The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s finance spokesman yesterday argued that giving the new Urban Renewal Authority the power to issue home repair loans threatens to “set up out most vulnerable citizens for further hardship”. 

Kwasi Thompson, the east Grand Bahama MP, addressing the House of Assembly on the Bill to create the Authority, argued that giving it the power to assess, issue and manage home repair loans may be “well meaning” but comes with “serious practical challenges”.

He asserted: “Government’s plan in the Bill to address the pressing issue of home repairs through loans is, at best, misguided, and at worst, sets up our most vulnerable citizens for further hardship. While the intention to assist homeowners may be well-meaning and, quite frankly necessary, there are serious practical challenges

“Has the Government truly thought about the high risk of default, particularly given the economic realities of many in urban areas. The reality is if persons could afford or qualify for a loan they would have already repaired their homes. How will the Authority manage the substantial costs associated with processing loan applications - lawyers, title searches, mortgages, conducting inspections and pursuing repayments?

“Just speak to the Mortgage Corporation, student loan programme or Bahamas Development Bank. Is a loan programme truly the right solution when many residents are struggling just to make ends meet? Shouldn’t our focus be on tackling the root causes of these housing problems - poverty, lack of opportunity, and decades of neglect?” Mr Thompson continued.

“This requires a much broader, more strategic approach, investing in education, job creation and community development alongside targeted home repair assistance. The Bill itself is very vague when it comes to the details of this loan programme. What is the criteria? What is the approval process? Without these specifics, how can we be sure that this programme won’t be subject to bias, with loans awarded based on favouritism rather than genuine need?”

The Urban Renewal Authority thus becomes the latest government agency to enter the business of issuing loans, an enterprise where no state-owned enterprise (SOE) has to-date enjoyed success as Mr Thompson indicated. All have have borrower delinquency rates with several requiring recapitalisation.

The Bill’s section 17 allows the Authority’s Board to “grant loans for minor repairs to a home, in a sum fixed by the minister and upon such terms and at such interest rates as the Board determines”. It adds: “Every loan shall be secured by a mortgage in favour of the Authority, which shall be prepared by the Board at the expense of the borrower.”

The Bills seems to give wide discretion and power to both the responsible minister and the Authority Board on the size of the loan to be extended, the duration and interest rate to be attached. It is also unclear whether the Authority will have the necessary technical expertise and resources to assess borrower risk, and manage and administer a loan portfolio such that taxpayer liability is minimised or eliminated.

It is also unclear whether the Authority itself will be the lender, or a guarantor and facilitating a loan from a private financial institution or other arm of government. “Where there is a default of repayment of any sum due under the loan, the Authority may proceed to realise that security without prejudice to any other rights conferred upon the Authority by the terms of a mortgage or any other instrument given as security for such loan, or by any other law,” the Bill adds.

“Where the Board, after a decision to grant a loan and before the payment of the principal sum loaned, determines that the decision was influenced by misrepresentation on the part of the borrower, or that the circumstances existing at the time of the decision to grant the loan are materially altered, the Board may cancel the loan without incurring liability for so doing.”

The Bill also gives the Authority to write-off loans, suspend or extend the repayment period. “Where the Authority has granted a loan, it shall from time to time make or cause an inspection to be made of the home to ensure the loan is being used for the purposes for which it was made, and require the owner of the home to submit an accounting of the disbursement of the proceeds of the loan,” it adds.

“Any person who fails to allow an inspection or collection of the documents pursuant to subsection five commits an offence and is liable on summary conviction to a fine of $300 and, in addition, a penalty of $100 for each day such non-compliance continues.

“Whereupon any inspection, pursuant to subsection five, it appears to the Authority that the whole or any part of the loan has not been used for the purposes for which the loan was granted, the Authority may, without prejudice to any other remedy available to it, direct that the principal sum of the loan together with the interest due on the loan be repaid to the Authority within the time specified in the directions.”