The Second Wave: How Development loans were banked and RIP’s

The fact that NAMA is now set to leave loans under €20 million with the banks is debunking the justification for its original creation.

Yes, there were bigger loans with bigger problems, and they have been covered on every facet, and that will form the bulk of NAMA’s asset book, but what doesn’t go across will be handled by the banks (who incidentally already manage NAMA loans on behalf of the agency, only the legal ownership goes to the agency).

In Bank of Ireland’s case this will account for €2.1 billion of loans of which €1.6bn is already impaired! That’s a massive 76% impairment rate, of which €800m has been provisioned for – so about half of the expected loss is covered.

That tells us nothing about every other institution though, because BOI is likely to be one of the healthier ones, they neither …

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Concerns surrounding people coming off tracker rates

The Financial Regulator has voiced ‘concerns’ over the manner in which disclosure and transparency are enacted when people move from a tracker rate onto any other rate in a press release yesterday.

There were no firm figures given, and no direct accusations (although the Financial Services Ombudsman has received c. 60 complaints). The release comes on the back of a story in the Sunday Business Post by Emma Kennedy which outlined that PTsb ‘misclassified’ up to 300 mortgages and put them on standard variable rates rather than trackers. The issue was spotted by PTsb and rectified by them, customers have been refunded (on average €5,000) the difference they paid plus interest.

The way in which people ‘come off’ trackers tends to be by their own volition, if they opted for a fixed rate while on a tracker contract they do not need to be re-offered their tracker rate at the end. If they were on a fixed rate and are coming …

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Talking about Trains

I had a chat with Ronnie O’Toole who is currently an economist with NIB, and we talked about buses versus trains as a solution to transportation, I’ll cover more of this conversation in a later post but there are many interesting points and reasons for getting rid of trains and replacing the system with buses. This video covers the American version of the same debate.

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Retarded banking policies

Banks allowed their commercial teams to make a really big mess which the nation now has to clean up, the mess wasn’t on the residential loan book (although it may be in the future), it was primarily on the commercial/development book and those are the loans that NAMA will be taking.

So one might think… ‘at last, the bad stuff is out of the way’ and it is for the most part, at least from a ‘toxic asset’ point of view, what isn’t out of the way is the continued lack of foresight that major banks in this country seem to have.

I ask: ‘Did you know property prices have fallen significantly?’. ‘No I didn’t’ said the martian who just rode in on a moonbeam and landed in my office, but other than him, everybody knows the craic, house prices are down everywhere to varying degrees, and that means prices are lower than they used to be.

So why are some banks refusing to look at mortgages where the actual value of the property is …

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A bank who wants clients should issue a tracker offering.

Trackers are dead and gone, there is one on the market but it’s at a margin so high that it is effectively worse than a bad variable rate. Evidence from the UK indicates that Co-Operative Bank’s tracker offering which is 2.39% tracker mortgage.

Will Irish banks follow suit? Probably not in the short term, when the market turns there will be some bank who have accumulated more than capital required and they will then turn this into lending, having said that, it will likely be a self underwriting product, one where the LTV is <= 50%, minimum of €200k borrowed but no more than €450/500k, and a qualifying income of €90k combined needed (stripped of overtime/bonus etc.).

If trackers come back I would be totally satisfied that they will operate as a client cherry picking operation more than anything, having said that, with time a competitor might follow suit!

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Financial planning? Get a financial planner!

As the lyric goes I’ve been laid up from work my rent is due, my kids all need bran new shoes, money’s too tight to mention… Mick Hucknall soared up the charts in the 80’s with this song, and looking back, society has little changed some 20 years later. In reality, many of us are quite familiar with this …

Financial planning is a phrase that is slowly and surely beginning to permeate society at every level; TV, newspaper, radio, and even bus shelters. Financial planning can be defined as A coordinated process for identifying, planning for, and meeting goals related to financial needs for individuals, families, and small businesses.

As it applies to Joe Soap, it basically means that both he/she and their family are protected in uncertain times. How does one do this? Who should they turn to?

Can we really plan for the worst?  Planning for eventualities is a part of life, and whether we like or not, sooner or later they happen. All a person can really do …

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