The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government plans to review the Homeowners Protection Act to ensure it "is fair to all concerned" following industry complaints, the Deputy Prime Minister has confirmed.

K P Turnquest told Tribune Business that the Minnis administration plans to consult with mortgage lenders and the Consumer Protection Agency over potential changes to legislation passed by its predecessor prior to the May 10 general election.

Disclosing that he had already received "representations" from the private sector, Mr Turnquest said the concerns centred on provisions seen as imposing overly-burdensome restrictions and 'red tape' that will further slow and already struggling mortgage/housing market.

The Deputy Prime Minister also expressed surprise that Sir Franklyn Wilson, Arawak Homes' chairman, would express concerns about the Act now rather than during the Bill's early 2017 passage.

"It's interesting that he would now comment on that when he was silent about it when they were passing it," Mr Turnquest said in reference to a recent Tribune Business interview with Sir Franklyn.

"Be that as it may, I've had representation from other entities regarding some of the provisions. We're going to look at it, consult with the industry, the Consumer Protection Agency, to make sure we have an Act that is fair to all concerned."

When asked what the main concerns raised with him were, Mr Turnquest said it related to the consequences of "interventions" triggered by various provisions in the Homeowners Protection Act. "It's just mainly about the objectives of the interventions that are brought on by provisions of the Act," he told Tribune Business recently.

The Deputy Prime Minister was speaking after Sir Franklyn called on the Government to "urgently review" the Homeowners Protection Act, branding it "a real disaster" for the Bahamas' struggling mortgage market.

A well-known Progressive Liberal Party (PLP) supporter, he criticised the Christie administration for "unnecessarily rushing" the Act into law so it could meet a 2012 manifesto promise prior to the May 10 general election.

He argued that it imposed overly-burdensome restrictions on what banks and other mortgage lenders "can and cannot do" in relation to their distressed properties, and introduced concepts and definitions that were unworkable in practice.

In particular, Sir Franklyn said the requirement that delinquent real estate assets be sold at 'market value' was unduly subjective, given that a single property could attract five different appraisal values from five different appraisers.

In addition, the Act prevents mortgage lenders from selling distressed homes to relatives of their staff, including cousins. Given the tight-knit nature of Bahamian society, Sir Franklyn said this requirement - especially given the absence of definitions - would be extraordinarily difficult to comply with "because almost everyone's a cousin".

With some $529 million worth of mortgage loans still delinquent at end-August 2017, Sir Franklyn echoed concerns previously expressed by commercial banks that the Act will further slow the sluggish housing market, thereby negatively impacting the real estate, construction and legal industries that rely heavily on it for business.

Mr Turnquest told Tribune Business it was "absolutely critical" to revive the Bahamian housing market if this nation's anemic GDP growth and employment prospects are to improve.

"We have to improve the quality of jobs such that the quality of loans rises, and get people back to work in the labour market to spur economic development and activities," he said.

"One thing works with the other. It's a matter of getting people back to work, and getting some of the liquidity in the marketplace to produce as fast as possible."

The Christie administration's rationale for developing the Homeowners Protection Act was to make delinquent Bahamian mortgage borrowers more secure in their homes, with all the attendant social and economic benefits that will bring if they can restructure their loans.

However, as indicated by Sir Franklyn, it threatens to increase the costs, time and difficulty/uncertainty incurred by banks in repossessing mortgage collateral - usually the homes and businesses subject to the original loan.

With a higher risk now associated with mortgage lending as a result, the banks may both hike interest rates and refuse to grant new Bahamian loan applicants access to credit.

This would impede Bahamian dreams of home ownership, with the banks having previously warned that home loan costs and accessibility could largely depend on how the courts interpreted the Act's provisions.

Ian Jennings, Commonwealth Bank's president, told Tribune Business in early 2017 that his institution viewed the legislation as "changing the risk profile of mortgage financing".

He added that Commonwealth Bank, and all other Bahamas-based commercial banks, would now have to each determine whether this impact was "material" enough to spark an increase in mortgage lending rates and/or a tightening of their borrowing criteria.

Suggesting that the latter could involve requiring borrowers to come up with higher downpayment or equity contributions, Mr Jennings said then that it was "too soon" to determine the Act's impact on the mortgage and housing markets.

The Act inserts the courts into the foreclosure and 'power of sale' process, requiring lenders to give delinquent borrowers 30 days' notice before either invoking their 'power of sale' under the mortgage or seeking a court-approved foreclosure.

In both cases, borrowers can apply to the Supreme Court for relief. On the foreclosure process, the court can either adjourn, stay or suspend the matter if it believes the borrower will be able to pay principal and accrued interest within six months.

As for the 'power of sale', the latest version of the Bill allows the court to postpone this for "a reasonable period where a sum equal to at least one half of the principal, and accrued interest, has been paid at a specified time".

Mr Jennings, in common with Sir Franklyn, said the Act's provisions included definitions that needed to be clarified by the courts. He pointed to clause nine, which empowers the courts to prevent a bank exercising its 'power of sale' for a 'reasonable time' - with no definition of 'reasonable time'.