The Tribune

By DANA SMITH

Tribune Staff Reporter

dsmith@tribunemedia.net

THE government’s Mortgage Relief Plan will begin accepting applications next Monday in an effort to put a dent into the crisis that now sees more than 4,000 mortgage accounts in arrears.

Speaking at a press conference at RBC headquarters, chairman of the Clearing Banks Association (CBA) Nathaniel Beneby said only a maximum of 1,000 Bahamians are expected to benefit from the mortgage relief plan (MRP), but it would still be considered a success as homes would have been saved.

“All member banks are pleased to provide support and are fully participating in partnering with the government in the MRP,” he said. “CBA is also committed to giving the implementation and execution of the plan top priority.”

One of the MRP’s main objectives, he said, is to “bring immediate relief” to defaulting mortgagors who qualify under the plan.

The plan is viewed as a “bridge”, allowing time for mortgagors to re-organise their financial affairs, restore good credit rating and save their homes.

Citing statistics from the Central Bank, he revealed as of July 31, nearly 16 per cent of all mortgages were in arrears for longer than 90 days, worth a combined $460 million.

“This represents over 4,000 mortgage accounts in arrears,” Mr Beneby said. “This is a crisis.”

Mr Beneby noted that the current figures are stable and the number of accounts in arrears do not seem to be increasing.

He continued: “Based on a very rough estimate by CBA, it is projected that approximately 800 to 1,000 persons could benefit from the plan. I wish to focus on what happens to the over 3,000 mortgagors in default who in all likelihood won’t benefit from the MRP. The reality is the MRP cannot and will not help everyone.”

Mr Beneby attributed the high number of mortgagors in default to the economic recession, high unemployment, persons who were “caught financially over-extended,” as well as divorces and separations.

“There are many legitimate reasons why mortgages are in default and families are losing their homes,” he said. “This is why the banks are looking at each mortgage situation on a case by case basis to determine how best to help Bahamians retain their homes.”

Another “main objective” of the MRP, Mr Beneby said, is the government’s plan to enact legislation to better regulate lending and borrowing from within the industry.

“Bahamians need to be willing to do some things differently, with better fiscal discipline as it pertains to consumer spending,” he said.

Citing more Central Bank statistics, he revealed consumer loans represent $2 billion or 33 per cent of total private sector loans among all banks as of July 31.

“There needs to be a behaviour change for consumer spending,” he said, before announcing that with the assistance of the Central Bank, the government is preparing to implement a Borrowers Protection Act 2012 and a Credit Report Act 2012 to regulate lending and borrowing.

“It would be premature to discuss these proposed Acts as they are at the draft and consultation stages,” he said. “However, the proposed Acts are equally important as part of the MRP.”

The Borrower’s Protection Act will ensure fairness when a lender is exercising its power of sale over a mortgagor’s residence and will also address the “major issue” of salary deduction.

Salary deduction, Mr Beneby explained, is when lending institutions – who are not necessarily regulated by the Central Bank – approve a deduction from a the borrower’s salary to go towards loan payments.

The Credit Report Act contains provisions allowing the Central Bank to supervise the credit reporting industry and the licensing of credit bureaus by the Central Bank and will also help to “bring order” to unregulated lending institutions.

In order for Bahamians to qualify for the MRP, a mortgagor must have maintained a good credit history prior to June 2008 and have become unemployed or underemployed involuntarily, or have experienced chronic illness, Mr Beneby explained.

The plan starts on September 10, at which time banks will begin to take applications from persons qualifying under the plan, and will end next year on March 10.

“Hopefully this initiative would assist in avoiding a repeat of the mortgage crisis we are experiencing and help Bahamians to retain their home,” Mr Beneby said. “It is my view that whatever number of Bahamian families benefit under the MRP, even if it’s only one, by saving their homes, the MRP would be considered a success.”