One should think that transparancy is of utmost importance for any Icelandic government since the heyday of the behind-closed-doors governance of the Independence Party and the Progressive Party.
Questions remain regarding the true ownership of Magma Energy, which has now gotten its hands on valuable energy resources through a game of remiscent of previous governments. Little has changed regarding keeping everything possible up on the table.
Therefore trust is hard to come by for politicians who claim they are working hard. For whose benefit should be the obvious question.
A rumour now persists that the foreign creditors who will eventually be the controlling stakeholders of Islandsbanki (formerly Glitnir, formerly Islandsbanki) are demanding that 20.000 homes whose home equity is negative.
This would be a massive blow to Icelandic society and screams out for an answer for the following questions.
Who are and will be the foreign creditors of Islandsbanki? At what price did they assume that position?
A story from visir.is indicates that the largest creditors will be comprised mostly of hedge funds, not international financial institutions like the government has maintained.
At an auction held by the International Swaps and Derivatives Association in November of last year, attemps were made to find out how the market evaluated the Icelandic banks. Usually hedge funds, insurance companies and banks buy and sell these derivatives, to either insure bonds from being called in or betting on the business not being able to service its debs.
The results were that Kaupthing’s bonds were estimated at 6,6% of face value, Glitnir’s at 4% and Landsbankinn’s at 1,25%. According to the rules of the auctions, Landsbankinn’s is therefore deemed to be basically worthless.
Early 2009, the price received at the auction was estimated to probably be too low. That’s when they started being traded in international markets and the price rose. Kaupthing was estimated to rise to 10%, a significant increase from the auction. Glitnir’s managed an even higher jump up to 14%.
These are risky investments, as much rubble still needs to be cleared from the banks ruins and the impact of the current currency controls is still unknown. But the creditor group has changed a lot through the year, from being mostly comprised of European banks to now US hedge and insurance funds.
Their influence on the actions taken by Islandsbanki towards Icelandic households could be significant. It is to the detriment of the government that this rumor goes unanswered.
And what will happen in Icelandic society when 20.000 homes are foreclosed on and sold through auctions? Will Bjarni Armannsson or Bjorgolfur Thor come along and buy them at bargain prices? Then charge the previous owners rent for living there?
The glue that holds Icelandic society appears to be thinning every week.
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Rumour: Foreign Creditors Demand Foreclosure Of 20.000 Homes « Homes
2 years ago
[...] See original here: Rumour: Foreign Creditors De… [...]
Vilhjalm A.
2 years ago
I am as suspicious as anyone else about the motives of the foreign creditors, but I don’t see how they can maximize their profits by foreclosing on homes.
If the creditors foreclose and put the houses for lease, they will get less money per month than from mortgage payments.
If the creditors foreclose, most likely the indebted ex-homeowners would not be able to pay the difference between the mortgage price and the re-sale price. And the creditors would have to start 20000 separate lawsuits and become perpetual debt-collectors.
The scheme would only work if the creditors were able to sell the houses easily and then take the money out of the country. First you would need a buyer(s) with a lot of money (maybe 1.5-2 billion euros), and a buyer(s) willing to invest in a poor corrupt country. The only real possibility is the Icelandic pension funds. Or the Chinese government.
And how are the creditors going to take the money out of the country, by paying dividends?
Also, it seems unlikely that Glitnir has that many mortgages, and that many underwater mortgages. If I remember correctly, the Icelandic government bought Glitnir for only a few hundred million Euro – so how can Glitnir now have 1.5-2 billion euro of mortgages as assets?
The rest of the story about how creditors have come to own the Glinir debt is interesting – and disturbing.
The original debtors and creditors to the transaction have now both completely changed identities. The original debtors were banker-kleptocrats, the creditors banks (mostly) from Germany. Now the debtors are in effect the Icelandic people, the creditors American hedge-funds. If the owners and borrowers of the 10 horses are now completely different people, can you argue that it is morally necessary to pay back the 10 horses in full?
Vilhjalm A.
2 years ago
Ok, the 20000 part is just idle speculation or wild rumour (although it sounds plausible), go here:
http://kreppan.blog.is/blog/kreppan/entry/949604/
“Þessi tala um nauðungarsölu 20 000 heimila að kröfu erlendra kröfuhafa Íslandsbanka er tóm tjara. Ég efast jafnvel um að svo mörg heimili séu yfirhöfuð með húsnæðislán hjá einmitt Íslandsbanka, hvað þá að þau séu öll á leið í nauðungarsölu. Ef menn hugleiða tölfræðina aðeins í ró og næði, þá held ég að raunverulegar nauðugarsölur vegna kreppunnar verði sem betur fer aldrei nema nokkur þúsund, sem út af fyrir sig er auðvitað óviðunandi tala. En 20 þúsund slíkar er sem betur fer tala langt út úr korti.”
Dadi
2 years ago
Thanks Vilhjalm. I don’t think Islandsbanki has that many mortgages either.
I think this rumour epitomises the uncertainty and lack of trust that is evident in Iceland right now. The astonishing lack of information from the government as well as them dragging their feet in re-organizing the household debt makes the country rife with rumours.
What you described though in your first comment could well be plausible. Not just Chinese, but Russian investors have been circling the country in the last nine months.
And what is most disturbing about the changing of ownership is that the new creditors have bought their parts at a seriously discounted price. Even if they’d massively discount the mortgages they’d still be making a profit. They cannot seriously demand that nothing changes on the debtors’ side, when so much has changed on the creditor side.
Matthew Griffin
2 years ago
Unbelievable that Iceland has this huge number of homes. Is that any sign of foreclosure crisis there too?