Sinn Fein TD and Finance spokesperson Pearse Doherty TD has expressed serious concern that NAMA is forgiving developers’ loans. Deputy Doherty said he’d received confirmation of this policy last week in a parliamentary response, and today again when NAMA was in front of the Finance Committee.
Doherty said it would cause outrage among struggling mortgage holders who receive no leeway on their debts.
Deputy Doherty said:
“In today’s Finance Committee I asked NAMA to confirm whether the sell-off of €1.9 billion in loans to a third party is debt forgiveness. They confirmed the practice of selling off loans at what NAMA paid for them and admitted they had no jurisdiction over the loans once they’d been passed on.
“The debt forgiveness works like this: NAMA bought a developer’s €100 million loan to Anglo for €40 million (and the taxpayer recapitalised Anglo then with the outstanding €60 million). NAMA is mandated to pursue the full €100 million, not just the €40 million. But NAMA has sold the loan off to a third party for €40 million. The state has just lost €60 million. This is debt forgiveness through the back door.
“When NAMA was established, there was huge concern in this state that the body could be used to provide a write off of debts from developers, as NAMA would not be paying the full value to banks for the loans it was acquiring.
“NAMA and the government of the day assured us that NAMA would not just be pursuing the value of what it paid banks for loans, but would go after developers for the full value of debts. This is what NAMA is set up to do – not just to breakeven but to potentially make a profit.
“Through a series of Parliamentary Questions, I have established that NAMA has sold off €1.9 billion in loans to date to a third party. Whether or not this third party chases the developers for the rest of those loans is immaterial. The state will not benefit from anything that is made on these loans by the third party. The third party might not pursue the developer for any more than what they bought the loan for. Therefore, the losses that have been incurred on these loans have been crystalized by NAMA, and the developers who own the loans have essentially had part of the loans written off.
“Mortgage owners in this state are struggling under the burden of their debts and are receiving no write offs and little help in the management of their loans. I believe this policy of NAMA’s will cause outrage among struggling mortgage owners.
“The government needs to tell us if they are aware of this policy, if they know what it entails and if they are happy for it to continue.” ENDS
Questions asked by Deputy Doherty:
Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm the procedure adopted by the National Asset Management Agency when selling loans under its control, so as to maximise the return to the taxpayer from such disposals.
Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm that the National Asset Management Agency does not sell loans under its control for less than the original book value plus accumulated interest to the point of disposal, unless there is a competitive bidding or tendering process.
Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm that the National Asset Management Agency has sold loans, or allowed loans to be refinanced out of NAMA, at less than the original book value plus accumulated interest to the point of disposal; and if it has, if the relevant debtor has obtained any financial advantage through debt forgiveness or debt write-down from these transactions.
Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm the cash received by the National Asset Management Agency since its inception in respect of the sale of loans; the total original book value of the loans plus interest accruing to the point of disposal and the total NAMA acquisition value of the disposed loans.
Minister for Finance, Michael Noonan: I propose to take questions 179, 180, 181 and 182 together.
I am advised by the National Asset Management Agency (NAMA) that since inception to 31 March 2012 it has sold loans with a nominal value of €1.9 billion, and generated €7.2 billion in cash receipts from borrowers. (see page 3 of NAMA Quarterly Report, 31 March 2012 for additional detail)
The Agency advises that net profit on disposal of loans is recorded in its Section 55 Quarterly Accounts and in its year-end consolidated income statement. The cumulative amount to 31 March 2012 is €89.7m. These documents are available on the Agency’s website, www.nama.ie. The Section 55 Quarterly Accounts for the three months ending 30th June 2012 are currently being considered by Government and will be laid before the Houses of the Oireachtas in due course.
The Agency advises that in the case of a loan sale, it disposes of the entire par debt and that therefore the matter of debt compromise does not arise. For the debtor, the only change is that there is a new loan note holder. NAMA operates a phased an orderly programme of disposal of both assets and loans to achieve the best possible outcome for the taxpayer.
The Agency advises further that it has launched an active loan sales process, having recently established two sales advisory panels one for Europe and one for the US. NAMA’s objective in any loans sales transaction is to achieve the best outcome for the taxpayer. In this context, the disclosure of the additional information sought by the Deputy could adversely affect the Agency’s competitive position. Providing such information would be commercially counterproductive for the taxpayer as it would be of greatest benefit to potential loan purchasers.