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The National Housing Co-Op Bill 2017

The National Housing Co-Op Bill 2017

Explanatory Memorandum

The Current Position

A watershed moment in the Distressed Irish Residential Mortgage Crisis, is upon us, for a variety of reasons, with more than one hundred thousand Irish residential mortgages in various levels of arrears.

In excess of 6% of total residential mortgages in Ireland are now in the hands of so-called “Vulture Funds.” Contrary to what we are led to believe, there is no economic, social or moral benefit in having “vulture funds” operating in Ireland and their presence should be discouraged as soon as possible.

As the economy moves through recovery the fact is, this rising tide is simply not lifting all boats. Because of the sheer numbers of citizens affected, the medium to long-term effects cannot be measured in terms of moral and social impacts, although we are seeing increases in reported cases of alcohol/drug abuse, suicide, mental illness and marital/family breakdown.

Every occupant of an Irish Residential Dwelling affected, whether they are a Mortgagor or a Tenant is in the firing line of the stated intentions of the Banks under increasing pressure from the ECB, and the “vulture funds” who will ultimately control these properties.

 

WHAT SIDE ARE YOU ON?

THE COMMON GOOD           or          THE VULTURE FUNDS

Legal Changes

Several adjustments to existing legislation are proposed to enhance the ability of Courts to deal with applications of Possession and Sale of property securing default Loans, in a fairer, more transparent way and to eliminate the practice of bundling large numbers of loans into portfolios for sale to “Vulture Funds”, while at the same time ensuring where an order for sale of a property securing a defaulted loan is managed to ensure the best possible outcome is achieved for both the Lender and the Borrower.

Additionally, increased application of relevant EU Law is proposed to ensure existing protections for Borrowers are recognised and considered by the Courts.

The National Housing Co-Operative Society

The National Housing Co-Operative Bill 2017 proposes a potentially all-encompassing solution to the issue of Residential Dwelling Mortgage Arrears regardless of whether the underlying security for such loans is a Family Home or a Buy To Let investment property.

The controversial issues of “Strategic Defaulters” and/or “Moral Hazard” shall be dealt with in detail, and in truth, the real “Moral Hazard” is if we simple do nothing.

IF NOT US - THEN WHO?

IF NOT NOW – THEN WHEN?

So, the proposal contained in this Bill is as follows:

1 Establish a new standalone Entity – The National Housing Co-Operative Society

2 Acquire ALL Principal Dwelling House Loans (PDH’s) and ALL Buy To Let Residential Loans (BTL) in arrears over 360 days.

3 The figures are as follows:


(Figures are per Central Bank at 31/12/2016 issued 16/3/2017.)
Number of accounts: 59,000
Balances outstanding: €13.9 Billion.

4 Purchase Price of Mortgage Book:

            a) From Vulture Funds

These firms would receive the price paid by them to the Banks/Building Society with an appropriate adjustment based upon cost of funding and time in existence.

b) From Banks

Based on Balances outstanding at 31/12/2016 minus accumulated Bad Debt Provisions advised to Central Bank PRIOR to 31/12/2016 verified on a case by case examination covering all accounts in the specific categories of accounts being acquired. All additional costs incurred and debited against customer accounts to be deducted from sale price.

5 Establishing the money value of the purchase:

Accounts +12 months

Number of accounts Balance O/S
Estimated Written down value @50%
12K €2.3 B.
€1.15 B.

  

Accounts +24 months

Number of accounts Balance O/S Estimated written down value@30%>
47K €11.6 B. €3.48B.
Total:   59K
€13.9 B. €4.63 B.

                                                                                                                                                      

Rounded to a purchase cost of                                                              €5.00 B.

The final cost of the purchase would be established after examination of figures in Central Bank and the Lending institutions in order to cross check for accuracy of Bad Debt Provision figures. The exercise would be completed on a no profit no extra loss to Banks i.e. neutral in their respective Balance Sheets.

FUNDING ARRANGEMENTS

NTMA to be mandated to negotiate on behalf of the Co-Op, but not to underwrite in any way, a Secured Property Bond to raise the total needed through the ECB/EIB with a combination of 15 year and 20-year fixed interest rates.

At current available interest rates the cost of borrowing this sum should not exceed 2% fixed.

SECURITY FOR THIS PROPERTY BOND

The borrowings under this arrangement to be secured by a charge over the properties being acquired from Banks and Vulture Funds.

Note: Essential as a minimum that the “Buy-In-Values” be achieved in order to provide a margin of security. Hence NO NEGOTIATION over price, unless at a lower value.

This will allow the Property Bond to stand alone and be without Government Guarantee and thus be Off Balance Sheet.

EFFECT ON BANKS AND VULTURE FUNDS.

Lest there be concern about the impact of this transfer from the Banks and Vulture Fund’s on their respective Balance Sheets the following would apply.

  1. No Profit or Loss to V.F’s. They exit the Irish Market early.
  2. Banks would receive a sum calculated as the lesser of 4 (b) or 5 above.
  3. Banks would not incur new losses because of this exercise.
  4. Neither would they make any profit write-back as a consequence of any rise in property values.
  5. Banks would receive a big profit boost arising from the reduction in the cost of managing 59,000 accounts with all the attendant internal costs being eliminated. The same comment would apply to the mountain of external costs being incurred – Legal/Solicitors costs and expenses etc...
  6. A very significant infusion of new free capital would accrue to the Banks as a result of this sale. It would also assist Banks to come more quickly into accord with new ECB requirements.
  7. The New Capital should be “ring fenced” by Government to require Banks to provide low interest rate funding for New Social & Affordable Houses to be built to relieve the pressure on the lower end of the housing market and other necessary socially desirable projects, which are not the subject of this document.

For No Fault – Defaulters and for Judgment Mortgagors whose homes are about to be repossessed, this Bill rolls out the Mortgage To Rent option on an industrial scale.

The draft Bill clearly describes the legal architecture but, as a legal text, is still a work in progress.

LET’S KEEP PEOPLE IN THEIR HOMES

ITS UP TO YOU

THE TIME IS NOW

Níl aon tinteán mar do thinteán féin”

Location

C/O OCON.IE
Cappagh House,
Enfield,
County Meath,
Ireland.

Tel:046 9541779

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