Nama-type agency may be answer - Distressed mortgages

WHEN Fianna Fáil set up Nama in 2009, it was a painful but necessary response to Ireland’s financial crisis, notwithstanding the fact that the party bore major responsibility for the economic meltdown in the first place.

Its purpose was to remove bad debts from the banks and recapitalise them so they could begin lending again. Despite provoking controversy over Project Eagle in the North, and, more recently, Project Tolka, Nama has achieved a measure of success and, considering the enormous task of dealing with €74bn in loans, has avoided out-and-out scandal.

It is still too early to tell whether Nama has been a triumph of financial firefighting but the signs are pointing that way. It may have lost out by selling some assets too quickly, but it has reduced the State’s exposure from €74bn to less than €6bn and could, in fact, return a profit to the taxpayer.

In that event, the idea of a Nama-style solution for distressed mortgage holders seems like a good idea. Fianna Fáil is planning to introduce legislation in the Dail before the summer recess in July that promises to do just that.

Entitled ‘The Family Home Retention Agency Bill’, the draft legislation proposes the establishment of a state agency, described as a ‘friendly vulture fund’, which would buy distressed mortgages on family homes at discounted prices from banks and other lending institutions.

Strangely, it is neither party leader Micheál Martin nor finance spokesman Michael McGrath who is leading the charge on this but Fianna Fáil’s foreign affairs spokesman Darragh O’Brien, and backbench TD John McGuinness, who chairs the Oireachtas finance committee. They have been working on the bill with the campaign group Right2homes.

Since it was Fianna Fáil that set up Nama in the first place, it is a wonder that it did not occur to the party that a similar arrangement was going to be needed for the tens of thousands of home owners who found themselves in negative equity and saddled with huge mortgage repayments.

Nevertheless, it is better to tackle the situation late than never. It is an idea first suggested by Edmund Honohan, the master of the High Court, who in 2015 called on the Government to ‘nationalise’ repossessed homes that banks have sold to vulture funds and use them as social housing.

This would mean compulsorily acquiring the properties at the price paid by the speculator and either renting them back to the former owners or arranging a more affordable mortgage.

Last week, AIB, a bank bailed out by the taxpayer, sold off €400m worth of mortgages to Goldman Sachs for around €200m — a 50% discount that should have been available to homeowners.

Private equity firms and hedge funds descended on Irish shores in 2010 with the sale by Bank of Scotland of its Irish loans portfolio. Seven years on, they remain unregulated.

It is time to reign them in or, better still, see them off by forming an agency like the one proposed, one set up primarily designed to help people stay in their homes rather than simply to make a quick buck.