‘Wonderful start’ for bad mortgage acquirer

Monday, August 22, 2016

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sir Franklyn Wilson’s group has “gotten off to a wonderful start” with its ‘bad mortgage’ restructuring venture, which helped drive a $65 million year-over-year decline in banks’ non-performing home loans during the 2016 first half.

The Sunshine Holdings chairman confirmed to Tribune Business that his group’s newly-created entity, Gateway Financial, had recently acquired “several hundred” delinquent mortgages from one of the Bahamas’ main commercial banks.

He added that Gateway’s efforts to subsequently restructure these loans had already proven “very effective”, and would allow many borrowers to remain in their homes on terms better aligned with their financial circumstances.

Sir Franklyn described the Gateway initiative as potentially “very significant” when it came to reviving the Bahamas’ stalled housing and construction markets, adding that it would bring both social and economic benefits.

“It’s public knowledge, or ought to be public knowledge, that a company called Gateway Financial did acquire a portfolio of mortgages from one of the banks, and is running a programme that has gotten off to a wonderful start,” the Arawak Homes chairman told Tribune Business.

“There are some home owners giving testimonies that will eventually be made public, but suffice to say that there are a number of smiling faces on people whose mortgages have been restructured. It’s proving to be a very effective initiative.”

Sir Franklyn confirmed that Gateway Financial was part of the Sunshine Holdings’ group, and was owned by two of its member companies.

“Our corporate group is involved with it,” he said. “It’s [Gateway] a group in which Sunshine Finance and RoyalStar Assurance are the two equity partners.”

Sir Franklyn added that Gateway Financial was doing “whatever it takes” to keep previously delinquent Bahamians mortgage borrowers in their homes.

He explained that the company was aided in this task by its “non-bank” status, which meant it was not burdened by the laws and regulations governing what commercial banks could do to aid struggling homeowners.

As a result, Sir Franklyn said Gateway Financial had much more “flexibility” when it came to devising solutions that were specific to each defaulted borrower’s circumstances.

“They[Gateway] do whatever they can to help people stay in their homes,” he told this newspaper.

“They can be as aggressive as circumstances allow, and that puts them in a position to do stuff banks are not able to do. It’s working. Because it’s a non-bank, they have the flexibility to do whatever it takes.”

Sir Franklyn declined to identify the Bahamian commercial bank from which Gateway Financial had purchased the distressed mortgages, saying only that it was “one of the big clearing banks”.

Nor did he state the ‘purchase price’ paid by Gateway Financial and how heavily the portfolio was discounted, or the new terms offered to those mortgage holders, although much-reduced interest rates are likely to be part of the package.

Entities such as Gateway have been viewed as part of the solution to the Bahamas’ entrenched mortgage/housing market crisis, as they can reduce the pile of ‘bad loans’ weighing down commercial bank balance sheets.

Selling such distressed loans enables commercial banks to recover some of their previous provisioning, and releases capital for lending to better-qualified home purchasers.

This, in turn, could help to revive the Bahamian mortgage market, which at end-June 2016, was still grappling with some $608.4 million worth of loan arrears.

And kick-starting commercial bank lending, and stimulating the domestic (Bahamian) housing market, would also boost key industries such as construction and real estate, increasing activity throughout the economy.

“It’s something that could be very significant,” Sir Franklyn told Tribune Business of Gateway Financial. “The people stay in their homes, stabilise themselves in circumstances they can live with, and we get these distressed mortgages off the market.

“And the more we get them off the market, the quicker the potential to restart the home construction market.”

Sir Franklyn added that initiatives such as those being pioneered by Gateway Financial would also reduce the number of abandoned houses seen throughout New Providence and Grand Bahama, and said: “There’s social and economic implications to it.”

The Sunshine Holdings group’s Arawak Homes subsidiary would be among the prime beneficiaries should the hoped-for impact of Gateway’s activities fully materialise, but the wider Bahamian economy and society would also feel the same positive effects.

The Central Bank of the Bahamas, in its report on June’s economic developments, acknowledged that Gateway Financial’s ‘acquisition’ had helped to produce a 12.5 per cent year-over-year decrease in non-performing bank mortgages during the 2016 first half.

This, in turn, drove a $63.2 million (7 per cent) decline in the Bahamian commercial banking industry’s total non-performing loans (those more than 90 days past due) over the same period.

“The reduction in total arrears was primarily due to a contraction in the dominant mortgage segment by $88.8 million (12.7 per cent) to $608.4 million, largely due to a $65.3 million (12.5 per cent) decrease in the non-performing category—partly related to the sale of some non-performing claims,” the Central Bank confirmed.

The prime candidates as the source of Gateway’s distressed mortgage portfolio are likely to be Scotiabank, Royal Bank of Canada (RBC) or Bank of the Bahamas.

Tribune Business last year reported that Scotiabank, and its Toronto head office, were especially keen that an entity such as Gateway Financial be established in the Bahamas.

The bank was then looking towards Ascendancy, a Mexican company that had successfully undertaken a similar task in dealing with its non-performing loans in that nation.

Tribune Business sources familiar with the Ascendancy situation suggested its arrangement with Scotiabank involved purchasing around $30 million worth of the latter’s mortgage portfolio at a price equivalent to $0.24-$0.25 on the $1, or 25 per cent of their value.

Ascendancy was initially supposed to enter a joint venture partnership with Sir Franklyn’s group, but the Gateway Financial ownership - Sunshine Finance and RoyalStar - indicates this arrangement has been altered.

Sir Franklyn confirmed as much, disclosing that Gateway has a “strategic relationship” with Ascendancy, which was helping with its systems and in other areas.

Tribune Business revealed earlier this year how RoyalStar, one of the Bahamas’ main property and casualty insurers, had invested $3.45 million to acquire preference shares in a company called Ascendancy Bahamas.

Anton Saunders, RoyalStar’s managing director, confirmed then that Ascendancy Bahamas had been created to buy distressed mortgage loans from Bahamian commercial banks at deeply-discounted prices.

This indicates that Ascendancy Bahamas has been renamed as Gateway Financial. The latter’s changed ownership structure is possibly a response to Government concerns, which delayed the issuance of Gateway’s necessary permits.

Some suggested the Government had wanted to unveil its own Mortgage Relief Plan first, while others said the Christie administration was afraid of the potential stigma/backlash associated with a Mexican company’s involvement in acquiring distressed Bahamian loans and subsequently impacting Bahamian lives, especially just before a general election.

Comments

Letsdoit says...

What kind of investigative reporting is this?....or is it just repeating and not reporting. Tribune Business really cannot find out which large commercial bank sold hundreds of delinquent loans to Gateway?....Really? Is that not the begging question?

Posted 22 August 2016, 3:48 p.m. Suggest removal

newcitizen says...

Neil Hartnell wouldn't know how to write a story if Franky the Snake didn't call to tell him what to write. The Tribune's business section is no better than a publicity stunt for Nassau's cast of upstanding crooks.

Posted 22 August 2016, 11:24 p.m. Suggest removal

Sickened says...

Once these banks clean up their mortgage books they will focus on leaving The Bahamas altogether.

Posted 22 August 2016, 4:37 p.m. Suggest removal

Rightfully so, there is little to no money to be made here. With all of the anti money laundering laws, there is really no purpose in being here. Canadian's no longer care about this place and they will not continue to just sit and let their banks take loses in a place that they couldn't bother with.

Posted 22 August 2016, 11:27 p.m. Suggest removal

kaytaz says...

Sounds like a great idea.....should make it available to all lenders

Posted 22 August 2016, 4:57 p.m. Suggest removal

MonkeeDoo says...

Talk about LIP Service: Scotiabank can't disclose the source of the money that purchased the loan portfolio ?. No wonder the international community want to shut our banks down for inadequate Money Laundering controls. Let me be BLUNT here: Did any webshop or webshop owner put the money up to buy these loans. Forget the Mexicans. Where did the money come from to pay Scotiabank. Was it the proceeds of a criminal or outlawed operation or business. ? What does the Central Bank know about it ?

Posted 22 August 2016, 5:10 p.m. Suggest removal

Greentea says...

are you saying he bought Scotiabank's underperforming loans?

Posted 22 August 2016, 10:17 p.m. Suggest removal

jackbnimble says...

He brought hundreds of Scotiabank's non-performing loans for a consideration of $6,654,883.55 by a Transfer and Assignment of Mortgages dated the 4th day of May, 2016 from Scotiabank (Bahamas) Limited to Gateway Financial Ltd. The document is recorded in Volume 12568 at pages 315 to 322 - The document in recorded on the public record for all who search to see.

Posted 23 August 2016, 4:01 p.m. Suggest removal

bogart says...

This EMPIRICAL data poses the greatest concern to the BAHAMAS ECONOMIC OUTLOOK because if one of the largest Banks in the CARIBBEAN stationed in the BAHAMAS decides that the short and long tern success in doing business and getting back mortgage payments from employed paying customers is not feasible or effective then other investors and banks will note. If on the other hand given the BAH MAR restart and restart of Sandals then it is a blunder which shows that Banks are not perfect. Existing miscalculations are visible such as BARCLAYS being bought out by FIRSTCARIBBEAN by equal 45% shareholder CIBC and then having to rebrand under the CIBC banner which is more known.

Posted 24 August 2016, 8:30 a.m. Suggest removal

**Sickened:** I don't think that they have to clean up any books. They will just write it off and close up shop. Bad debts here are just a drop in the bucket for RBC and maybe a couple of drops for CIBC.

Posted 22 August 2016, 5:12 p.m. Suggest removal

BOB can write it off, RBC has actual shareholders that don't like to see loses. A drop in the bucket is enough for them to start raising all of your fees. Trust me, when I say the Bahamians will pay for any loses, not the shareholders.

Posted 22 August 2016, 11:28 p.m. Suggest removal

banker says...

Wondering what is the effective interest rate on the "restructured mortgages"? Are the people going to be paying interest only for the first half of the mortgage and the home equity doesn't get driven down.

Nothing lower to the ground than a snake's belly.

Posted 22 August 2016, 5:18 p.m. Suggest removal

I'm sure the restructuring is based on taking the current outstanding value and placing it on 100% of the home equity and then telling people to pay a slightly lower rate. And now there is a company who will have much lower reservations in kicking them out once they miss the first payment.

That's on top of the fact that these mortgages were probably bought for about 50-65 cents on the dollar.

Here the Tribune is celebrating the sale of mortgages from a stable institution to the hands of what we will all see in the coming year as a bunch of loan sharks.

Posted 22 August 2016, 11:32 p.m. Suggest removal

Exactly right. Let me spell out what you just said in terms that people can understand.

Let's suppose that you bought a $100,000 dollar home and you put $10,000 down. Then you can't pay your mortgage.

In a normal process, the bank repossesses the home, they take their remaining $90,000 owed plus fees etc, and you get some of your deposit back. If your home has appreciated, then you possibly get all of your downpayment back AND maybe a little bit more if real estate prices have gone up since you bought the home.

However, if you loan was bought by these sharks, then call you in, and say "Good News -- we are not going to kick you out of your house". However when you sign on the dotted line for the re-finance, the amount is for 100% of what the house is worth. Then if you run into trouble again, the sharks will kick you out, penniless. Your original equity -- your deposit on your house is gone.

Guess who profits? Not exactly the banks. They sold your non-performing mortgage to the snakes and sharks for pennies on the dollar.

Posted 23 August 2016, 10:40 a.m. Suggest removal

Well_mudda_take_sic says...

The corrupt racketeering numbers' bosses are behind Gateway Financial Bahamas, previously named Ascendancy Bahamas. Sir Snake (with the help of Christie) embodies all that is most evil in our country today. Forget the Chinese and Minnis, Sir Snake is definitely public enemy number one when it comes to corruption and the destruction of the Bahamian economy!

Posted 22 August 2016, 9:33 p.m. Suggest removal

The Snake and Christie are the faces of those raping and stealing from Bahamians and not one person do I see actually standing up. We deserve this for allowing it.

Posted 22 August 2016, 11:33 p.m. Suggest removal

Well Mudda - thats exactly what I thought and probably the US Embassy too. Someone needs to answer where the money came from ???

Posted 22 August 2016, 10:23 p.m. Suggest removal

In a few years we won't be able to recognize our country. Between the numbers criminals, Sir Snake and the new Chinese bank buying up all the land and mortgages, there will be nothing left for middle class Bahamians to buy. Our entire population will need to go to these thugs to buy a piece of property. Even our government will need to go to these guys in order to get land to build government housing developments in the future. Once these people have control of the land one can only imagine how high the interest rates and downpayment requirements will go.

Posted 23 August 2016, 11:21 a.m. Suggest removal

Mortgages went bad because customers could not pay because of the following reasons which needs to be investigated as it involves 4,500 defaulted accounts which equates to husband and wife and children of perhaps 25,000 Bahamians. Asset value would be close to a BILLION in collateral tied up, and some 700-800,000,000 in loans. OTHER businesses impacted are construction, building supplies, insurances, appraisers, real estate agents and firm. Other businesses which accept real estate as collateral to buy cars, furniture, etc through equity financing are impacted. BUSINESSES are prone to negative movements as many mom and pop shops may have pledged real estate to support business and overdrafts etc. BANKS are not innocent in causing this fiasco as many loan officers have to meet high unrealistic mortgage targets to get a pay increase set by FOREIGN HEADOFFICES which do not know our Bahamian MARKETS, people, culture, better than BAHAMIANS. 4,500 defaulted mortgages did not happen all by themselves and the BANKS ARE BLAMELESS. INVESTIGATIONS are needed to see why these defaults happen. THE CUSTOMERS WERE THROWN UNDER THE BUS AND NOONE WANTS TO INVESTIGATE THIS HISTORIC NATIONAL FINANCIAL DISASTER!!!!!!!!!! ...............allegations of BANKS falsely qualifying customers can be easily investigated as all BANKS did not simply change their APPLICATIONS just to do so.......allegations of LOAN OFFICERS accepting TIPS from applicants is nothing new.....allegations of selling HOUSES for LOW VALUES TO FRIENDS IS NOTHING NEW.....allegations of OFFICERS IN COHOOTS WITH CONTRACTORS IS NOTHING NEW.......allegations of FRAUD is LEAVING OUT OTHER LOAN INFORMATION IS NOTHING NEW............allegations OF BANK SELLING HOUSE WITH PEOPLE IN IT IS NOTHING NEW.....Allegations of banks HAVING THE CUSTOMER PAY FOR INDEMNITY INSURANCE TO PROTECT THE BANK and not using it is nothing new>>>>>>ALLEGATIONS OF THE BANKS FORGETTING TO PAY THE INSURANCE AND AN APPLICANT DIES AND THE OTHER CANNOT REPAY LEADING TO DEFAULT is nothing new.....ALLEGATIONS OF OFFICERS BEING NOT WELL TRAINED IS NOTHING NEW>>>>>ALLEGATIONS OF BANKS GIVING SUV"S AND THOUSANDS OF BONUS DOLLARS TO GIVE OUT HUGEST NUMBERS OF MORTGAGES IS NOTHING NEW>>>>>ALLEGATIONS OF LAWYERS REFUSING TO TAKE CASES OF AGGRIEVED DEFAULTED MORTGAGE CUSTOMERS O PURSUE CLAIMS BECAUSE OF VARIOUS REASONS IS NOTHING NEW>>>>>ALLEGATION OF THE CENTRAL BANK REFUSING TO HELP INDIVIDUALS IS NOTHING NEW.........ALLEGATION THAT THE CUSTOMER HAS NOONE TO TURN TO TO RESOLVE PROBLEMS IS NOTHING NEW.....ALLEGATION OF PAYING A BANK FEE FOR THE BEST POSSIBLE ADVICE TO MAKE A ONCE IN A LIFETIME INVESTMENT FOR A SUCCESSFUL MORTGAGE THAT GOES BAD AND NOONE IS INVESTIGATED...ABSOLUTELY INCREDIBLE !!!

Posted 23 August 2016, 8:34 p.m. Suggest removal