Draft legislation to establish the National Asset Management Agency has been published by the Department of Finance.
The Bill proposes to give NAMA extensive powers to take over land and development loans from banks in an effort to get them lending again to support economic recovery.
The new agency is to take control of 10,000 loans by the end of next June. The top 50 developers will be brought into NAMA by Christmas
The paper value of property and development loans NAMA is planing to take over from the banks is €90 billion, but the current market value is far less.
NAMA will pay the banks somewhere between those two figures, as it is required to take into account the long-term economic value of the property concerned.
Each loan will be valued separately, taking into account the quality of the collateral and the likelihood of getting a return. Over time, NAMA hopes to manage and then sell off the property to get its money back.
The full cost will not be known until the process of taking over the loans is completed some time next year, but the Minister for Finance will give an estimated total cost when the Dáil begins debating the legislation in September.
Sweeping powers for new body
The legislation gives NAMA extensive powers, and limits the opportunities to legally challenge its work. The Government is keen to stress that the developers who borrowed the money in the first place will still be liable for the full cost of the original loan, and will be pursued by NAMA if they default.
The loans will be administered by the bank but new agency will control the relationship with the borrower and make all the decisions. The organisation, which will be based in the National Treasury Management Agency, is expected begin operations this October.
Today it emerged that it will have significant new legal powers to compulsorily obtain property or other interests such as shares. Where it faces legal challenge, the legislation allows it proceed without being unduly obstructed. It will also have the ability to force developers to sell off properties to pay back loans. It will also be able seize assets and appoint receivers.
Financial institutions can apply to take part in the NAMA process. If they do so, they will have to accept NAMA's decision on what assets it will take over and its valuation of those assets.
Assets to be taken over include land and development loans, but also what are called 'associate loans'. These are other loans - not necessarily property-related - held by people or companies with land and develpment loans, or where the borrower 'may be a systemic risk to the financial system'.