The Tribune

By SANCHESKA BROWN

Tribune Staff Reporter

sbrown@tribunemedia.net

PRIME Minister Perry Christie said yesterday the government has modelled its new mortgage relief programme after a similar plan in the United States that “yielded successful results.”

Addressing parliamentarians in the House of Assembly while wrapping up the 2016/2017 budget debate, the prime minister said he is “confident” the new programme “will also be successful in providing meaningful relief to a significant number of borrowers in financial difficulty” in The Bahamas.

Mortgage relief for struggling homeowners was one of this administration’s under performing programmes with Mr Christie admitting in 2013 that only four or five homeowners were expected to receive assistance through the plan.

However, Mr Christie said the government has allocated $20m over a four-year period toward the plan’s second version, which his administration believes could assist upwards of 1,000 delinquent borrowers.

“The leader of opposition described the plan as ‘too little too late’ but this is going to help a lot people,” Mr Christie said. “It was announced in this year’s budget communication that, as part of the effort to modernise this country’s financial infrastructure, the government has been successful, in collaboration with the Clearing Banks Association, in designing a comprehensive mortgage relief programme to assist borrowers negatively impacted by the financial crisis.

“I would note that, building on experience with the previous programme, several features of this new programme go beyond that programme in ways that are specifically designed to provide greater relief to more borrowers. For example, the new programme expands the scope of the eligible borrower pool to reach more borrowers in true distress. The programme also contemplates permanent loan modification as opposed to only forbearance, that is time-limited relief. As well, the new programme provides for a so-called ‘waterfall’ of steps to be taken to achieve a target level of affordability, rather than just one general relief option. As for the execution strategy, the programme also features a strong focus on borrower outreach, which is critical to the success of the programme.

“A mortgage relief programme in the US with many similar features has met with a good level of success and I am confident that this new programme will also be successful in providing meaningful relief to a significant number of borrowers in financial difficulty.”

Last month, in his initial budget communication, Mr Christie said the revamped programme will provide financial incentives that will allow banks to offer borrowers who have some ability to pay, but have fallen behind, the chance to get back on track.

“Subject to programme eligibility criteria, banks will offer qualifying borrowers a minimum 20 per cent to 25 per cent reduction in monthly payments,” Mr Christie previously said.

“For their part, borrowers will be required to attend a financial counselling programme that will be established and run by the government.

“According to initial estimates, upwards of 1,000 delinquent borrowers, which are persons who are 90 days or more in arrears as of May 1, 2016, are anticipated to qualify initially for the mortgage relief programme. That number could, of course, go higher.

“The programme has been designed to make it as attractive as possible for eligible borrowers to agree to participate – eg, through large reductions in monthly payments, the ability to immediately start paying lower amounts prior to loan modification paperwork, etc,” he said.

“As well, the programme has been designed on the basis of the most current information from the banks’ own portfolios, thereby maximising the chances that programme participation will materialise. The total cost is estimated to be in the range of $20m over four years and will be paid by the government.”

When the PLP’s mortgage relief plan was officially introduced in September 2012, there were an estimated 4,000 homeowners in mortgage payment arrears. That year, State Finance Minister Michael Halkitis said that around 1,000 would likely qualify for assistance under the plan.

As a result, the government later announced that $10m would be allocated to the plan, which was a major 2012 election campaign promise and listed in the PLP’s Charter for Governance.