By NEIL HARTNELL
Tribune Business Editor
Royal Bank of Canada’s (RBC) mortgage lending arm rejected 90 per cent of applicants seeking loans to purchase government homes, a Cabinet Minister has revealed.
Kenred Dorsett, minister of housing and the environment, told the House of Assembly that lenders such as BISX-listed FINCO were turning down mortgage applicants for numerous reasons.
He explained that these factors included outstanding liens and judgments against the mortgage applicant, plus the fact some already had existing home loans.
“Although most people can pay the down payment, many of them for various reasons are being rejected by approved lenders, including the Bahamas Mortgage Corporation,” Mr Dorsett said, during his contribution to the 2015-2016 Budget debate.
“Ninety per cent of the persons assigned homes who were being processed by RBC FINCO were rejected.”
Mr Dorsett added: “One example of this is a young lady who applied for a home whose parents were willing to guarantee the loan. However, because of the age of the parents, the young woman was not able to qualify on her own.
“Another example is that of a man who applied with his wife, but neglected to mention that he had an existing mortgage with his ex-wife. There are also persons who apply, pay the deposit but later are found to have judgments against them for various sums of money. This is what my team and I face on a daily basis.”
Mr Dorsett’s comments give another insight into the housing/mortgage crisis afflicting the Bahamas, and why so few Bahamians are able to meet the banks’ more stringent qualifying criteria.
With $700 million worth of mortgages already classified as non-performing, Bahamian commercial banks and other lenders are understandably reluctant to extend further home loans.
And, with few new borrowers qualifying for loans, excess liquidity in the Bahamian commercial banking system, representing funds available for lending, still comfortably exceeds $1 billion.
Mr Dorsett pledged during his Budget address that he will “stick to best practices”, and not allow government homes to be occupied before mortgage financing is obtained by the owners – thus protecting taxpayer dollars.
To overcome borrowers’ loan qualification challenges, the Minister said a portion of the $100 million raised from the Bahamas Mortgage Corporation’s planned bond issue would be employed to start a ‘rent-to-own’ initiative.
“It is evident that we must find a way to assist those persons who can pay the down payment and the monthly sum through salary deduction, but cannot obtain mortgages,” Mr Dorsett said.
“Therefore, once we are able to secure the funding from the bond placement, we hope to use a portion of the funds to advance the pilot rent-to-own programme in New Providence and the Family Islands.”
The Minister added that the Bahamas Mortgage Corporation’s $100 million bond issue would finance further government housing projects and the build-out of associated infrastructure, despite concerns over whether its troubled financial position can absorb this.
Mr Dorsett gave a vague pledge that the bond issue “will be advanced in a manner that will not compromise the Corporation’s financial position”, having earlier acknowledged its “financial constraints” that prevented the construction of new government subdivisions.
He added that the Bahamas Mortgage Corporation had instead focused on extending private mortgages, with $24.5 million worth of home loans granted since 2012. There is a further $3 million in undrawn loans.
“The management of the Bahamas Mortgage Corporation has advised that the private initiated mortgage portfolio performs far better than mortgages issued for the Government housing programme,” Mr Dorsett said.
He added that the Government was planning to enter into joint venture partnerships “for the construction of hundreds of new homes” in both New Providence and Grand Bahama.
These developments include the proposed Carmichael Village; 60 homes in Adastra Gardens; and build-outs on 20 lots in both Claridge Estates and Stanley Acres.
Mr Dorsett also unveiled two public-private partnership housing developments planned for Grand Bahama. One will involve the Grand Bahama Port Authority (GBPA) and lots in Heritage, and the other the Estates at Sunrise subdivision.