stupidity of the Irish property owning classes; see my Famine comment above for details.

  17. @obsessive

    You are right the irish are so into property it is unreal. They expect the world to give the everything because they own a couple of fields and have a relative in FF. Look at the Healy Reas. It will all end in tears.

  18. Well, the Home Choice Loan scheme was defanged by complaints to the EU. I can’t see that this NAMA scheme is anything more than a rehash of it. I don’t see that it will be any less anti-competitive.

    Will it be damaging? Yes, I think so, in the kick the can down the road way. Instead of getting through the property collapse and a slow return to a normal market, we will have a zombie property market, where only NAMA has finance for only NAMA properties. As these will not be funding movers, but will only be funding FTBs or investors (I reckon, given the type of property NAMA ‘holds’), this scheme will function to delay a return to normality.

    The negative equity will be baked in with the scheme. What happens when the initial buyers try and sell? There will be no second-hand market. It is the second-hand market that is a key driver for the new home market – without credit, the second-hand market will be limited to the diminishing pool of cash buyers.

    The same reasons that HCL was a bad idea apply to this bad idea. http://www.thepropertypin.com/viewtopic.php?f=4&t=15019

  19. So if NAMA wants to sell a property, it begins by creating a subsidy to keep the price artificially high.

    Isn’t this precisely the kind of crackpot thinking about stimulating property sales that has caused so many problems?

    How to crash the economy again, Part II.

  20. For a while the Nama sales will be the only sales ,then the prices will suddenly drop when people realize that the equilibrium price is much lower than the Nama price and the taxpayer will be left holding the bag.

  21. You can now buy a house with bedrooms, a fully fitted kitchen, and an only slightly complicated “option” package. Ireland has come a long way.

    I’d hope that the consumer protection branch of our Financial Regulator would jump all over this one.

    In the meantime I’m reminded of two comments of mine in the Independent. One (from 2008 – http://goo.gl/P6zbf ) is about “help” for first time buyers seems still at least partly applicable. The other (from 2009 – http://goo.gl/NCkmZ ) uses the same “pig” description for NAMA as Jules used above. If NAMA were actually likely to work would we need such complex schemes? Ehm..probably not.

    Again, I’m reminded of something my corp.finance prof used to say. “Finance is simple. If anyone is trying to make it complicated they’re trying to hide something.”

  22. Don’t residential property prices tend to mean-revert to 4x average income? With the average income under pressure both from negative GNP growth, and from a likely drop in public sector wages within the next 12 months, how in God’s name is any effort to put a floor under property prices destined for other than failure? There is, or rather will be, a clearing price, but it will have no relationship with or to the cost, let alone the peak market price (where different), on which the vendors’ aspirations are based.

    From a revenue point of view – on the grounds that all the lenders are bust anyway – wouldn’t it make more sense to have some decent level of stamp duty or VAT entering government coffers from turnover at realistic price levels rather than waste time attempingt to preserve an overvalued fiction that Nama’s, or any other entities’, loans are worth more than they demonstrably are?

  23. To repeat a point I made elsewhere:

    Maybe I’m missing the point – but this is really a 100% drawn down of €72K mortgage with a deposit of €10K stating a price of €82K on a house that some gobshite has valued at €100K.

    The fraudulent valuation allows the bank to maintain a book price of €300K, allows NAMA to subsidise a short sale and pass the loss on to the taxpayer and means the bank has also now got a €10K cushion – so it can still withstand a further 12% drop from €82K after an initial 18% drop.

    And surely the term/interest rate/structure on the mortgages will be waaaaaaaaaaaaaaaay more important at this stage than the purchase price.

    A 25-year 5% fixed mortgage of €90K would be much more attractive than a 30-year 4.5% Variable of €72K.

  24. Ooooops… “to maintain a book price of €300K” should read “to maintain a book price of €100K”

  25. Ooooops… “to maintain a book price of €300K” should read “to maintain a book price of €100K”

    No, this is the financial sector we’re talking about. You got it right the first time.

  26. The Irish solution to inconvenient facts seems to be – “just issue a guarantee, that’ll fool ’em”.

    What could possibly go wrong?

  27. Ireland just does not exist anymore – its just a geographical point where capital flows in and out.
    I realise the entire cultural / nation state thingy was a fiction but what has replaced this illusion.
    I like many are a product of this experiment and are uncomfortable with the new belief systems invented for our greater good and all but what exactly is this religion ?
    Its a still born creature me thinks- it has no inertia – it just is.

    My pagan soul rejects this blandness – but perhaps the pagan soul is a invention of the 19th century cultural petri dish.
    Who cares ?
    I just want to know what F$£Ker scraped this piece of genius.

    http://www.youtube.com/watch?v=wygzJtJwPnk

  28. @ ObsessiveMathsFreak

    I totally agree with you, this is the most perverse idea, and they have had quite a few. There is so much egg on their faces. All this nonsense about LTEV and getting lending going, preventing the banks from having to be nationalised. In reality causing the country to become quickly insolvent and putting us swiftly under the cosh of the MOU in double quick time.

    It bought toxic loans, now needs these loans to ‘disappear’ so the state (nationalised banks) sells them to the state (NAMA) itself, again! Lets pretend its legal structure is not an SPV because that just inks the waters.

    Some old and not so old tax payers lost colossal amounts on their AAA shares in Irish banks but still had to sink 70bn into them to bail them, so far. They are on the hook for NAMA losses, bank insolvency losses, bailout interest payments and the NPRF is gone! Now, they are being put on the hook for some more NAMA gambling. No wonder they thought a casino was a great idea. On another thread
    did I hear Pat Rabbitte say he wants another Social Partnership agreement? Is this as a top up to Croker? You cannot make this stuff up, we are serially incompetent.

  29. What is it with Ireland and property? I thought the Daily Mail-reading Brits were bad enough. Is it because if you stripped out FDI/MCN’s/etc. Ireland doesn’t really have much to sell… other than property to each other?

    What an incredibly stupid idea but I presume they are having to come up with ‘stunts’ like this because they can see the bad news clouds gathering on the horizon.

  30. It gets curiouser and curiouser as Lewis Carroll wrote in Alice in Wonderland. Today the headlines are Enda will not raise income taxes, Enda will not cut social benefits and that product of fevered Irish minds NAMA will continue to defy gravity. Have I died and woke up to a reincarnation of US politics in Ireland the mantra being no new taxes, no increases to existing taxes ad no cuts to social services or minimum wages. I also see in a Canadian newspaper the headline USA born on the 4th of July interred on August 3rd which refers to the day the US goes bankrupt if the budget impasse continues. To cap it off I also read US per capita debt higher than Greece’s per capita debt $44.000 vs $45,000.

    Next door Derby loses 5,000 railway manufacturing jobs to Germany. Factory opened in 1839 to close if no new business materialises. The rise of Financial Services promoted by the British Government at the expense of research and design in manufacturing is being blamed. It has a familiar ring to it, did not our Gov’t promote a Wall Street and Chicago Board of trade clone on the banks of our own lovely Liffey. Manufacturing is so old fashioned, in the new millenium it is all about trading esoteric financial paper, material things are so nineteenth century we have to be on the cutting edge.

    There is nothing unique about Ireland we adapt all the flawed policies of nations as far apart as the US, Argentina (pension fund confiscation) and the UK.

  31. This is surely a new record. Considering how many diverse views and contrarians post on this site i think it is remarkable that not one post in the first 33 has even the slightest good thing to say about this idea. If it goes to court this thread could be exibit A.

    This is a Ponsi Scheme. Pure and simple. The problem is that if no body else is lending people might well go for it. I hope Rich is right and that the IMF and EU tell Nama to go back to the drawing board, or better still sack the people who came up with this.

  32. I heard Brendan Mcdonagh last week on radio and he seems to be a man with a lot of nibblers at his heels.Expectedly so.But we expect him to deliver for the taxpayer,so he should be in no hurry to come up with,or implement some half baked idea(Mortgage enhancement scheme,as outlined here) that will rock the property arena unnecessarily,just because powers that be in society(Big guys,who want to spend little money on lots of cheap assets)are chomping at the bit to get a piece of nama action.Hold you’re nerve.You are in charge.Act like it.We are in no hurry,Sir.
    PS:Totally disagree with nama,but we are where we are.Process still evolving,but keep you’re ideas fresh.Don’t be afraid to stand back,to give yourself a clearer picture.
    ps:What about conveyancing,and deed downgrading.This will cripple Ireland.Only winners again are lawyers,barristers and solicitors.Is there a familiar ring to it…..thought so.Lack of people representation at every level is ruining this for the people of Ireland.Its more than a little bit obvious that there is an out of control factor in Ireland Inc.Thank You, for reading.

  33. I especially like the part where this plan hinges on the “fair market value of the house”, ignoring the fact that the scheme is clearly designed to prevent anything but a fair market value for a house being arrived at.

  34. “It is easy enough to value such a sales package using the Black-Scholes model.”

    I disagree. The Black-Scholes model depends on the ability to accurately calculate the forward price of the asset. Suppose you have a house worth 100k. You will get a very different option price if you use a forward price of $100k than if you use a forward price of $60k.

  35. Jesus Eamonn Kinsella

    ‘We are in no hurry,Sir’

    What part of economic meltdown dont you understand! NAMA, nor Ireland not even Europe is in control of the financial crisis, King Canute stuff.

    NAMA must secure the best price for the taxpayer, no doubt, how is this achievable? simples, sell everything asap to get the best price, surely their best minds at over 200k a year can drip feed houses at prices banks can agree to lend to potential buyers? The reduced cost of housing will mean more disposable income

    So the banks face a further write down, my opinion is they are dead, ghosts that will haunt the country, like famine ships empty and pointless

    The goal is not to save the value of assets but to promote the rebirth of the local economy and bring this financial holocaust to its nadir

  36. Niall Dunne

    I especially like the part where this plan hinges on the “fair market value of the house”,

    It is really a question of who the market value is fair to.

    A realistic evaluation of Irish property values would not be fair to banks, their bond holders, the European financial system, our so called European partners political fortunes or to our existing patriotic property owners.

    NAMA has made property speculators of us all, and this was not an unintentional outcome.

  37. I agree with a lot of the contributors above but even by blog-standards (at least, irisheconomy.ie blog standards) this thread is unremitting in its criticisms. Partly this is my fault, I probably described the suggested, outlined, mortgage scheme more critically than necessary, partly this is because the scheme does have big flaws, and partly because by their nature blogs tend to attract lots of negative energy. Although the outline scheme is probably a non-runner (for the reasons discussed above) it is appropriate to mention that the people at Nama are trying to do their best with a very difficult, perhaps impossible task. As noted over on namawinelake:

    “The agency [Nama] is by all accounts working very hard at a senior level to deal with developer business plans and everything that goes with managing a portfolio of €73bn of loans. The NAMA CEO is reportedly working 75 hours a week and reports reaching here suggest senior personnel at NAMA are working 12 hour days. Other reports suggest a degree of management dysfunction at a lower level in the organisation. But there is no suggestion that NAMA staff are sitting around all day playing solitaire on their computers.”

    In case anyone wants my excel program to calculate the value of a bull spread etc. I will post it up on my university web page. Our department is in the midst of a web page upgrade so it might be a few days. The calculation is straightforward – just Black Scholes for European options with continuous dividend yield – standard textbook stuff, if you read that kind of textbook! For bloggers interested in “blowing off steam” rather than the intricacies of options pricing, here is a humorous book of Irish insults: http://www.obrien.ie/book653.cfm.

  38. Who in their right mind would want to buy a poorly built, out in the middle of nowhere dog box or a substandard, up in the clouds apartment?

  39. @a

    What is the difficulty in calculating the forward price? The implicit rental yield is somewhere around 5%. Are you confusing the forward price (known now) with the realized price in the future (not known until later). The forward price is just a simple function of the current market price, rental yield and current interest rate.

  40. Gregory Connor reflects on the bad reaction of IE posters to the mooted new NAMA property prayer:

    partly this is because the scheme does have big flaws, and partly because by their nature blogs tend to attract lots of negative energy.

    I think that the “negative energy” of the postings so far owe a lot to the fact that the ongoing attempts to prop up property values seem to have nearly bankrupted the state, and to the uninitiated it can seem as if our economic and fiscal policy still has as its primary goal protecting the banking system and the value of property investments.

    The mortgage scheme itself might be almost harmless but it does invest the state even more in pushing up property values and encouraging home ownership, a policy which has not served us very well recently.

    Are we doubling down again, again?

    “The agency [Nama] is by all accounts working very hard at a senior level to deal with developer business plans and everything that goes with managing a portfolio of €73bn of loans.

    That can not be easy, but if NAMA was a bad idea from the start all the hard work that the staff are putting in is a poor investment of effort.

  41. @Gregory Connor

    I am afraid that all this is doomed to irrelevance within a very few years. As William Butler Yeats said in relation to the 1916 Rising: “all is changed, changed utterly…”. He could have been talking about the 2011 census results,
    which appear to have been as big a surprise to commentators in Ireland as the 1916 Rising was to the British. The 2011 census results “change everthing utterly”.

    It is clear that the housing surplus is melting away. Unless action is taken to rev up the house-building industry asap, a housing shortage is inevitable. Even if that were to be done immediately, it would take a couple of years before the number of new house completions began to increase. During the boom, there was a failure to spot in advance that a housing surplus was looming. Now, there is a failure to spot in advance that a housing shortage is looming.

    The trend is most pronounced in the Dublin and surrounding counties area. The figures below speak for themselves and need no elaboration:

    Fingal:

    average annual increase in number of households 2006-2011: 2,750
    number of new house commencements in year to April 2011: 142

    Dublin City:

    average annual increase in number of households 2006-2011: 3,900
    number of new house commencements in year to April 2011: 160

    South County Dublin:

    average annual increase in number of households 2006-2011: 2,000
    number of new house commencements in year to April 2011: 128

    Dun Laoighre:

    average annual increase in number of households 2006-2011: 1,700
    number of new house commencements in year to April 2011: 50

    Louth:

    average annual increase in number of households 2006-2011: 1,100
    number of new house commencements in year to April 2011: 130

    Meath:

    average annual increase in number of households 2006-2011: 1,800
    number of new house commencements in year to April 2011: 235

    Kildare:

    average annual increase in number of households 2006-2011: 2,150
    number of new house commencements in year to April 2011: 193

    Laois:

    average annual increase in number of households 2006-2011: 1,160
    number of new house commencements in year to April 2011: 109

    Wicklow:

    average annual increase in number of households 2006-2011: 1,140
    number of new house commencements in year to April 2011: 126

    I can’t really make it any simpler than this.

  42. @Gregory C

    There was a more “balanced” (don’t fall into the journalistic trap of requiring a two-sided discussion no matter how trumped up one of them has to be otherwise it is biased reporting) thread started by Karl W a few weeks ago. The balance was because he referred to the offloading of the commercial stuff through finance provision also – and that rightly got a reasonable response.

    Here you focus on the tricky dicky whizzo market manipulation through taxpayer risk part, and there is nothing wrong with calling a spade a spade. It happens far far too seldom in Ireland. cf say, Yorkshire.

    The other thread was using an example which was slightly different but amounts to much the same thing. I reckon the options element would have been different:
    http://www.irisheconomy.ie/index.php/2011/05/19/frank-daly-on-nama-providing-finance#comment-148165

  43. @jto

    Isn’t that a bit like comparing a 5 yr moving average of X with a 1 yr moving average of Y?

    What if the 1yr figure for X is lower than the 1 yr figure for Y, or if the 5 yr figure for Y is larger than that for X?

    Can we tell from that?

  44. @grumpy

    That is well stated; I agree with your sentiments. You are right about calling a spade a spade, as long as it isn’t insulting individuals. The outlined scheme does seem to me a bad idea, and not an appropriate use of cash and risk capital from an Irish taxpayer perspective. Nama should not be involved in any derivatives-based speculation on Irish property prices, even if it is wrapped up as a component of a property sales package. So I think my original post served a purpose if it made clear that there is a speculative-type option hidden in this mortgage scheme.

  45. As commented above we do seem to be singing from the same page of the hymn book.
    I can easily put myself in the shoes of our politicians, bankers and business people. Even though many years of exposure to foreigners have opened my eyes to what is not optimal in Ireland the genetic disposition to having an eye for the main chance is still there. Our politicians, bankers and members of the business oligopoly were buzzing with high anxiety as the economy was coming apart in 2007.
    The banks are failing they must be rescued and so a consensus was reached. The Gov’t will prop up the banks directly and indirectly and so it started with transfers to Anglo-Irish on the assumption that property values would decrease 15% to 20 %. We must keep in mind that the mantra at the time was “property values have never decreased in Ireland”. When it became evident that property values were headed for a 50% drop in the case of finished developments and 80% in the case of raw land with building permits a new consensus was necessary. With TARP and extend and pretend policies being implemented in the US our Gov’t, Central Bank, privately owned banks and the building/development fraternity reached a consensus to adopt the US policies and so we have NAMA. The thinking at the time was that we are in a short term liquidity crisis and if we can get through the next two years we will soar again. I have some sympathy for our Gov’t in that there was a lot of wishful, hopeful, prayful thinking going on in all the institutions relevant to our situation. Even today the words “solvency crisis” are avoided like the plague or the Famine by the ECB, IMF, European Commission, Central Banks throughout Europe and the developed world.

    In a perfect world given a liquidity crisis NAMA might have worked. Now that it is evident that we are in a “solvency crisis” NAMA is counter productive largely because of the magnitude of the housing supply that overhangs the market. As I see it the Gov’t will soon be in a position where it must cut its losses and one of the first casualties will be NAMA.

    In a nutshell we have not studied Japan and how a three to five year problem became a 25+ year problem. There are also the peculiarly Irish considerations as in God forbid that someone can buy a house for $150k that I paid $300k for and even worse them foreigners will pick up our property for half nothing. For the greater good we should adopt the mantra of an early loss is the cheapest loss so as the recovery can begin.

  46. @ John the Optimist,

    Given your reasoning, you would also be against this proposal as you fear a shortage of property?

    That people may like or feel they need to have their place is easy to justify. However this fails to address how much wealth and future earnings should be spent on this.

  47. @ Mickey Hickey

    I think it is also worth mentioning that the procrastination involved in responding to the unfolding disaster was a major part of what turned NAMA into such a failure. It took ages for NAMA to get set up and by the time it was up and running the govt had lost all credibility and the bond yield was lost. NAMA was based on the notion that the crisis was a short term phenomenon and that confidence in the market would be regained if enough money was thrown at the problem but FF destroyed that thesis via a mixture of hubris, incompetence and hail marys.

  48. @Ahura Mazda

    Given your reasoning, you would also be against this proposal as you fear a shortage of property?

    JTO again:

    I am neither for it nor against it. It is far too complicated for a simpleton like me to understand it. In general, I am against putting artificial floors or ceilings to prices. Let the market work. I am merely noting that the NAMA proposal, and all the agitation of posters on here agianst it, all seems to be based on the assumption that there will be a surplus of houses streching indefinitely into the future, whereas the reality is that the surplus is melting away like the snow in June, with population and households growth (as confirmed by the census) now far in excess of the rate of new house building.

    Ahura Mazda

    That people may like or feel they need to have their place is easy to justify. However this fails to address how much wealth and future earnings should be spent on this.

    JTO again:

    This will be determined, as always, by supply and demand.

    A housing shortage developed in the middle to late 1990s when population growth raced ahead of the rate of new house building, this having been reduced in the early 1990s on the back of numerous forecasts that the following two decades would see net emigration and low or negative population growth (example: DKM report 1991, that forecast the population would fall to 3.3m by 2011 – they were a mere 1.3m out). The opposite happened. This was one of the factors behind the large increase in house prices in the middle to late 1990s . Had this site been around in 1991, I am sure that 99 per cent of the posters would have agreed with the DKM predictions.

    The response to this was a number of reports designed to boost housing output. ESRI published a report in 2002 saying that the ‘shortage of new houses’ was a major constraint on growth, even though the number of new house completions annually was allready ober 50,000. The construction industry was pleaded with to boost housing output still further. They did. But, too much so. Then a surplus developed and house prices fell.

    The significance of the surprise census results is that it indicates that the cycle is now turning again, indeed probably has been doing so for a couple of years. What goes around comes around. Feast and famine. Supply and demand. Oldest law in economics. When the surplus dries up, the necessity for putting an artificial floor on house prices, which people are getting worked up about here in relation to this proposal, will be utterly irrelevant. I myself am not in favour of high house prices. That is why I want to see measures to rev up the house building industry begun asap, bearing in mind it will take a couple of years before they have any significant affect on new house completion numbers.

  49. My real problem with the scheme is that it presents consumers with a deal which is rationally difficult to understand, let alone lessons learnt from behavioural economics

    That said, Nama does have a case to explore unusual alternatives as
    1) There is likely undue underconfidence in the property market now
    2) It does hold ‘market maker’ amounts of the commercial and retail market

    However Nama is tasked with making a profit, nothing more , thus I think the government should step in and consider wider based initiatives. Fact is: Irish people are a bit nuts about property, and we had a bubble. Thus I think they need to look at root cause remedies, chiefly around creating a more efficient market, e.g.

    A) A universal asset register and pricing: quality metadata on the property assets, and all prices freely available
    B) Consumer education: most people don’t appreciate a primary residential property purchase, is in fact an investment (a pension). They need financial education
    C) New instruments/markets: property is a sticky, poorly liquid asset. Property funds (with unitized shares and secondary trading), would be an excellent idea. These could offer increased security of tenure to renters.
    D) Nama backlog: consider (c) above, also consider Nama taking out. exotic instruments, e.g. insurance against house price increases. Etc

    The government has all the cards…they really need to take the initiative

  50. @jto

    “with population and households growth (as confirmed by the census) now far in excess of the rate of new house building.”

    John do you have some like for like figures to confirm this? It would be useful if you do.

    On the series you posted above, I don’t see any reason why it might not be the case that, say, the annual differences in household formation and housing starts, could actually be equal over the last few years.

    Think about a series that starts high and then drops a lot. the 5 yr average (households in your post) is much higher than the 1 yr average (housing starts).

  51. @Desmond B

    Why not just take the taxpayer out of it and mandate spread betting firms to make a market in house price products as part of their regulatory approval 😉

  52. I thought I read somewhere recently that if the 20-24 year old 2007 bracket is paired with the same bracket in 2011, there are 100,000 less. No? Would this not have major implications for property purchases for first time families, etc?

    Just to reiterate my earlier point. The NAMA proposal is crackpot thinking. No consideration is given for the impact on non-NAMA properties, which presumably would still guide below the equivalent subsidized NAMA price. Naked market distortion, but it’s ok because a state agency is involved, is that the new thinking?

  53. @All

    I sincerely hope that those in control of the good ship NAMA are reading the comments above because even the briefest perusal would clearly indicate that this scheme belongs in the crackpot zone along side other beauties such as Dublin’s Olympic bid, the Bertie Bowl and Basel III for the remaining Irish banks.

    Am I in splendid isolation when I believe there are a couple of relatively easy wins to restore some credibility back to the broken property market and banking system?

    The easy wins are fixes and as indicated on previous threads fixes are generally not fair. I repeat they are not fair. They are not designed to be fair, elegant or equitable. They are designed to get to the root of the issue stop the rot and move on. If that process gets in the way of equity or fairness well frankly my dears I couldn’t give a damn. We need solutions to these issues not crackpot financial inventions which are declared dead before copulation even begins.

    The solutions:

    1. Declare RoI a Basel III free zone for the next 5 years.

    We don’t have banks anymore – we have ECB conduits so why we feel the need to pretend BOI, AIB et al are in fact on a capital par with Goldman and Barclays makes less sense to me with every passing day. They’re not. Stop the pretence – the White Knights are not coming to buy these institutions despite what Messrs Honohan and Elderfield believe.

    Buyers will only come in when the possibility of making real money becomes evident, not because of a large capital base but because of profit expectations. Losses divided by a large capital number still gives one a loss on capital, not a return. This is self evident, yet for some unknown reason the cheerleaders for their Swiss cousins on Dame Street refuse to acknowledge the fact that fighting yesterday’s Regulatory wars is a complete waste of time. The mis pricing valuation genie has already flown and the need for excessive burdensome capital is….well I’m at a loss to know what it is.

    History tells us that banks require oodles of capital at the top of the economic cycle, not here. At this stage of the cycle less is more, in capital terms, and because those in command refuse to accept that they have called this wrong, will watch as this banking disaster continues to spiral lower. When the facts change I change my mind – what do you do Matt and Pat?

    2. The loans to deposit ratio is the ONLY long term banking metric that stands the test of time. Ratios less than 100% are always preferable to those above 100%.

    Given the above why is it assumed the hard lifting to restore these ratios in an Irish context can only be achieved by way of loan reductions i.e. deleveraging. I propose the following – abolish DIRT for 5 years and incentivize Deposit holders to return cash to these shores through equity ownership aka a mutual ownership structure of the remaining ‘banks’.

    Failing that an ECB Guarantee scheme of some sort is required.

    3. Given the expected over capitalized nature of the banks balance sheets the country requires a debt write scheme. Residential Property prices from the top will definitely fall by a minimum of 66% to 70% and in all probability to revert to long term average net yields of 7% as a result falls of 80% will, sadly, be the norm.

    Banks price property, they always have and they always will providing property remains a leverage driven market, which is likely.

    Those in control of the leverage control the price in the marketplace. With house price falls of 66% to 80% likely anyone suggesting that novice property consumers who visit the property shop perhaps once or twice in their adult life time are in some way responsible for 100% of this mis pricing error are delusional. This is a fact which the banks, the Govt and the public at large have to accept.

    Bubble markets recover in a ‘L’ shaped fashion which in simple language means prices ain’t coming back to prior bubble levels for extremely long time – the CBI believes it to be about 2040. They’re optimistic. In such a scenario it simply is socially moribund to allow quite literally hundreds of thousand of the citizens of the country to become economically stagnant as negative equity restricts their ability and the ability of the country to recover.

    We need a fix to this issue and we need it fast. Lets not kid ourselves debt write offs are the only sensibly option as it recognizes that the error in the main resides with the leverage providers i.e. the banks. Up until now this basic message has yet to get through. The banks have been the prime architects of their own downfall – crystalising that error is the next step.

    4. Force NAMA to sell the properties they own – if that means the arse falls out of the market – well so be it. That’s life. It will only hasten those in command to recognise that 1, 2 and 3 above are the only true options that we actually have.

  54. The government has all the cards…they really need to take the initiative

    Can you give us an example of a government initiative on the property market that has not been an unmitigated disaster (in any country)?

  55. @Grumpy
    The only problem with spread betting is the lack of stake/involvement in the underlying assets. Thus I’m not sure how it contributes to market efficiency

    @Overseas
    The Irish government has poor form…but whether we like it or not, they have all the cards. Thus my take is that they should take measures to increase market efficiency (new instruments, liquidy and public information).

    Also in general I really am unsure about a huge proportion of a particular asset class (residential property) being in the hands of retail investors, who aren’t ‘market neutral’ in their ownership. By not ‘market neutral’, I mean prone to personal, private sentiment. That makes for an ugly and asymetric market.

  56. @Yields or Bust
    Who is going to administer a debt write-off ? How are you going politically to deal with the huge inequalities it will create? Are you going to write-off the pre-bubble mortgages? It also mean writing off what’s left of your banks ,what about the foreign banks who have purchased some of the loans?
    What about securitization? What about CDS on those CDOs?
    In short, are you trying to start a civil war or WWIII?

  57. @Gregory Connor

    1. How many jobs does the sale of a completed property yield? None.
    2. What is the multiplier effect on the economy of every €82K (72K+10K) put up by a purchaser/bank on this scheme? Probably less than 1.
    3. If that €82K could be spent elsewhere in the economy what multiplier could be expected?
    4. Why will a bank that refuses to lend now, loan €72,000 to a NAMA property?
    5. What would the differential in jobs terms between NAMA making a loss of 10billion over 10 years or a profit of €10billion over 10 year?

    As for the NAMA people working long hours!!.
    It is an absolute truism that when that happens, the people involved have no idea to run an organization or alternatively are not being allowed to run it in a rational way.
    But one immediate solution to that would be cut the salaries by 50% and employ and extra 25% staff. And tell the existing people that 40 hours will be fine as long as they know what to do during those 40 hours.

    @Des Brennan.

    However Nama is tasked with making a profit, nothing more.

    ‘Nothing more’. That is the origin of this proposal. Regretably.

    @Grumpy.

    Excellent Analysis and solutions.
    I would disagree only with the last point. I think NAMA should not sell any finished properties in Ireland. It should rent/lease them only.
    ALL NAMA efforts should be used to complete partially finished properties. Give the properties away for free to whoever will finish them in two years.

    Yet, after all that has happened, the bank and property mindset still prevails. No wonder it does. The same people by and large are still in charge.

  58. @Yield or Bust / @Grumpy

    @YoB. Sorry that was your analyis and solution that I was referring to. Apologies.
    @Grumpy. Maybe the spread betting on this could be located in Two-Mile-Borris. It would be unusual to have very different kinds of bull runs in the fields of North Tipperary.

  59. @Overseas Commentator

    Once Irish Permanent is nationalised, the Irish government will own every mortgage lender of significance other than Ulster Bank. It will not be necessary for it to create any legislation in order to write off mortgage debts. It will be able to do it by fiat.

  60. @Kewin Walsh

    Then the government will be the proud owner of banks with huge negative equities .Is he going to borrow some more to recapitalized them?

  61. I have a cheaper scheme in mind. Get the E**** to provide 30 year money at 5% and provide fixxed rate mortgages at 6%. The positve spread of 1% will be used to administer the programme with say a cost incoem ratio of 10%. Profits could be used to pay down some of the bank re cap debt.

    If JTO is right, anybody buying a house at current levels with a 70% LTV and proper credit metrics is probably an extemely good credit.

  62. @Johntheejjeit

    “the housing surplus is melting away” has to be about the most farcial comments I have heard recently.

    Visit Nass, Loughrea etc. to visit a couple of estates.

    PIGS fly, NAMA lives and idiots reign.

    I am rapidly loosing interest.

  63. SEPTEMBER 2011

    IRELAND CUT TO JUNK WITH NEGATIVE OUTLOOK

    Thats what we are looking at. Morgan was right again. An easy bet

  64. Jukes, I think JTo point is that supply is tight in the Dublin region. Alas, nobody wants to live in Loughrea and probably never will.

  65. During the peak of the boom i made an interesting calculation.

    Number of housing starts 170,000

    Pouilation of Ireland 4,000,000

    Expected lifetime 75 years.

    Existing housing stock 1,200,000

    Number of expected houses in 2090 14,000,000

    Number of houses per person assuming constant population 3.8

  66. @JohntheO
    In assuming population will continue to grow, you are falling into the same trap as DKM in 1991, no? (extrapolating from the most recent trend).

  67. @Tull

    We all know that demand is tight in the Dublin region. The problem with Ireland is that everbody thinks that the price of a semiD in Dublin has something to do with the Economic performance of the counrty and we have had a series of finance ministers who have mortgaged the country on that fanasty. Ireland is(was?)a strong economic entity due to multinational investment full stop and high property prices combined with goombeen politics who bet the bank and more on high property prices puts the economic success of ireland and the jobs that depend on it in peril

  68. @DOD
    It seems Moody’s don’t believe that they can return to markets in second half of 2013 and are concerned about private participation in a second bailout they believe Portugal will require.
    Where does this leave the Greek situation?

  69. Hogan,

    That is what everybody here does. Extraps from the favourite data point to the pre determined conclusion. JTO has decided he is positive, that is his right. He collects evidence and sometimes beats a confession out of it to suit his case.

    So does everybody else on here.

  70. @Overseas Commentator

    There would be an increase in tax revenue and a reduction in tax expenditure if mortgages were cut and consumer spending increased as a result.

  71. @ceter

    And PIIGS fly. Any ejjit could have told you there was no chance of back to “the market” in 2014. You don’t gurantee the debts of the gamblers, shut down basic public services and expect to get away it. It dosn’t work like that if it did Al Capones Grandson would be running America and Lehmanns brothers would be a great place to deposit your winnings.

  72. CP,

    where does that leave the ECB. I think they hinted that they would refuse to accept Greek and preumably Irish and Portuguese collatoral if downgraded to junk by the RAs.

    Well they will have to backtrack quick smart or we re going to have the collapse of the euro.

  73. Let me get this right…

    The banks borrowed a shed load of money to lend to developers to build a load of apartments that no one wants.

    The banks go bust – shhhhhh! I mean, the banks have a bit of a “liquidity issue”. They get to dump all these loans into NAMA – which has borrowed a shed load of money to buy these unwanted apartments at a discount.

    Now NAMA has a load of apartments that no one wants, the banks still have a “liquidity issue” and no one thinks borrowers are credit worthy enough to allow them to borrower against their future earnings using these unwanted apartments as security.

    So NAMA wants to offer these sub-prime borrowers the “opportunity” to buy a load of unwanted apartments – and it’s using money it borrowed from the very people who are recycling all the money they got back via the Irish government which which to do it?

    I assume the people in NAMA are aware of the “greater fool” concept – and this is their attempt to not be it.

    It probably also is the term they use to describe their view of the Irish taxpayer.

  74. @tull

    If the ECB call time on the 140bn of irish bank bonds they are rolling over the Euro is Caput. They know it we know it.

    They have replaced Mr. Senior Bond and the Irish taxpayer as the most exposed to an irish junk explosion.

    Have no doubt the day that Lenihan made the unlimited guarantee he simulateously made all Irish paper junk.

    Everybody in world knew this.

  75. How about this from the NYT article posted by DOD>>>

    “Responding to Moody’s decision on Tuesday, the finance ministry said in a statement that Moody’s had “ignored the effects” of the tax plan outlined last week in Parliament.

    The tax hike, the finance ministry added, “constitute a proof of the government’s determination to guarantee the deficit targets for this year.”

    Still, the finance ministry said Moody’s downgrade vindicated the government’s recent policy initiatives since “a robust program of macroeconomic adjustment constitutes the only possible approach to reverse the tide and recover credibility.”

    Vindication must be one of the most abused word in the English language.

  76. Without the possibility of an exchange rate devaluation, which hits the “protected” sections of the Economy, The doctors, judges etc. who made hay during the good times and want it continue forever it is impossible for and austerity program to work. The people in reciept of state handouts who have an economic muliplier of 1 or greater will be replaced by the “stronger” voices of the wealthy such as the judges who tend to save or spend a larger portion of their income abroad or on foreign produce such as performance cars. These people have a multiplier of 0.5 or less and their income streams from the government will be protected.

    In this way an austerity program is actually predestined to fail. IT IS A MATEMATICAL CERTAINITY. As GDP decreases the load to pay the protected non-productive sectors increases as a percetage of GDP, whatever minor nominal changes are made. Simulataneously the coupon, or percentage on the debt is increased beacause of the obvious risk.

  77. NAMA was always a daft idea. It crystalized losses and is now seeking to uncrystalize them. Let’s just accept that NAMA needs to sell its loan book to somebody.

    It seems the price of property is determined largely by the available credit. We need foreign banks in to supply that credit.
    When pillars aren’t supporting anything they’re merely bollards – so get rid of AIB and BOI. Pay HSBC or some other bank to take them over.

    That would strengthen our position in terms of debt restructuring (HSBC don’t need the ECB to keep money in its ATMs)

    The best way out of a bad situation is to slowly build up stronger positions. Even though solutions may not be immediately apparent – stronger positions increase the probability of better outcomes.

    So – narrowing the fiscal deficit and replacing the bollards with real banks will improve our chances. When you look at the state of the world – Ireland’s not that bad

  78. In the current senerio most countries enter a colony state mentality for good reason. They are expected to pay a hugely increased tax burden to pay out good euros to senior bond holders and the ECB for the luxury of them underwriting the debt of the top 2% of the country. Tax collection becomes more difficult whatever way the ruling class try to paint it. Major reductions in state services combined with reductions in unemployment benefit and other state handouts means that all means to increase the tax take are resisted by the local populace and you even find the law enforcement will resist attempts by the new lords to enforce draconian tax laws.

  79. @JtO
    Looking at just the most recent house completitions looks a little short-term and ignores very signifcant house building in the previous years.
    Since the 2002 census the population has increased by 664k while we have built 550k houses over the same period according to the CSO.

    Allowing 20k for the decrease in the household size and obselense the house completitions in the last decade would still indicate that we have built significant more houses than we will need for some time.

    Over the same period the number of vacant properties has increased from 102k to 294k. I think it is a stetch to say that we are going to face a housing shortage any time in the next few years.

    @Tullmc
    “Jukes, I think JTo point is that supply is tight in the Dublin region. Alas, nobody wants to live in Loughrea and probably never will.”

    If the houses in Loughrea are being sold for €10k somebody will want to live there. You will always find a buyer if the price is right.

  80. @ceterisparibus

    No real suprise on Portugal.

    Sarkozy’s finesse to the benefit of French financial institutions is also falling apart after S&P – a kon_job well called; it does nothing for Greece.

    ‘Spose the ECB will look into its inner sanctum, genuflect at the altar of the 2%, and come out with another massive revealed Lorenzo tome wherein if the ECB does not agree with either the RAs or the Markets it will simply ignore them …. [but how much longer can this go on? ….

  81. Ireland is a democracy. Within that democracy there has been a ‘herd’ mentality for at least the last decade. That ‘herd’ mentality basically said at the start of the decade
    ” We own a property or an invesment linked to property values. We are going to try together to push up property values for our own benefit. We don’t care about others who are not joining the herd”
    The herd mentality has been saying in the 2nd part of the decade
    “We own a property or an invesment linked to property values. We are going to try together to maintian property values for our own benefit. We don’t care about others who did not join the herd. We have been and are prepared to bankrupt the country to protect our own property investement”
    NAMA and all its plans fit in perfectly with this herd mentality.
    Thank you Mr. O’Connor for pointing out the unfairness again that those outside the ‘herd’ should continue to be basically robbed by ‘the herd’.

  82. Incidently excessive profit taking, speculation and collusion in basic human rights such as wheat prices, cotton prices, basic medication and education is not allowed. Why should it be any different for shelter?
    In reply to a pster above, who commented on Governments and housing, Italys government only allows max 2 residential properties for one person and they managed to have no dip in housing prices during the crisis. Successfull program there.
    Signapores government has for years been running a highly succesfull housing scheme which allows the highest ownership of property in the world.
    Shnaghai and Beijing have recently brought in measures to cool their housing markets, such as limited ownership.

  83. If this Nama scheme only applied only to resident first time buyers and for max one property per person it would be much better. Could this scheme benfit foreign speculators in any way?

  84. And if NAMA has no other ideas what should it do with the excess money? Other than pay mega salaries to smart boys to come me up with ponzi schemes?
    Buy back the stupid Govt 2 year bonds now trading well below par.
    There is a sporting chance that we may not default within two years.
    That might do the State some service.
    More service than the proposed ponzi scheme.

  85. @Dreaded_Estate

    As NamaWineLake showed, the relevant factor is the growth in the number of households, not just growth in population. According to his calculations, which I have no reason to doubt, even if the population was static, the number of households would still be growing at 17,000 annually. But, of course, the population isn’t static.

    According to my calculations, between census 2002 and census 2011, there were 540,000 new house completions and the number of households increased by 380,000. That leaves 160,000 excess. But, you need then to subtract (a) the number of old houses that were taken out of the housing stock (call this X) and (b) the number of the houses built in that time that were second or holiday houses (call this Y).

    So, the excess number built between census 2002 and census 2011 is 160,000 minus X minus Y.

    No one knows for sure the figures for X and Y. But, on my calculations around 60,000 for X and around 40,000 for Y seems plausible. Almost 30,000 houses built pre-1960 (most pre-1940) were taken out of the housing stock in the 4-year period between census 2002 and census 2006. It is likely to have continued at more or less the same rate in the 5-year period between census 2006 and census 2011.

    So, the excess number built between census 2002 and census 2011 is likely to be in the region of 60,000, give or take a few thousand.

    Factor in:

    (a) New house building has ground to an almost total halt, so that 60,000 excess is melting away and the situation of 2002 in terms of the number of vacant houses is likely to be restored by 2013 or so, but, with the difference that in 2013 the number of new houses being completed is likely to be far less than in 2002.

    (b) Housing supply was tight in 2002 – that is why an ESRI report in 2002 stated that ‘shortage of new houses was a major constraint on growth’, so restoring the situation to what it was in 2002 means a tight housing supply situation.

    (c) If we did all the above calculations for only Dublin and the surrounding counties, they would be tighter still.

    @hoganmahew

    In assuming population will continue to grow, you are falling into the same trap as DKM in 1991, no? (extrapolating from the most recent trend).

    JTO again:

    Population growth has been taking place in Ireland at a very rapid rate since 1961, and on both sides of the border. It isn’t a short-term phenomenon.

    population of Republic Ireland 1961: 2,818,341
    population of Republic Ireland 2011: 4,581,269

    increase between 1961 and 2011: +62.6 per cent

    Furthermore, it is not just a southern phenomemon:

    population of Northern Ireland 1961: 1,427,391
    population of Northern Ireland 2011: 1,799,392

    increase between 1961 and 2011: +26.1 per cent

    In relation to the N. Ireland figure:

    (a) there was a war going on most of that time

    (b) the majority unionist population is elderly and has smaller families, so its size has hardly grown at all in that time – growth in the nationalist population in N. Ireland in that time has been at approximately the same rate as that of the population in the Republic of Ireland, i.e. over 1% annually, and well over 1% annualy in the past couple of decades.

    I think that 50 years is long enough to establish that it is a trend, not a blip.

  86. @Jules

    “the housing surplus is melting away” has to be about the most farcial comments I have heard recently.

    Visit Nass, Loughrea etc. to visit a couple of estates.

    JTO again:

    Not sure about Loughrea, but I assume that you mean Naas (not Nass), which is in Kildare, is it not?. Well, for Kildare, the CSO figures last week show:

    vacancy rate in Kildare in April 2006: 9.9%
    vacancy rate in Kildare in April 2011: 8.1%

    So, quite a sharp fall. Looks like the Kildare surplus is indeed ‘melting away’.

    A similar pattern in all the counties in the region:

    vacancy rate in Dublin in April 2006: 9.7%
    vacancy rate in Dublin in April 2011: 8.6%

    vacancy rate in Louth in April 2006: 13.4%
    vacancy rate in Louth in April 2011: 12.4%

    vacancy rate in Meath in April 2006: 10.6%
    vacancy rate in Meath in April 2011: 9.1%

    vacancy rate in Laois in April 2006: 15.7%
    vacancy rate in Laois in April 2011: 12.6%

    vacancy rate in Wicklow in April 2006: 11.4%
    vacancy rate in Wicklow in April 2011: 9.9%

    So, there was a fall, in some cases a sharp fall in the vacancy rate in all these counties between April 2006 and April 2011. But, then factor in:

    (a) A comparison between April 2006 and April 2011 vacancy rates is rather misleading, because it doesn’t take account of the fact that the vacancy rate was rising sharply in April 2006 and was probably a couple of per cent higher by April 2008, as the number of new house completions between April 2006 and April 2008 was still very high. The fact that it was well below its April 2006 level by April 2011 in these counties indicates that it fell very sharply betweeen April 2008 and April 2011, as the number of new house completions dried up.

    (b) You don’t need to get to zero vacancy rate for there to be a tight housing supply. You get it at around 5% vacancy rate. As Dreaded_Estate showed, the vacancy rate nationally even in April 2002 was around 8%, which probably equates to around 5% in the Dublin and surrounding counties in April 2002. As I pointed out above, in 2002 ESRI were highlighting a ‘shortage of new houses as a major constraint on growth’.

  87. I am reminded today again that unsold properties are only one side to the bent hen’s penny. The other is the ocean of personal mortgage debt arising from the bubble.

    I have argued here several times that default begins at home and that without a program of mortgage repudiation/reduction, domestic defaults and all they imply for recovery will spiral. It was therefore heartening to read this report on the INMO calling for some form of mortgage strike.

    With talk of further terrible euphemisms (‘adjustments’) being inflicted on the economy, radical thinking and action are necessary and arguably long overdue on this front.

  88. There was a storm of criticism regarding the Nama mortgage enhancement proposal on this thread, some of it deserved in my opinion, but the flaws in that Nama proposal are as-nothing compared to some of the policy suggestions given by a few commentators. I am worried that some commentators cannot add and subtract properly, or are not willing to try.

    New government-funded giveaways (the government already ran out of money and is being funded under an IMF bailout program) or bank-funded giveaways (the banks are insolvent, propped up by the ECB and funded by the IMF/EU) are not on the horizon.

    Free houses and free mortgages? Get real, folks.

    Lots of other sensible comments though so it was a good thread and thanks for all the interesting discussion.

  89. @Overseas Commentator

    You say

    “..Who is going to administer a debt write-off ? How are you going politically to deal with the huge inequalities it will create? Are you going to write-off the pre-bubble mortgages? It also mean writing off what’s left of your banks ,what about the foreign banks who have purchased some of the loans?
    What about securitization? What about CDS on those CDOs?
    In short, are you trying to start a civil war or WWIII?..”

    Not trying to be smug or smart but I clearly indicated that schemes such as mine are never going to be fair or equitable. You’ll notice I was pretty explicit in this regard.

    The answer to your questions is the banks will administer the schemes – they had a significant role in bringing the consumers to this place in the first instance it would seem logical that they make amends to fix their own errors. Unless I missing something here.

    The inequalities it will create are minor league to what will be left if the problem is not tackled head on. The 2012 budget is coming and the additional cash coming out of citizens pockets to keep the IMF/EU/ECB show on the road will probably be the tipping point plus a combination of JCT and Mr. Draghi rate rises will finish the job.

    My scheme (its on a previous post) is to go back in time to when average net yields once prevailed and since that date ALL mortgages need to be restructured. That net average yield of 7% was last seen in c2000.

    The net loss on the banks will be in line with the cash set aside for the recapping on the latest PCAR dated 31st March i.e. we’re already paying for it.

    The foreign banks who purchased the loans will make a loss most likely. Next.

    Re CDSs – it depends on whether you believe a restructure is a default event or part of the normal ebb and flow of risk taking – I happen to believe its the latter and as a result their is no default – ISDA have said as much recently so no payouts to CDS holders.

    Re securitization/CDOs – parties will most likely lose money. Next.

    No civil war necessary at all what this requires is honesty. Banks screwed up, consumers less so but society and Govt must recognise that this problem is not going to be solved until there is a fessing up that lending money into property deals at 3% less than the equivalent risk free rate i.e. 1% net rental yields at the height of the market in 2006 was a banking error – its their day job to know that lending practices such as that always end in tears. Always. Time will not solve the problem – see Page 58 on the 31.03.2011 PCAR report from the CBI – they also believe time will not solve the problem and today its seemsthe nursing unions are coming to the same conclusion.

  90. @Yield

    My advice to you is not to yield on your proposals.

    Approx €66 billion will go into the banks to recover losses and bail-out private bondholders and do the Basel 111 shuffle just in case there is not enough for the bondholders to be 110% happy.

    A modest! €10 billion would easily buy up the equity in residential owner occupied mortgages in default or close to default. Theses then become shared ownership houses (i.e 50% or 100% council houses).

    @Gregory Connor:

    You need to be more specific in your critisisms. If I am included then I humbly suggest that I was not proposing to give away free houses.

    The proposal to give away away unfinished properties for free provided the purchaser completed the properties with his own funds within two years make perfect economic sense.

    Market Value of Asset being given away is close to Zero. Dead Sunk Cost.
    Potential private investment in new construction. Substantial.
    The benefit is to the economy and workers.
    The loss is to the banks/NAMA. But that loss has long since occured.
    The powers that be (banks/NAMA/Dept of Finance/ ECB /EU etc) prefer not to admit to these losses. Their careers are at stake. They value their careers far more than they value the jobs of fellow citizens.

  91. Why it’s not possible to calculate the forward price.

    Consider the argument from arbitrage, to calculate the 1 year forward price.

    You take out a Nama mortgage for a house worth 100. You rent it out at 5% for a year, and then sell it back, reimbursing Nama. You don’t know the amount that you will need to reimburse Nama (this depending on the amount that you sell it at).

    I guess you could say that there is just a wide bid-offer spread on the forward price, but I think it’s wide enough to make arguments using the BS model useless.

  92. @Gregory

    So tell me when the number of people that can no longer pay for their mortgages reaches 200k plus – which it will. What then?

    All +200k go through a new and improved bankruptcy procedure? Spare me please.

    Otherwise under normal procedures bank takes house trys to rent same or sell it – both almost guaranteed money losers relative to current mortgage – and the benefit to society is what exactly? Previous owners now on housing waiting list, or back renting – with previous negative equity still to pay, so net net no benefit but no doubt socially many times worse off. Bank suffers loss (which more than likely will be greater than my scheme) regardless and sovereign pays anyway.

    Perhaps you could explain the upside, because I sure as hell fail to see it. Unless a scheme of arrangement such as mine is accepted as the only long term solution for mis selling goods above their long term market price then the problem gets worse. What exactly are your advocating – extreme wage inflation? another property bubble? all 4.5 million reside in Dublin? The nurses await your musings.

  93. @a

    What you have described is not the forward price. The forward price does not depend upon the eventual realized market price, it only depends upon the current market price. But your example is a good foundation for calculating the forward price. So the house is currently worth 100 and has a rental income of 5% with no risk of nonpayment. There is a riskfree account paying 4%. Then the forward price of the house is 99. This is because if you agree to buy it in one year’s time, you lose 5% rental income and gain 4% interest income. The forward price is just the current price adjusted for rental income compared to equivalent interest income. It does not depend upon what the house sells for next year since it is for a transaction completed now, but where the money is not exchanged until later. It just adjusts the current price for the difference between interest income and rental income.

  94. I’d also claim that there is no market rate for the repo (this is the term in equity derivatives, anyway), which is the right to short sell the house. Basically if everyone expects the price of the house to be 80k in one year when it’s worth 100k now, and the rental rate is 5%, then everyone would be willing to pay up to 25k for the short sale right.

  95. “The forward price does not depend upon the eventual realized market price, it only depends upon the current market price. ”

    For the argument via arbitrage, the eventual realized market price would determine how much you need to pay back Nama, as I understand it, so it would indeed enter into the calculation of the forward price.

    For the problem with the repo, it’s not the eventual realized market price which is important, but the expected realized market price. Forget the rental rate and just suppose you have a house worth 100k now. If everyone expected the house to be worth 80k 1 year from now, then everyone would be willing to pay 20k for the right to sell the house now and buy it back in one year’s time. This rate would be important in the calculation of the forward.

  96. @a

    Yes I agree that this market is illiquid and not functioning properly and the whole foundation of the Black Scholes is weak in this application. That makes the specific Black Scholes based pricing that I gave just illustrative. But the point is still important that Nama is proposing to purchase bull spreads on Irish property and hold them on its books, with Irish taxpayers as the main suppliers of risk capital (e.g. paying back the Nama bonds as they come due). You are correct that the forward price is only hypothetical in this application, there is no real forward market. Even without Black Scholes type pricing we can do options analysis to understand the risk of the position that Nama proposed to take on.

  97. OK, fair enough. Nama is clearly taking on a risk (but my guess is that BS straightfowardly applied is probably underestimating it).

  98. @Gregory OC

    “Free houses and free mortgages? Get real, folks.”

    Welfare recipients in many cases get ‘free’ housing. A friend of mine, a landlord, is paid €1000 per month by a local council for a house. The tenant in the house, a single parent with 3 children, pays €150 on top.

    Someone always pays and in Ireland it is usually the taxpayer in both the public and private sectors.

    Perhaps, many indebted ‘homeowners’ have decided they have paid enough by way of direct debt repayments and various taxes and levies. Free houses do not come into it.

  99. @ John the Optimist,

    “This will be determined, as always, by supply and demand.”

    I’m of the opinion that property prices were determined by a credit bubble. Or if you want to screw around with the ol’ supply and demand tosh; if the house buyer puts in 20% and the bank provides 80% of the property purchase price, should the level of demand be apportioned? If we go for a simple majority, then it’s the banks 😉

  100. What would it take to get foreign banks back into Ireland to lend money again?

    Would this work. State merges AIB and BOI and takes them over. State then sells a 40% share of this nationalized bank to HSBC or some other entity. State comes up with some very favourable terms to entice them.

    As Ahura says – it’s all in the supply of Credit. There is a reasonably positive momentum behind us at the moment

  101. @Yields or Bust
    You could always pass a law that retroactively forbade anyone from selling their house for more than a set yield against an estimated rent and demand that anyone who sold a house above that price, e.g. during the boom, should refund the buyer.

    The estimated rent could be determined by a newly created quango.

  102. @Hugh

    And your actual solution is what exactly? Hope and pray the problem goes away? Have 200k plus people made bankrupt because the banks lending models on times salary etc sees its wheels coming off?

    When you have a serious solution let me know becasue hurlers on the ditch live in a safe place. This disaster is happening as we speak and at 12.45pm today it will just get that bit worse.

  103. @ Yields
    I’m not proposing a solution until there’s an explicit statement of what problem or problems we’re supposed to be trying to solve.

    Is the problem that some people are unable to pay their mortgages, have very little chance of ever paying them and will be (correctly) forced into the (appalling) Irish bankruptcy process?

    Is the problem that some people can still pay their mortgages but dislike the idea of paying a mortgage on a house that didn’t increase hugely in value like they expected?

    Is the problem that there are people in a grey zone in the middle and that it’s not enough for the lending bank to individually figure out a custom solution that recovers the maximum value for the bank – as is their duty?

    What, exactly, is the problem that we’re trying to solve, and why? First tell me that. I don’t see how generalised calls for free money are a solution to anything in particular.

  104. @Hugh Sheehy

    You make a good point. In Italy if one sells a home within five years of purchase, tax roughly equivalent to income tax is paid on any profit (I might be overstating it but that is the rough rule). After five years there is only capital gains tax. However, you must understand that there is often a degree of ‘nontransparency’ regarding the fine detail of property transactions there.

  105. @Hugh

    The problem is the first scenario in the main but I completely disagree that 100% of the mis pricing error – for that’s what it actually is – rests with the individual/consumer concerned.

    The consumer as a result of scenario 1 is likely forced into a procedure which helps none of the parties concerned. This makes no sense especially when the lending banks ultimately determine the price of the product – not the consumer – in the first instance.

    Unlike cash markets housing is not something which is worth what someone is willing to pay for it – this irks me greatly when this God awful phrase is used in relation to housing. Nothing could be further from the truth because we know that in c98% of all housing transactions the transaction would simply would not happen without 3rd party lending. So it is not what the consumer is willing to pay its what the bank is willing to lend. This is basic stuff.

    In making those lending decisions the banks therefore hold the keys to the valuation decision and they got their valuation decisions wrong.

    They’ve got it wrong because the models on which they have determined the ‘price’ of a property and a ‘value’ are not the same thing – the banks have assumed they are. This is a fundamental banking asset pricing error.

    One hears of individuals being approved for x amount to buy a house based on their current earnings and times that etc. That normally gives the consumer buying power in the market. He/she goes off and buys a property normally up to that loan plus deposit. The property is ‘priced’ at that level but 9 times out of 10 its fundamental ‘value’ is significantly different.

    The value is what the asset can earn in the open cash market i.e. its rent. Rent is not borrowed money its normally earned cash, and is always a better value determinant than leverage based asset prices.

    What has happened here (and has been the case for years ) is that the banks have allowed the financing decision and the valuation decision to become one. These decisions are not one. In finance 101 you will always learn that the decision to invest is based on the returns available and if those returns are sufficient to cover the cost of capital well all the better.

    These are very separate considerations and because the lending models have mixed these decisions into one the problems have emerged. How in Gods name this can be considered a consumer error is completely beyond me and as a result the consumer should in no way be allowed to bear 100% of this mis pricing mistake through a bankruptcy procudure or other wise.

    This is why housing differs to cash markets and this is why its regulated. How can it make any logical sense that party whose daft lending practices causes the bubble and the mis pricing and the party whose losses the consumers are now forced to pay through additional taxes, lost opportunties and jobs are now expected to bear the mis pricing error aswell through a bankruptcy procedure new or old. I simply do not accept that this is logical or close to being fair.

    My scheme seeks to remedy the ‘pricing’ error and return the asset class to its fundamental value in so doing one gets away from who can or can’t ‘afford’ the repayements because your defintion of affordability will always differ to mine. Under a scheme such as mine these issues simply don’t arise. The assets are valued based on their fundamental earnings ability and we know that’s about 7% capitalisation of net rents on average over the market. Do the calculation and write off the debt and move on.

  106. @ Yields
    Your scheme seeks to retroactively set the price that a house should have sold for, leave the original seller keep a much higher sum, have the original buyer borrow and pay a much higher sum, and to get someone else to make up the difference. It’s a free money scheme.

    Where will the money come from, and is this offer still open?

    Can I go out and buy an overpriced house now and have your scheme correct the price down for me in the future?

  107. @Rich says

    I don’t do melt down’s,and don’t do giveaway fire sales either.
    Read it again, Rich.You’re ideas are three years too late,and represent kneejerk hindsight thinking.Our problem should have been tackled(left with the banks and sold by them)three years ago.There should have been no nama.Our politicans inaction have led us to where we are.Its now too late for you’re meltdown,”fire sale”,as you advocate,and a lot of other ideas.Non runners now.We must sail on,as our depleted nama asset value would amount to a giveaway at present were we to go to the market place.Nama’s brief was to make a profit,period.That’s changed now too,as it may need to evolve into a management company in the short to medium term.It also needs to get creative in its project planning.I have never saw a project that didn’t have angles,and this animal has angles too.Its time to develop them into policies and evolve nama into the living organism,as against the dead sales carcase it has become.It holds assets on behalf of the state.We must safe guard our remaining assets.These assets thru nama can be used to initiate a lot of new user groups and govt schemes for sections of society,from management groups,to repair and trade groups,to housing schemes,local initiatives etc.We must not give any more concession to imf or ecb pressures.Our corner has been badly defended I’m sorry to say.Its ok to expect a writedown,debt forgiveness and changes in our future economic fortunes,but we cannot take it for granted that ”OUR FRIENDS”in europe will remember to reward us for playing good bad dog in times of woe for them.Eaten bread is soon forgotten and we need it on paper if we are to give upnama or any more assets like it.We got so much from europe….WELL.”Don’t forget what europe were given from our indigenous land and sea natural wealth every year also.Its time we were remembered at the top table.We have given our fair share,and don’t ever let anyone forget that.
    Having said all that,our situation is changing on a daily basis allmost,so still I feel its best to ride it out for the present.
    Smacks of a pre debt dollar default help call, with moody’s downgrading Ireland yesterday.No need for it at all.I think we all know there are forces(markets and otherwise)at play here out of our control,so we should only expect in anticipation of what we can control.
    Some good points made above too.Best one being the need for creativity in nama!!

  108. I really like your blog and i respect your work. I’ll be a frequent visitor. How can I subscribe to RSS?

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