The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Government’s mortgage relief plan is “not in conflict” with current bank lending practices, according to Clearing Banks Association chairman Nathaniel Beneby Jr, who added that most of what was in the plan “banks have been following in any event”.

Speaking at a press conference on the plan, Mr Beneby said: “In terms of implementing this plan, when you look at eligibility and how the plan works, most of what is in the plan the banks have been following in any event. It is not inconsistent with what we have been doing over the past four years or so in assisting mortgagors who were in default.

“One of the significant differences is, if you look at how the plan works, you would see that they’re proposing to split a mortgage between two loans - total indebtedness and total serviceable debt.

“What the banks will do is assess applications to determine what amount a mortgagor could pay based on their existing income. The difference between that and what is owed is called the ‘gap amount’ that’s in the plan.

“A portion of that gap amount is what the banks will defer payment on; it will be interest free for three years so as to allow the burrower to pay on the serviceable amount, which is structured to suit their current financial position,” MR Beneby added.

“That also helps them to redeem their credit rating, and it allows them to stay in their home. In the past the banks have not done that; that is a very major difference. That gap amount is also where the Government is making a contribution towards assisting the mortgagor in retaining their homes.”

The Government has committed roughly $10 million to the mortgage relief plan. The maximum each applicant will be able to receive is $7,500.

The mortgage plan has been modified since its initial introduction. The Christie administration’s 10-point plan for mortgage relief, introduced during the election campaign, initially included pledges to get banks to agree to a 120-day moratorium on foreclosures and write off 100 per cent of unpaid interest and fees for those facing foreclosure.

In its original plan, the PLP said it would encourage banks to reduce the interest rate on the mortgages in question to prime plus 1 per cent. Regarding the CBA’s position on the initial plan Mr Beneby said: “The Clearing Banks can not speak to those specifically. What we can speak to and present is what we have negotiated with the Government in earnest, and both parties are fully supporting what has been produced.

“The CBA was not engaged to produce a plan. The CBA was consulted, but in terms of producing a formal plan we were not requested to produce a formal plan. The plan we are looking at is what we have been asked to discuss and produce, so the CBA really cannot comment now on what was in the public domain during the general election”.