Obviously the PLP did not consult with Mr. Paton in regards to their Mortgage Plan. Here is a business individual speaking sense and objectively analyzing the situation. Mr. Paton's suggestion to have the Stamp Duty exempted for those refinanced is a good idea. Unfortunately the politicians of today do not believe in good ideas.
Even though delinquent homeowners affect Mr. Wilson’s business, I expected Mr. Wilson to be more objective in his analysis of this mortgage situation given that he is a highly respected businessman in the Bahamas. When questioned about the ‘moral hazard’ issue, Mr. Wilson stated above that he believes it is one of political bias. I would disagree with him based on the grounds of ‘economic loss’. In defense of the potential moral hazard, Mr. Wilson stated that the FNM government already interfered due to the Payment Plan for customers that were delinquent on with their BEC bills.
If a plan reduces or causes a party to suffer financial loss, this is known as ‘economic loss’. By definition, a payment plan is the rescheduling of when and how much a customer repays what he or she owes to another. The PLP proposes extinguishing a portion the debt owed by delinquent homeowners. The former only reorganizes an individual repays what is owed, while the latter eliminates a portion of what is owed. By implementing a payment plan, the receivable held on the books by the banks would not change. However, under the proposed PLP plan, banks will have to reduce their receivable amounts on their books and record an expense.
In addition, there is an article on CNBC entitled, ‘Debate Rages over Principal forgiveness at Fannie and Freddie’, which quoted the Acting director of FHFA, Ed Demarco, concerns over moral hazard in regards to principal forgiveness, which is similar to the PLP proposal of Interest forgiveness. Mr. Demarco stated,
“One factor that needs to be considered is the borrower incentive effects. That means, will some percentage of borrowers who are current on their loans, be encouraged to either claim a hardship or actually go delinquent to capture the benefits of principal forgiveness?”
Something needs to be done, and a few points proposed by the PLP are valid, however, the proposal does create a moral hazard issue.
BayStreet says...
Obviously the PLP did not consult with Mr. Paton in regards to their Mortgage Plan. Here is a business individual speaking sense and objectively analyzing the situation. Mr. Paton's suggestion to have the Stamp Duty exempted for those refinanced is a good idea. Unfortunately the politicians of today do not believe in good ideas.
On Attorney urges 'debt for equity' mortgage relief
Posted 12 April 2012, 1:18 p.m. Suggest removal
BayStreet says...
Even though delinquent homeowners affect Mr. Wilson’s business, I expected Mr. Wilson to be more objective in his analysis of this mortgage situation given that he is a highly respected businessman in the Bahamas. When questioned about the ‘moral hazard’ issue, Mr. Wilson stated above that he believes it is one of political bias. I would disagree with him based on the grounds of ‘economic loss’. In defense of the potential moral hazard, Mr. Wilson stated that the FNM government already interfered due to the Payment Plan for customers that were delinquent on with their BEC bills.
If a plan reduces or causes a party to suffer financial loss, this is known as ‘economic loss’. By definition, a payment plan is the rescheduling of when and how much a customer repays what he or she owes to another. The PLP proposes extinguishing a portion the debt owed by delinquent homeowners. The former only reorganizes an individual repays what is owed, while the latter eliminates a portion of what is owed. By implementing a payment plan, the receivable held on the books by the banks would not change. However, under the proposed PLP plan, banks will have to reduce their receivable amounts on their books and record an expense.
In addition, there is an article on CNBC entitled, ‘Debate Rages over Principal forgiveness at Fannie and Freddie’, which quoted the Acting director of FHFA, Ed Demarco, concerns over moral hazard in regards to principal forgiveness, which is similar to the PLP proposal of Interest forgiveness. Mr. Demarco stated,
“One factor that needs to be considered is the borrower incentive effects. That means, will some percentage of borrowers who are current on their loans, be encouraged to either claim a hardship or actually go delinquent to capture the benefits of principal forgiveness?”
Something needs to be done, and a few points proposed by the PLP are valid, however, the proposal does create a moral hazard issue.
On Insurance ensures 'no fiscal risk' from PLP mortgage plan
Posted 10 April 2012, 3:36 p.m. Suggest removal