# The National Housing Co-op Bill



## Brendan Burgess (21 Jun 2017)

Has anyone reviewed this? It seems like complete nonsense. 

http://www.irishtimes.com/news/soci...ider-friendly-vulture-fund-proposal-1.3085255

"The Bill, which has had input from the Master of the [broken link removed], Edmund Honohan, homelessness campaigner Fr Peter McVerry and former nonexecutive director of [broken link removed] Pat O’Sullivan, is an initiative of the Right2Homes organisation, which describes itself as a not-for-profit organisation “committed to supporting legal initiatives aimed at preventing bank repossessions of family homes throughout Ireland”."


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## Brendan Burgess (21 Jun 2017)

http://www.right2homes.com/

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.


No Profit or Loss to V.F’s. They exit the Irish Market early.
Banks would receive a sum calculated as the lesser of 4 (b) or 5 above.
Banks would not incur new losses because of this exercise.
Neither would they make any profit write-back as a consequence of any rise in property values.
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...
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.
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.


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## RedOnion (21 Jun 2017)

It doesn't make any sense at all. 

Ignoring the social / moral aspects for a minute, without an underwriter how would they get funding? Looking for a 15/20 year bond secured at 100% LTV (present value) on a portfolio with a history of non payment. And they think they can get that for 2%??

There is no real upside to banks - under IFRS accounting their provisions should be calculated on the present value of future expected cashflows. Expected legal costs should be included in this, so there shouldn't be a 'profit' from avoided costs.


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## Andy836 (22 Jun 2017)

It is rubbish. The fact it is being sponsored by the chair of the finance committee (john mcguinness) calls into question his competence. 

These secured bonds will apparently be "secured" by the underlying properties (not the loans which they actually seek to buy) - so an anti repossession group are going to pledge properties as collateral and investors are going to take that security seriously?

It also assumes that these long term defaulters will simply hand over ownership of their properties to the co-op and all of a sudden start paying market rent, and cover the maintenance costs of a home they now no longer own?


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## Delboy (22 Jun 2017)

Honohan should stick to his day job as he's shown time and time again that he's hopelessly out of his depth on the issue of Mortgage arrears/repossessions. He seems to have adapted David Hall's line of hyperbole on the potential numbers of repossessions.

Seamus Coffey does a small piece on what Honohan said at a meeting on the Co-Op bill
http://economic-incentives.blogspot.ie/2017/06/where-are-vulture-funds.html


> The 1,874 cases are split into lenders and those who have acquired loans, i.e. *vulture funds.  These funds make up 15 per cent of the cases* in the lists extracted and the year in which these cases were initiated can also be seen.
> 
> Let’s consider another group taking repossession cases. Let’s include *AIB, BOI, EBS, PTSB, KBS and Ulster Bank *and make a bit of a leap that we can exclude them from the class of subprime lenders that the under the “overwhelming impression anecdotally” are bringing repossession matters before the courts.
> 
> ...


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