The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has yet to inform Bahamian commercial banks how they can access its $10 million contribution to the Mortgage Relief Plan, with other institutions joining Scotiabank (Bahamas) in confirming they have no to few distressed borrowers qualifying.

Anwer Sunderji, Fidelity Bank (Bahamas) chief executive, said that while the BISX-listed institution had 30 distressed mortgage borrowers it felt might qualify for the Plan, no process had been established for drawing on the Government funding.

He told Tribune Business: “Our big issue is simply that there’s no clarity on how we draw on those government funds. We have yet to find out what the status is for drawing on them. It’s not been clarified as yet.”

His comments reveal further drawbacks and difficulties being experienced with the Mortgage Relief Plan, which was already having much less of an impact than the Government had hoped.

Under its terms, Bahamian commercial banks assess what distressed borrowers can afford to service given their current income levels. They then look at the total mortgage debt outstanding (principal and interest) at the time of the application, and what figure the borrower can now afford to service.

The difference between the two is called 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 per borrower, or one-third. It has allocated a total sum of $10 million to the Mortgage Relief Plan.

However, due to the strict qualifying criteria, plus aggressive mortgage restructuring initiatives undertaken by Bahamian commercial banks in previous years, fewer borrowers than hoped have been qualifying for the Mortgage Relief Plan.

Kevin Teslyk, Scotiabank (Bahamas) managing director, this week said that none of its 59 applicants for the Mortgage Relief Plan had qualified. It was the same experience as Bank of the Bahamas International, which has also seen zero mortgage borrowers qualify.

Confirming this, Paul McWeeney, Bank of the Bahamas International’s managing director, told Tribune Business: “We have persons we think could be eligible if they consider expanding the programme, but right now we have no one who really qualifies. We’re optimistic they’ll extend the terms of the programme to try and allow more persons to qualify.”

Mr Teslyk last week disclosed that the commercial banks and Ministry of Finance were in discussions over how the Mortgage Relief Plan could be modified and improved, so that the Government’s $10 million allocation was fully utilised.

He indicated that a revised Plan was likely to be rolled out in the New Year in the hope that many more distressed borrowers qualify. Mr Teslyk also hinted that the August 2012 ‘cut-off date’ might be altered to enable homeowners who subsequently ran into difficulties to qualify.

Malvern Bain, vice-president of asset recovery at Fidelity Bank (Bahamas), backed up Mr Sunderji’s comments on the current confusion when it came to accessing the Government’s Mortgage Relief Plan contribution.

“We do have about 30 [borrowers] we are looking at,” she told Tribune Business. “But we haven’t yet got clear instructions as to how we should access the funds. We were told to send in the names to the Ministry of Finance, and at some point they’d make arrangements to pay us.

“We’re still waiting for clear instructions as to how that process will work, and I would imagine that wouldn’t be outlined until they’ve looked at the process and widened the scope, so more people qualify. The issue now is not so much who gets paid, but who they qualify.”

Ms Bain told Tribune Business that around 160 distressed commercial bank mortgage clients had qualified for the Plan to-date. “I think Fidelity is looking at more than any other bank,” she said.

“We’re trying to do a little bit more, not sticking to the final $22,500 deferred amount. Some people are selling second properties, so they may be able to get more deferred when they sell those and pay down the deferred amount. We’re trying very hard to get people to participate.”

The Bahamian commercial banking industry had previously expressed hope that 1,000 delinquent homeowners might qualify for the Mortgage Relief Plan, out of 4,000 total non-performing loans. But even that seems highly optimistic under the current structure.

“The banks are coming out and saying far fewer people are coming out and qualifying than anticipated,” Ms Bain said, “and they need to expand the pool of applicants qualifying. Suggestions are being made as to how to do that. The pool is far smaller than anyone anticipated.”

Ms Bain also described as “sort of scary” the October increase in loans 31-90 days past due, telling Tribune Business this indicated more Bahamian borrowers were running into debt service difficulties.

For October, loans 31-90 days past due increased by $47.9 million to $373.7 million or 6 per cent of all outstanding loans.