By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A distressed mortgage restructurer that has seen "grown men cry" during its rescue of "many, many" Bahamian homeowners is urging greater participation by commercial banks.

Rosel Moxey, Sunshine Holdings' vice-president of business development, told Tribune Business that the groups' Gateway Financial vehicle has proven an "integral part of the solution" to the Bahamas' mortgage crisis.

Besides saving the biggest investments many Bahamians will make, Ms Moxey said Gateway Financial's purchase of non-performing mortgages was also boosting the economy by freeing up commercial banks to lend again.

While declining to provide data on how many homes have been saved, and the total value of mortgages restructured, she described the newly-created distressed market as "a fantastic sector" given its ability to impact the Bahamas at an individual and national level.

"Gateway is doing well but, more importantly, our clients have been doing well," Ms Moxey told Tribune Business. "We have had the opportunity to restructure many, many loans.

"One person, very well known in our community, was one of our earliest success stories. The day we closed [on the purchase of non-performing mortgages], she was supposed to attend court for a vacant possession Order."

Having intervened just in time, Ms Moxey said Gateway was able to restructure the $800 monthly mortgage payments she was unable to meet into an arrangement where principal and interest could be met, along with homeowners insurance payments that were placed into escrow.

The insurance payments proved especially valuable when Hurricane Matthew hit the Bahamas some five months later, with Ms Moxey saying the woman went from the verge of being forced out of her home to the status of "no longer being a client".

"The stories are endless," the Sunshine Finance executive told Tribune Business. "We have literally seen men cry in our office, asking: 'What is the catch?' We've had people write back to us saying they were staying at home, figuring they would not come out until the police or bailiffs came and got them.

"One woman was operating with the mindset of sitting in the parking lot in our offices, thinking she was never going inside. She walked out singing the praises of our officers, and felt she'd walked into a new day and new opportunity.

"We've seen grown men cry, we've seen husbands and wives saying nothing but joining hands. This is what Sunshine is about. Of course we have to be profitable. We're a business; we have to survive. But we believe in national development, we believe in being trustworthy for our creditors and profitable for our shareholders."

Gateway Financial got its start when it purchased a portfolio of "several hundred" delinquent mortgages from Scotiabank (Bahamas) in summer 2016.

Although the price was never disclosed, Tribune Business sources suggested Gateway paid between 25-28 cents on the dollar for the distressed assets. The low valuation enabled it to subsequently restructure borrower obligations to a monthly debt service payment they could afford, with - as an example - an $800 repayment falling to around $200.

Apart from rescuing Bahamian borrowers and keeping them in their homes, Gateway's intervention also aided Scotiabank. The bank revealed to Tribune Business earlier this year that it gained $7 million from the sale of its non-performing mortgage loans, which helped to drive a 266 per cent increase in 2016 profits.

Ms Moxey said Scotiabank's results proved how the restructuring of delinquent mortgage loans, and their removal from balance sheets, could reduce loss provisioning and free-up commercial banks to get the economy moving by extending new credit.

"This is a fantastic sector for our company," she told Tribune Business. "It is regrettable that the Bahamas has the highest rate of foreclosure for the Caribbean and some Canadian cities.

"I sincerely believe we are an integral part of the solution to mortgage relief for individuals, but also from the banks' point of view.

"A lot of people want to make the banks the bad party, but if you invest in an asset and it becomes non-performing, to have an exit strategy - you won't get dollar for dollar, but you'll get something - keeps them liquid and keeps them lending, and not stagnating the economy," Ms Moxey continued.

"If you offer an exit strategy, they are more inclined to keep lending as they have a buffer for their loss. Everyone wins, and we're changing many people's lives."

Both the International Monetary Fund (IMF) and John Rolle, the Central Bank of the Bahamas' governor, have said the commercial banking sector needs to be more aggressive in cleaning up the non-performing loan pile that has dragged down the housing market, associated industries and the wider economy since the 2008-2009 recession.

Excess liquid assets in the commercial banking system stood at $1.707 billion at end-September 2017, indicating that banks are flush with surplus cash but are either reluctant - or have no avenues - to lend it out.

Total non-performing loans, though, fell by $49.5 million or 7.7 per cent that month to hit $597 million, a decline likely aided by the $162 million transfer of 'toxic' credit to Bahamas Resolve from Bank of the Bahamas. Complete private sector loan arrears stood at $912.2 million.

Ms Moxey told Tribune Business that Gateway Financial wanted to become "more active" in the fledgling Bahamian distressed debt market, and urged other commercial banks to follow Scotiabank's lead in selling off their worst non-performing loans.

"It is a necessary sector and we hope to see more of it. We want to be more active in the space," she said. "Our economic challenges are incredibly multi-faceted, but this is one way to get money flowing in the economy and save, for most people, the investment that is most dear to them - the one they've put their heart, soul and money into.

"I don't mean to sound so passionate about it, but I am. People are crying, their home is part of their heart, part of what they see themselves leaving for their children, and if we can save that it's a thrill for them. It's awesome to know that the work we're doing is impacting people so intimately on a personal level, and having a positive impact at a national level.

"We hope as many banks get on board as possible. I'd encourage more to participate, and we hope they follow suit as the impact is clear. Think about how many distressed mortgages there are in our market."

Gateway Financial's impact was referenced in a recent IMF paper, which said a properly-functioning distressed debt market was key to resolving the mortgage crisis in the Bahamas' and wider Caribbean.

The authors, Kimberly Beaton and Inci Otker, wrote: "Introducing asset management companies can also help jump-start the market, capitalising on the limited, but promising, experience in the region (as in the Bahamas).

"High non-performing loans are a drag on economic activity in a region where financial systems are dominated by banks. Persistently high non-performing loans constrain the availability of credit, as banks tighten lending standards and focus on cleaning up their balance sheets.

"A decline in bank lending, in turn, contributes to a weaker economy that can further increase problem loans. Our analysis suggests that these effects are persistent, with the fall in credit from worsening asset quality lasting up to five years. Limited access to credit has been a major obstacle for doing business in the Caribbean, threatening much needed investment and durable growth in the region."

The IMF report said the Bahamas' non-performing bank loans, as a percentage of outstanding credit, rose from 3-4 per cent prior to the financial crisis to a peak of just over 15 per cent, before falling to a current level of around 12.5 per cent.