Ireland’s state-run “bad bank” expressed hopes to discover a product that will perk up residential property sales as lenders warned of weak loan demand on Thursday, May 19, 2011 and as the number of Irish residential mortgages in arrears increased.
Since their 2007 peak, the prices of Irish houses fell by an average of 40 percent and the severe prolonged housing market crash left the Irish economy in pieces causing many homeowners to struggle in making mortgage repayments.
The National Asset Management Agency (NAMA) has held preliminary talks with Allied Irish Banks and the Bank of Ireland about finding ways to provide financial support to buyers of residential properties that are linked to the agency from the autumn.
NAMA will be continuing its discussions with the banks in the coming weeks to try to come up with a solution that will enable it to deal with a purchaser of its properties should they fall into negative equity on a further price dip.
NAMA said that it wants to give confidence to consumers so that they can buy and that they wont be caught up in negative equity if ever they get into a deal.
One method that it has found out in exploring ways to finance deals is the so-called “vendor/staple financing” to potential buyers, a method that is internationally used and requires the buyer to inject “equity capital” of 25 percent or 30 percent of the original price of the asset upfront.
The buyer would then enter into a loan agreement with NAMA to repay the outstanding percentage of the original price over a five or seven-year period. NAMA expects to typically deal with sovereign wealth funds, pension funds, insurance companies and private equity firms.