The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE government has committed roughly $10 million to its mortgage relief plan according to Minister of State for Finance Michael Halkitis.

He told Tribune Business that the government was looking to assist around 1,500 persons who had lost their homes to foreclosure during the recession.

In an interview with Tribune Business after he outlined the plan in the House of Assembly yesterday Mr Halkitis said the government planned to launch the plan in the first week of September.

“Banks are getting ready from an administrative point of view, so we think it is something that can bring relief to some people who were affected by the recession. It won’t cover everybody but we think it will be a tremendous benefit to those it can help,” said Halkitis.

The minister added: “We believe that roughly 1,100 people would fall into that category and when we add in some people from the Bahamas Mortgage Corporation that may be another 300 or so. We are looking to being able to assist around 1,500 people in total. When you look at the maximum that each individual will be able to get, that is $7,500, you can see that the exposure by the government is not unlimited but it’s in the range of around $10 million or maybe even less. We think that is something we can afford and we think the benefits far outweigh the cost.”

During his contribution in the House of Assembly Mr Halkitis said requirements for eligibility under the plan were: Owner occupied primary residential properties, including owner occupied duplexes were eligible not vacant lots or revenue generating/ investment properties; mortgages originating prior to January 1,2009; outstanding mortgage principal amounts not exceeding $500,000 dollars; acceptable credit history prior to June 30, 2008 and loans that are delinquent due to documented financial hardship caused by involuntary unemployment or chronic illness. Mortgages must also have sufficient sustainable documented and verifiable income to support the restructured payment and lenders must have a valid first and possibly second mortgage and the property is clear of other mortgages or leans.

Mr Halkitis also said the borrower would have to sign a forbearance agreement and perhaps new loan contracts that outline the extent of their obligations and the results of any breach.

“The format and content of these agreements are being finalised with the government in consultation with other stakeholders to ensure compliance with legal, accounting and regulatory compliance,” said Mr Halkitis.

“Individuals wishing to take part in the mortgage relief plan will apply through their lender, the lender would review each applying borrowers’ circumstances and determine what an affordable mortgage is, given the reduced income of the borrower.

“The difference between this affordable amount and the actual mortgage would be the gap which would be addressed by the plan through rewriting their mortgage loan into two loans, a serviceable loan and deferred loan. The government would contribute an amount equal to one third of the actual mortgage balance and what the client can service up to $7,500 dollars to permanently reduce the balance of the deferred loan and the client’s total mortgage debt. The lender would rewrite the remaining difference, a minimum of two thirds of the gap on a separate loan at zero per cent for up to three years.

“The debt would continue to be secured by the same real estate security hover there would be no principal payment requirement for a minimum of three years. The lender would then restore the remaining total serviceable mortgage debt over an appropriate term and at market interest rates. The loan term would be accessed on several factors including age of the borrower and sustainability of income,” said Mr Halkitis.

Mr Halkitis added: “If the joint government funding of up to a maximum of $7,500 and the lender deferral does not equal an amount equal to the gap debt the borrower would have the opportunity to cover the shortfall from other sources before being denied eligibility into the plan. In any event borrowers would have the right to appeal any decision by the lender to a panel appointed by the lender. The government will contribute an administrative fee of $100 per borrower to fund the cost associated with the restructure of the loan. The government will agree to waive any stamp tax that a will be incurred in registering the standard documents related to the plans and agree to a protocol to provide a waiver of duty on many other document which the lend might deem necessary to register for an individual to benefit from the plan, for example documents related to debt consolidation. The borrower’s financial circumstances will be reviewed annually to determine if their financial circumstances have sufficiently changed to provide for payments on all or a portion of the outstanding deferred debt. The borrower remains obligated for the full amount and a mortgage remains registered on a property for the full amount.”

Under the plan the lender would recover full principal when (a) the borrower pays the lender in full,(b) the borrower’s circumstances improve allowing for regular payments, (c) the borrower sells the house or (d) the borrower passes way and the lender is repaid by an insurance policy or when the house is conveyed to the heirs or is sold. A breach of the agreement by the borrower including failure to disclose relevant financial information, any delinquent payments on the restructured debt would result in the full amount including the deferred amount being due in full immediately and the lender would proceed with its standard security realisation process.