Banks sign up to govt's leaky homes deal, Dom Post reports. Agreement would currently see govt cover 15-25% of banks' losses for bad loans

Banks sign up to govt's leaky homes deal, Dom Post reports. Agreement would currently see govt cover 15-25% of banks' losses for bad loans

Banks have reportedly signed up to the government's leaky homes assistance package, in a move that would see the government guaranteeing 15-25% of losses stemming from bad loans made for repair or replacement of affected homes.

The Dominion Post this morning reported unamed sources saying the banks had signed up to the package, which would see the government cover 25% of replacement or repair costs, and in certain circumstances another 25% would be covered by respective local authorities that signed off building consents for affected buildings.

Leaky home owners would then be required to source the remaining 50% or 75% of costs themselves, which would generally have to be provided via a bank loan.

The package falls under the title of the Weathertight Homes Resolution Service (Financial Assistance Package) Amendment Bill, which is due to be passed after its third and final reading in Parliament next month.

Banks had been reluctant to agree to the package without some sort of government guarantee for losses due to the liklihood of some loans turning sour. Many leaky home owners currently owe more on their mortgage than their property is worth, often leaving them unable to access funds for repairs and unable to sell the properties.

Negotiations began last year looking at a 100% government guarantee for bank losses, meaning taxpayers would have picked up the full tab for bad loans made by the banks for replacement or repair of leaky homes. 

However, in March this year the New Zealand Bankers' Association, which is negotiating with the government on behalf of the banks, said in an oral submission to Parliament's Local Government and Environment Select Committee that it understood the government would only cover between 15% and 25% of any shortfalls from defaulted bank loans given under the scheme.

Interest.co.nz understands 15-25% of losses is still the ballpark figure for a guarantee from the government for any bank losses.

The New Zealand Bankers Association would not comment on today's report, other than repeating its comment given to the Dom that it was bound by confidentiality agreements:

"Negotiations between banks and government are ongoing., and we are confident the will be concluded before the package is rolled out to leaky home owners. As the content of the negotiations is confidential, we cannot comment on the details," a spokesman for the NZBA said.

A spokeswoman for Building and Construction Minister Maurice Williamson refused to comment on the Dom article.

15-25% of losses covered by taxpayers

In March, the Bankers' Association raised the prospect of the government covering 15-15% of any bank losses for loans given under the package.

"What the Government is offering is to enter into a loss sharing agreement with the Banks in relation to any amounts which are lent to fund the approved cost of leaky home repairs. This means that, in the event of a default, Government should contribute a proportion of any shortfall," NZBA CEO Sarah Mehrtens said in March.

"We note here that the credit support is provided in relation to the repair loan amount and not the total amount a customer has borrowed. While we cannot give the Committee exact figures, we expect the credit support extended by the Crown might cover 15 to 25 per cent of any shortfall on the repair loan. The remaining 75 to 85 per cent would therefore represent the Bank’s risk," Mehrtens said.

Banks have signed up

The Dominion Post reported unamed bank sources saying the banks had agreed to participate in the package.

"For the banks the key is the lending criteria and conditions. And they [the banks] are positive towards what the Government has done," one source told the Dominion Post.

The government assistance would "go a long way to help people meet the criteria". "An announcement is not too far away, we are just working on the fine print," the source said.

A further source said the banks had signed up because "it was political to do so".

Govt provision may not be big enough

In its Budget documents released on May 19 the government provisioned NZ$1.055 billion for payments made under the leaky homes scheme for its 25% contributions for costs, as well as the bank guarantee.

"There is a risk that the costs of the package will exceed the NZ$1.055 billion provided in the fiscal forecasts, as uncertainty remains regarding the extent of damage to eligible homes and the level of uptake," Treasury said in Budget documents.

An estimated 23,500 eligible leaky homes to fix as of January

A Department of Building and Housing report dated January this year estimated there were 23,500 eligible leaky dwellings to be fixed. This figure was based on a consensus forecast from a PricewaterhouseCoopers (PwC) report commissioned by the Government in 2009 suggesting 42,000 dwellings were likely to be leaky homes and only about 3,500, or 8%, had been repaired.

At the time of the PwC report it was estimated about 9,000 homes had fallen outside a 10-year liability limit, with another 6,000 homes estimated to have fallen outside this limit since the report was issued.

"It is estimated (therefore) there are 23,500 eligible households, so if as officials predict 70% of them take up this financial assistance package that equates to 16,450 leaky homes," the Department of Building and Housing said in January.

The PwC report estimated between 22,000 and 89,000 homes were leaky with the consensus forecast of 42,000. PwC estimated the total cost of fixing 42,000 leaky homes, including repair and transaction costs, at NZ$11.3 billion in 2008 dollar terms. The Government is currently incurring costs of about NZ$19 million a year running dispute resolution and related services. See the Government's Regulatory Impact Statement on the leaky home financial assistance package here.

The Government estimates the average cost of repair at NZ$27,500 to NZ$410,000 for stand alone houses depending on the level of repair needed from minor to full reclad, and NZ$16,250 to NZ$156,250 per unit for multi unit dwellings.

'Loss-sharing terms haven't changed in a while'

In Parliament on the way into Question Time this afternoon, Finance Minster Bill English said there had been a negotiations going on between the Crown and the banks in terms of the loss-sharing arrangement, "and as I understand it that’s progressing pretty well.”

Asked whether the government would guarantee somewhere between 15-25% of banks’ losses, English replied:

“The terms the government laid out quite some time ago now haven’t significantly changed. There’s been a lot of negotiation, but the key idea is that there’s some loss sharing and I gather we’re making very good progress on it.”

Asked if he was aware whether the loss-sharing agreement set out the government covering 15-25% of the losses, English replied:

“We’ve provisioned a pretty substantial contribution from the government into the scheme. That was in Budget 2010, so we think we’re pretty well covered. 

"The idea of giving home-owners this option was to help a lot of them get on and solve their problem rather than sitting and waiting and hoping that something would happen,” he said.

“You’d be best to talk to Maurice Williamson about the detail of it, because he’s been handling the detail. The Crown’s been interested in working with the banks, of course who have their own risks – that they have security on a home that may not have the value that they think it has, backing the mortgage," English said.

“So we’ve been looking at loss-sharing arrangements and you’re better to talk to Maurice about just exactly how that will work.”

Asked whether the provision included costs for any losses under the loss-sharing agreement, English replied:

“I’d have to go back and look at exactly the terms that we laid down, but the government’s been keen to help with the problem, but share with the banks the job of making sure that the money is well spent.”

(Updates with English comments, govt provision, estimated number of homes affected)

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Bloody marvelous. I hope they'll kick a few $mils toward hardies and fletchers and all the builders who built these houses so they don't feel too sad. 

Not to mention the architects who did the designs....they need their 4%...

regards

That's typical - first of all you think architects design houses (95% of houses are NOT designed by architcects - an 'architectural designer' is NOT an architect) and secondly you seem to think 4% is a fee.

4% is not enough to do a proper job of designing and observe construction.  However in NZ any incompitent twit can design a house and the LAW REQUIRES that you pay the Council to do construction observation (which they have proven themselves useless at)

In other countries you must have a real Architect to sign your buildings off.  Because they are then a profession (not in competition with anyone and Councils), they can charge enough to do the job properly and take responsibility.  But not in NZ, the Council's are forced to be there  doing something they are not competent to do.

Your typical stupid kiwi is proud of their expensive premium car because "it's had lots of extra research, development and design put into it".  But when it comes to their buildings (which are a far bigger investment) they are only interested in who is willing to put the least time and effort into research, development and design.  Who's willing to do the crappest job for the least money? - they get the job, in spite of the huge additional construction costs that cheap design generates. 

 

Another governmental bail-out ........ yipppppeeeeee ! ...... And the munny is coming from where , exactly ?

..... China !

God save our Gracious Yuan

Cos it's the only one 

To wipe our bums.......................

(Bridge)

Send  some to all of us

That we may fix all the stuff

That is blo...ody wrong with us...............(cresendo)

 

God send us some Yuan.

 

No Gummy from my pockets (you don't pay taxes here any more do you? - are you still on that island somewhere?) and my childrens' pockets because the current generation is loading them up with some lovely levels of public debt which we'll have to repay.

BTW don't have any children yet (as far as I know).

This is a joke. Right?  Until this Goverment stops handing over taxpayer money to every greedy, money grabbing,failed business outfit, dickwit investor etc NZ Inc is stuffed.

Never a truer word said , my friend ! ...

... which may explain why some retrogade turn-coats packed up and left .......  As much as we love our country , we are appalled by the pathetic governance .

Here here bobby! Too much bureaucracy in kiwiland. How about we become less of a nanny state and make people fully accountable for their own actions, rather than using the tax payer as a bloody backstop for every one of these uninformed idiots that put themselves in the crapper.

Coming up soon.......... Govt covering bank's losses for Mortgagee Sales

 

 

Why else was Kiwibank set up..... too cynical?

Hey they pay you and your over 65's an enormous amount , so don't get too self-righteous about government expenditure

Another Bailout?...... There goes the leftover bit of Kiwisaver incentives

And a one two three....God save our......

Funny how we don't mind thier politics when it involves them lending us money....but Frankie boy couldn't get his team on the ground for the cup......

enlightened hypocracy eh...bloody marvellous..!

Deja Vu. Isn't this a repeat of the "leaky homes" fiasco? It has all the same ingredients.

Hugh Pavletich, 15 Jun states: It's a shame the Christchurch City Council has done so much damage (over) the past decades with its planning - forcing high density and residential development on to the bad land.

Hugh Pavletich, 14 Jun 11 quotes Professor Geoffrey Rice of Canterbury University article in The Press 17 September 2010 "Quakes not new to ChCh", illustrating clearly the city has a history of them. I covered the 1994 Arthurs Pass one within "Christchurch: A bureaucratically buggered city" around the same time ... well aware of the for liquafaction in Christchurch as well with the extensive information provided by Ecan. The question that needs to be asked is - Did the Christchurch City Council Planning and also the Greater Christchurch Urban Development Strategy etc ..

In February there was a link to a youtube video from 1990's about liquefaction demonstrating it was widely known in the 1990's.

And this article in Stuff today
http://www.stuff.co.nz/national/christchurch-earthquake/5150213/Owner-demands-answers-on-why-her-building-failed
a BRAND NEW, modern purpose-built tilt-slab premises on Barbadoes St will have to be demolished after Monday's 6.3 magnitude quake.

The significance of this leapt out .. because .. 10 years ago I sat in on a large damages court case about a carpenter employed by the Education Department during the 1960's using asbestos-cement sheeting and had contracted Mesothelioma. The Education Department claimed they hadn't known about the dangers of blue asbestos. The Queens Counsel for the applicant produced article after article dating from the 1930's reporting the dangers of the material. It was widely known.

This could become a "class action picnic" for the ambulance-chasers. Just needs someone to start the ball rolling.

The whole leaky homes saga is getting to be a bit of a yawn.

The political systems the introduced the problem still exist and the problems won't go away until it is overhauled.

Trouble is most of the sheep keep participating.

The biggest problem with leaky homes began when councils contracted out certification.

Old agency problem.

To obtain the next job - there was a huge incentive to sign off on anything - which they did true to form.

The days when a building inspector was a retired builder employed by the council was the correct structure - and guess what - no leaky buildings !

 

Have updated with some comments from the Finance Minister

The saddest part of this story... New Zealand consistently ranks among the least corrupt nations on earth. I'd hate to know the details of what goes on elsewhere.

 

we are just as corrupt as anywhere else, its just a different form of corruption

our corruption does not directly see money change hands for favours

Its a more indirect, insidious and odourous form of corruption, a wink and a nudge, mates looking after mates,  

Case study after this new bill is introduced:

Joe & Mary average from average suburbia have nicer than average home that should be worth $600,000 if it was brick.  Their mortgage is average too $350,000.  Reclad quote comes in at $250,000 gst incl due to rotten untreated timber in some places.  They need to borrow the lot.  The job starts, gets delayed, costs run higher.  The total job once they move back in 9 months later due to poor weather and a change of lead builder due to sickness costs $320,000 incl gst.  Because Govt/council was always going to be paying half the bill it's easy to see how costs could run away on such a project.

In the final analysis joe and Mary pay $160,000 and suffer quite a bit of stress as you’d expect.  Their mortgage is now $350,000 plus $160,000 = $510,000.  Their home is now worth $600,000 just like all the other brick ones in their street.

How many Joe and Marys will put them selves through this to end up in this position?   

 

 

 

 

More welfare for the rich.

The National Party of Socialists hate the poor but seem to be hooked on welfare for themselves and assorted hangers on. Banks, Insurance Companies, Idiots who invested in SCF etc are all in for handouts. What happened to talk of the freemarket.

A new investigative documentary about exploring how New Zealand’s leaky home disaster came about and what we can do to fix it is screening on TV1 9.30pm Wednesday 6th July.

"A Rotten Shame' is John Gray’s journey of discovery. Using cases from the HOBANZ files, John takes us to houses in Tauranga and Christchurch as well as Auckland to show there are houses rotting all over the country. He charts the path of this national disaster from the legislative changes in 1991 through to today, confronting many of the parties involved, from politicians to builders and developers, demanding answers.

He uncovers shocking facts in the building industry: builders with no qualifications, council inspectors with no building background, flaws in inspections, shoddy building methods, bad decisions appraising new products and what a Master Builders guarantee really means.

This documentary is a wake up call for all home owners. Our home is our biggest investment and this documentary will arm home owners with much information they need to make wise decisions. And just as the issue of leaky homes is a fraught subject, this documentary was an extraordinarily slow and complicated process, eventually taking two and a half years to complete.

“And although overshadowed at present by things like the Christchurch earthquake (where it’s even more important to rebuild with good building practices), the full story of leaky homes has not yet been played out…..” Director John Hagen.