The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Opposition politicians yesterday slammed the latest Mortgage Relief Plan (MRP)as “a farce”, and questioned why the Bahamian people were giving the banks a $20 million subsidy for activities they already financed themselves.

K P Turnquest, the FNM’s deputy leader, told Tribune Business that the second version of the scheme appeared designed to enable the Christie administration to “take credit for what the banks already do”.

Questioning why the Government was giving Bahamas-based commercial banks, some of the wealthiest businesses in this nation, a $20 million ‘asset recovery’ subsidy from the taxpayer, Mr Turnquest said the ‘new MRP’ failed to address the “root causes” of the mortgage crisis.

Mr Turnquest’s assessment was backed by Branville McCartney, the Democratic National Alliance’s (DNA) leader, who said the $20 million allocated by the Government was tantamount to a subsidy of commercial bank credit collections departments.

Both men were speaking after listening to comments made by Simon Wilson, the Ministry of Finance’s acting financial secretary, during a radio talk show on Monday.

Mr Wilson revealed that the Government’s $20 million allocation, which is to be spread over four years, is to act as a “financial incentive” to Bahamas-based commercial banks.

“The Government is providing incentives to the banks for success,” the senior Ministry of Financial official said, disclosing that payment is dependent on the banks meeting set targets, such as ‘qualifying’ at least 20 per cent of their delinquent borrowers for the MRP.

Translated, Mr Wilson’s comments seem to imply that the $20 million is an ‘inducement’ or ‘sweetener’ to encourage the banks to do everything they can to find as many delinquent borrowers as possible for the scheme - and make the Government look good in the process.

This effectively amounts to a ‘wealth transfer’ from the hard-pressed Bahamian taxpayer and the Public Treasury to the commercial banking industry which, although forced to take its ‘licks’ in recent years, remains among this nation’s most profitable industries.

And Tribune Business can reveal that not all members of the Clearing Banks Association (CBA) have agreed to participate in the MRP.

This newspaper was asked not to print their identities, but commercial banking industry executives, speaking on condition of anonymity, confirmed that not all institutions has agreed to participate.

“Not everybody has signed up, and I don’t know if everybody is on board with it,” one official said. “People are operating independently of each other.

“Not all banks are going to sign up to this because it’s going to be a pain. It’s very complex, and there are too many rules.

“I think it’s all political; that’s my point of view.”

One institution that is ‘signed up’ is Royal Bank of Canada (RBC), which on Monday unveiled Andia Murray as its Mortgage Relief Programme manager.

An internal RBC e-mail said Ms Murray’s role would be to manage inquiries concerning borrower eligibility for the new MRP initiative.

“The programme provides financial incentives that will allow banks to offer borrowers, who have some ability to pay but have fallen behind, the chance to get back on track,” the e-mail said.

Mr Turnquest, meanwhile, suggested that the latest MRP version, and the $20 million taxpayer allocation, were designed to achieve the Christie administration’s goal of delivering on a key 2012 general election campaign promise.

Following the first MRP’s flop, which less than 10 delinquent borrowers assisted, as opposed to initial estimates of 1,000, the FNM deputy leader said the revised plan was structured to enable the Government “to take the credit” for what the banks are already doing.

He added that the scheme, as outlined by Mr Wilson, was nothing different from the processes commercial banks already employ when seeking to renegotiate, and restructure, the mortgages of struggling homeowners.

“We are now seemingly going to give the banks our hard-earned taxpayer dollars to do something they would ordinarily have done anyway,” Mr Turnquest blasted.

“They [the Government] haven’t been very clear on how this money is going to be spent, and how it’s going to cause the banks to do something they don’t do already.

“It begs the question: Why are the Government and Bahamian people needing to get involved in the [mortgage] relationship, providing financial contributions for them [the banks] to do the moral and correct thing.”

Mr Turnquest also queried “what world he’s [Mr Wilson] living in” on the assertion that very few delinquent borrowers were unable to make some kind of mortgage payment. The FNM deputy argued that in many cases, homeowners were having to choose between saving their home and putting food on the table.

“The whole approach to this is trying to sell the Bahamian people that they [the Government] are doing something, but it is really nothing more than what the banks are doing on their own,” the FNM deputy leader told Tribune Business.

“The $20 million seems to be some kind of inducement for the banks to give the Government credit for what the banks already do.

“Why should we give our hard-earned tax dollars to the banks to recover their assets to show they’re profitable? They should have their own incentives to recover their money.”

Mr Turnquest’s analysis was backed by Mr McCartney, who said: “What they’re asking, and paying, the banks to do is what the bank does in any event.

“What that boils down to is the Government is going to cause the Bahamian people’s money, and even tax dollars paid by people losing their homes, to support the bank - the same entity that is kicking them out of their homes.”

Mr McCartney said that as an attorney he had dealt with all sides of the mortgage delinquency and foreclosure period.

He explained that, typically, once a mortgage had been delinquent for three months, the lender sent the borrower a ‘notice period’ by way of letter. Even if attorneys had to be engaged, borrowers were not immediately put out of their homes, as more letters and negotiations had to take place as part of the process.

The DNA leader said the latest MRP version, which is billed as assisting at least 1,000 delinquent homeowners, would only finance the activities of commercial bank credit and collection departments, which dealt with all these issues now.

“I’m amazed he’d even say that; taking the Bahamian people’s money to pay the bank for what the bank’s paying for itself now,” Mr McCartney said of Mr Wilson.

“The programme the PLP is putting forward, as outlined by Simon Wilson, is going to end up the same way as the first one in 2012: Going nowhere.

“It’s a farce. It’s pathetic, and doesn’t make any sense. These guys can’t be serious. They’re using our money and, at the end of the day, the intent is all wrong.”

The new Mortgage Relief Plan also appears to reward delinquent borrowers with higher debt service ratios, who will enjoy a higher proportionate cut to their monthly payments upon qualifying.

Borrowers with a total debt service ratio below 45 per cent of income must have their monthly mortgage payments cut by “at least 20 per cent’.

Yet those with debt-service ratios higher than 45 per cent of total income must have a monthly payment reduction of at least 25 per cent.

While borrowers with higher debt-service ratios will likely require deeper cuts to their monthly repayments to help make them ‘current’ again, some observers will likely view this policy as ‘rewarding’ those who have been more irresponsible in their credit habits.

To be eligible for the revived plan, borrowers must be more than 90 days past due as of May 1, 2016. The property must be located in the Bahamas and owner-occupied up to duplex status, and the current outstanding mortgage balance should not exceed $500,000.

Borrowers’ current total debt-service ratio must be less than 75 per cent, and they have to commit to full financial disclosure, restrictions on incurring any further personal debt, and no more salary deductions.

Delinquent homeowners must also go to financial counselling, and go through a six-month trial period where their mortgage payment goes beyond 30 days past due no more than once.