Reading the Irish Examiner this morning I am struck and really upset by what I am seeing ..
On the cover is a picture of the large queues at the NAMA property auction in Dublin this week – while I am sure there are some genuine people in that queue looking for a break by getting a property they can afford and get their lives moving I am more than sure that their are plenty of “vultures” swooping to pick some meat off the dead carcases of our property collapse.
Consider the steps that lead us to this point:
Step 1 – Property owner (formerly known as bank customer) can’t afford mortgage: bank turfs the loans to NAMA at a huge discount and write off the balance (request money from government to cover the loss – p.s. we have to pay for this). End of problem for Mr Bank.
Step 2 – NAMA take on advisor’s, solicitors, experts of all sorts and deal with the “property owners” at huge cost (the problem is just in another box and we pay the fees). A good friend of mine, a solicitor tells me they all know the biggest game in town is getting a gig with NAMA!
Step 3 – NAMA creatively look for solutions to sort out the property market? Nah – lets just do a fire sale and get rid of the properties for half nothing. What brains came up with that solution?
Step 4 – Chase the original property owner for the deficit (at this stage it is probably much bigger than it ever needed to be in the first place), which they will never, ever be able to clear.
Step 5 – NAMA realise that it has a bigger hole than it thought in the first place – look for money from Government as they have a shortfall (that’s us folks!)
Step 6 – Vultures queue up, avoid buying any property until they come up for sale again in another bargain basement sale. Further devaluation of property prices as a result – yep you get a bigger hole with even more people in trouble..
I know there was a huge reaction this week to talk of Debt Forgiveness (why should we pick up the tab for other people’s carelessness? is the general attitude) but if you look at the scenario above, which we have all witnessed – the original property owner could have made a sensible arrangement with the bank, managed through the current economic climate and ultimately recovered more money than what was ever possible in an auction fire sale.
Possible Result – The deficit would have been a lot less, huge savings would have been made on unnecessary professional fees and the property market would not be further compromised.
Just a month ago a pub quite close to us was closed by the bank – the “owners” could not manage the level of debt as they bought too high. Now the pub is being touted around by the bank at prices a fraction of what the original debt was – they will never recover the deficit from the original owners and we will end up picking up the tab for the “unnecessary deficit”.
Will the new operators do a better job that the original owners? And what about all the suppliers who get burnt in the shut down scenario?
Debt forgiveness is emotive and really difficult to manage (fire sale is too easy, less messy, inhumane and lousy for the economy = our country) but it must be better than pure stupidity, which we will all end up paying for. It’s time to work hard at brave, practical solutions that have the best interest of the county at heart..
….and besides, why do we need to feed the Vultures?