The Tribune

The Government yesterday unveiled a revised Mortgage Relief Plan it believes could assist “upwards of 1,000 delinquent borrowers”, via a 20-25 per cent cut to monthly loan payments.

Prime Minister Perry Christie, during his 2016-2017 Budget address, said the Government had allocated $20 million over a four-period to the Plan’s second version.

Promising that further details will be revealed during the upcoming Budget debate, Mr Christie also promised that a re-drafted Homeowners Protection Bill will be presented to Parliament before year-end 2016.

The Prime Minister said this legislation was designed to make Bahamians more secure in their own homes, even if they had defaulted on their mortgages, and its recall will likely send a chill through many Bahamas-based commercial bankers.

The Homeowners Protection Bill ran into strong industry opposition when it first surfaced, with many believing it would act as a further disincentive for banks to lend, given that securing and repossessing loan collateral would become infinitely harder.

Many bankers privately told Tribune Business there was no need for such a Bill, given that the surplus of distressed properties clogging up the Bahamian real estate market meant many delinquent borrowers remained in their homes for three to five years.

And, more particularly, many in the banking industry were concerned that the combination of Mortgage Relief and the Homeowners Protection Bill created the risk of significant ‘moral hazard’, with borrowers deciding to stop paying to exploit government largesse.

Still, ‘Mortgage Relief’s’ inclusion in the Budget communication will come as little surprise to many observers, given that it was one of the Christie administration’s key 2012 election campaign promises.

The initial ‘Plan’ proved an abysmal failure, assisting less than 10 mortgage borrowers instead of the hoped-for 1,000, and the Government is now especially eager to deliver with another general election less than one year away.

The numbers referred to by the Prime Minister yesterday are similar to the first initiative, whose failure the Government blamed on high levels of consumer debt and a lack of information provided by the banks.

“The Government of the Bahamas, as part of the effort to modernise this country’s financial infrastructure, has also designed a comprehensive Mortgage Relief programme in collaboration with the Clearing Banks Association to assist borrowers negatively impacted by the financial crisis,” Mr Christie said.

“The 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.”

Warning that delinquent borrowers had to meet “eligibility criteria”, the Prime Minister said: “Banks will offer qualifying borrowers a minimum 20-25 per cent reduction in monthly payments.

“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, who are persons who are 90 days or more in arrears as at May 1, 2016, are anticipated to qualify initially for the Mortgage Relief Programme.”

Some observers will likely chuckle at the Government providing ‘financial counselling’ to delinquent borrowers, given its own debt woes.

However, Mr Christie continued: “The programme has been designed to make it as attractive as possible for eligible borrowers to agree to participate - through large reductions in monthly payments, the ability to immediately start paying lower amounts prior to loan modification paperwork.”

As for the Homeowners Protection Bill, he added: “I am fully cognisant that this programme, although well structured, does not address the root cause of the mortgage crisis in the Bahamas.

“Nor does it provide a guarantee that persons who may fall into financial difficulty are afforded a duty of care by their lender with respect to their home. In this respect, the Government is also discussing with the Clearing Banks Association guidelines on how to treat delinquent mortgagors.

“We want to ensure that a Bahamian who is delinquent is afforded opportunities to retain his or her home or, if all else fails, gives up that home in a dignified manner.

“To achieve this objective of which I have spoken Mr Speaker – to keep Bahamians in their homes - a revised Home Owners Protection Bill will be presented to this House for passage before the end of this calendar year. We are in the process of settling this.”