Working through NAMA…

Richard Curran wrote a short piece at the weekend in the Sunday Business Post about Nama, but not so much the issue of its existence, but rather the ramifications of its remit, and the parameters of that remit. So, I’ll write a short piece considering what he has to say.

There’s some intriguing stuff in there. As he notes, We should know the ‘ballpark’ price of [what NAMA will pay banks for their property] loans. But as Nama looms closer, the next big question will be how the agency treats its defaulting clients.

Once Nama takes over the loans, it will try and ensure they are repaid. Of course many of them will not be, and developers will default.

Of course…

This will lead to Nama making numerous trips to the high Court to take possession of actual properties.

When this happens, how will Nama pursue the developers? Where personal guarantees have been given, Nama will be within its rights to go after whatever personal assets these individuals have – houses, cars, plasma TVs.

That should be quite a sight. But, if like me that raises a question in your mind, Curran addresses it immediately.

The big question is: how tough will Nama be? Some of the non-Nama banks have already secured judgements against a number of individuals. Where multiple personal guarantees have been given, it will be a first come, first served situation.

Which could be a recipe for chaos. And by the by, is the legal system prepped for this sort of environment?

Anyhow, he also notes some stuff which should have everyone thinking about this.

There may be very few personal assets available for Nama to take.

Why would that be? Why… a basic reason.

Developers have had lots of time in the run-up to Nama to make whatever arrangements they can to shelter personal assets.

Family first…

However, assets transferred to family members at a time when the person could be deemed to be insolvent could still be taken by the bank, or by Nama. But it could involve a dirty legal process.

And even should that be entered into there is always the ejector seat for our poor benighted developer class.

Others may simply decide to leave the country, making the enforcement of personal guarantees almost impossible.

This is where Nama’s appetite to pursue these matters will be put to the test. In the US, when the Resolution Trust Corporation mopped up the S&L collapse debacle, it did not pursue clients on foot of personal guarantees.

But this isn’t the US…

It is highly unlikely that such an approach would be tolerated in Ireland. It’s a smaller country and politically it would be very difficult – given the cutbacks and higher taxes faced by everyone – for Nama to adopt hat kind of forbearance.
Some developers will co-operate as best they can with tehir banks and with Nama. Others are already adopting a ‘two-fingers’ approach to their banks, and will probably do likewise with Nama.

We have yet to see the protocols or guidelines which Nama will adopt in relation to these issues, but the time is getting very close.

Reading all that the thought strikes me that there are many more who won’t even have the comfort of knowing their potential fate, or any means to squirrel away assets, such as they are, as they lose jobs and face mortgages that have to be paid for, and then ultimately they start to have to jettison their personal assets… the houses, cars, probably not plasma’s, but more likely ordinary flatscreen TVs…