No relief for more than 3,000 delinquent mortgage borrowers

By NATARIO McKENZIE

Tribune Business

Reporter

nmckenzie@tribunemedia.net

THE Clearing Banks Association (CBA) estimates that roughly 800-1,000 delinquent mortgage borrowers could benefit from the Government’s relief plan, but its chairman yesterday acknowledging that there were more than 3,000 who, “in all likelihood”, would not benefit from the initiative.

“Based on a rough estimate by the CBA, it is projected that approximately 800-1,000 persons could benefit from the plan,” said Nathaniel Beneby Jr.

He added that there were over 3,0000 delinquent mortgagors who were likely to not benefit from the mortgage relief plan *(MRP), and conceded: “The reality is that the MRP cannot, and will not, help everyone.

“The global economic recession has had an adverse impact on many families. Between 2007 and 2011 the economic recession was severe, and these were very difficult years for many Bahamian families.”

Regarding the impact the plan could have on the mortgage market, Mr Beneby said: “It is my view that whatever number of Bahamian families benefit, whether it helps five, 10, 100 or 200, that will be considered a success.”

He added that there were safeguards in place against abusing the relief initiative. To quality for the plan, a mortgagor must have maintained a good credit history prior to June 2008, and involuntarily became unemployed, underemployed and experienced chronic illness.

Mr Beneby said that according to Central Bank statistics, as of July 31, 2012, total private sector loans were $6.2 billion, with mortgages representing $3 billion or close to 50 per cent of the total.

According to the Central Bank, mortgages in arrears over 90 days (non-performing) totalled $460 million or 15.88 per cent of total mortgages, representing more than 4,000 mortgage accounts in arrears.

Mr Beneby said that over the past several years there had been some stabilisation in the mortgage sector.

“The percentage of increases in non-accrual mortgages, non-accrual loans, are stabilising. The 4,000 plus is not becoming 5,000 or 6,000, so there is some stability in terms of the number of mortgages that are non-performing,” said Mr Beneby.

Under the plan, a lender will review each applying borrower’s financial circumstances and determine what amount of mortgage the borrower can afford to service, inclusive of principal, interest, property insurance and real property taxes, given the borrower’s reduced income.

The difference between the total mortgage debt outstanding, inclusive of accrued interest, at the time of application, and the mortgage amount the lender determines the borrower can afford to service with his/her reduced income, is defined as the ‘Gap’.

All eligible borrowers whose gap does not exceed $22,500 will qualify for participation in the plan. Eligible borrowers, whose gap exceeds $22,500, may qualify for consideration and participation in the plan at the sole discretion of the relevant lender. Of that $22,500, the Government will kick in a maximum of $7,500, or one-third.

If the Gap exceeds $22,500, an otherwise eligible borrower would have the opportunity to pay the amount of the excess (above $22,500) from other un-borrowed sources before being allowed participation in the plan.

When a borrower is approved, the borrowers will be required to sign a Forbearance Agreement and, if necessary, other legal documents that will detail the extent of their obligation and the consequences of any breach. Borrowers must agree to all terms and conditions of the mortgage relief plan.

Under the plan, the lender will waive all late fees on the original mortgage debt and restructure the approved applicant’s mortgage into two loans - a loan to be serviced by the mortgagor based on current income over an appropriate term, and at market interest rates, which is referred to as the serviceable loan.

Then there is a loan in the amount of the Gap at 0 per cent interest for up to three years, referred to as the deferred loan. No principal payments will be required on this loan for up to three years. At the end of the three-year term, the deferred loan will mature or may, at the discretion of the lender, be refinanced for a further period at terms and interest rates acceptable to the lender.

The Government will also contribute, up front, an administrative fee of $100 per borrower to fund the costs associated with the restructure of the loans. The Government has also agreed to waive any stamp tax or stamp duties related to documents the lender may deem necessary to allow a borrower to benefit from the plan.

The Government’s mortgage relief plan will commence on September 10 and end on March 10,2013.

Comments

BaystreetTrader says...

If those 3,000 delinquent mortgage borrowers voted for the PLP, do you think they would have voted differently given what they know now?

Posted 7 September 2012, 1:08 p.m. Suggest removal

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