The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

AN average of 100 persons per week have inquired about the Government’s Mortgage Relief Plan since it began earlier this month, its director of economic planning yesterday saying that 25 per cent have qualified for it.

Simon Wilson, guest speaker at the Rotary Club of West Nassau’s weekly meeting, said: “An average of 100 persons a week have been inquiring, that is excluding the credit unions, insurance companies and the Bahamas Mortgage Corporation.

“Twenty-five per cent who have inquired have qualified. There are some other things that have to be done before they can actually be enrolled in the programme. The disbursements by the Government have to take place and they have to sign forbearance agreement.”

Mr Wilson added that enrollment in the plan could begin “in a matter of weeks”.

“Our initial feedback and the response has been very  positive,” he said. “This is only a component of a wider programme of support for homeowners in distress.

“This programme is a living programme.

“There may be adjustments in terms with the lenders,” said Mr Wilson.

“The cost of the programme we estimate to be no more than $10 million; $2.5 million annually, which is about 1 per cent of the Government’s direct expenditure.

“The cost of the programme we feel is well within our limit during this period. We believe that once the Homeowners Protection Bill is tabled and passed, it will provide an additional safeguard to homeowners.” 

Under the Mortgage Relief Plan, a lender will review each applying borrower’s financial circumstances and determine what they can afford to service, inclusive of principal, interest, property insurance and real property taxes, given their reduced income.

The difference between the total mortgage debt outstanding, inclusive of accrued interest, at the time of application, and the mortgage amount the lender determines the borrower can afford to service with his/her reduced income, is defined as the ‘Gap’.

All eligible borrowers whose gap does not exceed $22,500 will qualify for participation in the plan. Eligible borrowers, whose gap exceeds $22,500, may qualify for consideration and participation in the plan at the sole discretion of the relevant lender.

Of that $22,500, the Government will kick in a maximum of $7,500, or one-third. If the Gap exceeds $22,500, an otherwise eligible borrower would have the opportunity to pay the amount of the excess (above $22,500) from other un-borrowed sources before being allowed participation in the plan.

When a borrower is approved, the borrowers will be required to sign a Forbearance Agreement and, if necessary, other legal documents that will detail the extent of their obligation and the consequences of any breach.

Borrowers must agree to all terms and conditions of the Mortgage Relief Plan. Under the plan, the lender will waive all late fees on the original mortgage debt and restructure the approved applicant’s mortgage into two loans - a loan to be serviced by the mortgagor based on current income over an appropriate term, and at market interest rates, which is referred to as the serviceable loan.

Then there is a loan in the amount of the Gap at 0 per cent interest for up to three years, referred to as the deferred loan. No principal payments will be required on this loan for up to three years.

At the end of the three-year term, the deferred loan will mature or may, at the discretion of the lender, be refinanced for a further period at terms and interest rates acceptable to the lender.

The Government will also contribute, up front, an administrative fee of $100 per borrower to fund the costs associated with the restructure of the loans.

The mortgage relief

plan will end on March 10,2013.