The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Scotiabank’s Caribbean chief yesterday said he was “confident” that the Bahamas would be able to solve its $675 million ‘bad mortgage’, crisis, suggesting that “execution” of a solution acceptable to all sides was the key.

Bruce Bowen, the Canadian-owned institution’s senior vice-president for the region, told Tribune Business that the banks, Government and other stakeholders had agreed a “collective solution” was essential to revive the Bahamian housing market.

He confirmed that Scotiabank had been in exploratory talks with Latin American companies that specialised in purchasing, then restructuring, delinquent mortgages to see if they could bring their skills to the Bahamas.

Mr Bowen said other commercial banks had been engaged in similar talks with foreign companies, given that the skills required were not present in the Bahamas.

While such discussions have yet to bear fruit, and Mr Bowen conceded that progress was “taking a little longer than we’d have liked”, he added that all sides needed to settle on a preferred model and than implement it.

“It’s taken a little longer than we’d have liked it to, but the encouraging thing to me, from my perspective as an outsider, is there’s a real understanding of the need to come up with a collective solution that addresses the impact on the financial sector as well as on the community,” Mr Bowen told Tribune Business.

“We are all better served if people can stay in their homes, even with lower payments, and service their mortgages. But there are a lot of instances where they cannot.”

In such circumstances, Mr Bowen said a better process was needed to satisfy all parties to the mortgage contract. This would allow the lending institution to more easily sell the subject property to recover its money, while also allowing the borrower to “move on”.

“There seems to be a growing consensus that something needs to happen,” Scotiabank’s top Caribbean executive told Tribune Business.

“I’m confident going forward that with the right minds focused on it, we can come to a solution. The Government is certainly very focused and wanting to move in that direction.”

Mr Bowen said the Bahamas’ discussions had “reached up to my level”, and added that there was “a lot of alignment with what the issues are”.

“Everyone’s interests are aligned on this,” he said. “It comes down to how we actually make it happen; how we execute on it.”

Dealing with the Bahamas’ extraordinarily high level of non-performing mortgages was one of the Christie administration’s major promises on the 2012 general election campaign trail.

However, its original Mortgage Relief plan, billed as aiding 1,000 troubled borrowers, was a flop. Just four were assisted, amid much acrimony and political finger-pointing, with the Government blaming the banks for the failure.

Mr Bowen said he did not know enough about the structure of the Government’s original Mortgage Relief Plan to be able to comment on it, or the efforts - led by Arawak Homes chairman, Franklyn Wilson - to revive it in a new form.

However, there is a sound social and economic rationale for attempting to resolve the’ mortgage crisis.

Almost $675 million worth of Bahamian home loans were past due at end-November 2015, according to the Central Bank of the Bahamas, weighing down both bank balance sheets and depressing their profits, via reduced interest income and higher loan loss provisions.

This, in turn, has resulted in a construction and real estate slowdown, and several thousand Bahamian families facing the loss of their homes, as banks continue to public 20-30 page brochures featuring distressed properties for which there are no buyers.

Mr Bowen acknowledged that the mortgage woes, and resulting housing market slowdown, were important social and political issues in the Bahamas, meriting attention from both Government policymakers and the commercial banking industry.

He confirmed that Scotiabank had explored whether foreign companies, who specialised in buying distressed mortgages from financial institutions and restructuring them, could aid the Bahamas by performing a similar role in this market.

Tribune Business revealed last year how Scotiabank had spoken to a Mexican company, Ascendancy Mexico, about bringing its skills to the Bahamas to address the non-performing mortgage ‘mountain’.

Mr Bowen yesterday told Tribune Business that Scotiabank had talked to more entities than just Ascendancy, revealing that it had used its Latin American “footprint” to engage companies that had performed mortgage restructurings in the region over the problems in the Bahamas.

He explained how such a structure might work in the Bahamas, using the example of his five years as Scotiabank’s country head in Puerto Rico.

“Once a year, we would sell a package of non-performing loans,” Mr Bowen recalled. “We would put it up for bid to several companies, and they would manage the work out with homeowners.

“That’s not because we, in theory, couldn’t do it, but because it’s not our core business.”

Mr Bowen said discussions between the Government and banking industry representatives had focused on “how you bring those skill sets” to the Bahamas.

Mr Bowen acknowledged that the purchase, then acquisition, of ‘bad’ mortgages had “not been the history in the Bahamas”, but said the problem was “not unique” to this nation.

“It’s working through, and having discussions among the Government and industry players as to what is the right model,” he emphasised. “It’s an issue of execution.”