By NATARIO McKENZIE
Tribune Business Reporter
and NEIL HARTNELL
Tribune Business Editor
A Cabinet Minister yesterday said 29 per cent of troubled borrowers contacted to-date had completed the requirements to enter the Government’s Mortgage Relief Plan, although he emphasised that this - and other legal changes - were “not a panacea” for the Bahamas’ housing crisis.
Michael Halkitis, minister of state for finance, said 408 delinquent mortgage borrowers, out of the 1,400 contacted to-date, had passed the eligibility test to be admitted to the Mortgage Relief Plan.
He revealed the statistics while introducing the Homeowners Protection Bill for its first reading in the House of Assembly, describing it as the “legislative centrepiece of a comprehensive response to the Bahamian mortgage crisis”.
Mr Halkitis said the Bill would make troubled borrowers more secure in their home, while also upgrading lending “norms and practices which have not kept pace with evolving international standards”.
He said these deficiencies had been masked prior to the 2008-2009 financial crisis and global recession, when mortgage and other loan delinquencies soared as the economy contracted, Bahamians were laid-off, and others endured reduced working hours and incomes.
Mr Halkitis described the Bill as “a major step forward in the rights of mortgagors in the Bahamas, bringing them in line with rights mortgagors have in this hemisphere”.
“The Government, however, does not view this as a panacea to the mortgage crisis,” he added. “In this respect, the Government is continuing to pursue its efforts with respect to borrowers’ protection, stimulating economic activity and job creation.
“Also, with respect to borrowers’ protection, the Securities Commission is in the process of promulgating rules to govern the operations of money lenders in the economy.”
While the Mortgage Relief Programme had not met with uniform success across all lending institutions,Mr Halkitis said: “According to the latest statistics available in January 2017, 1,744 borrowers were deemed eligible for the programme and 1,400 have been contacted.
“Of that 1,400, 408 have completed all the requirements for enrolment in the programme.”
The Government’s critics are likely to argue that such an enrolment rate hardly represents a major success, but the administration can easily retort that the initiative has worked if just a few Bahamian families can remain in their homes and life’s biggest investment.
Mr Halkitis yesterday said Hurricane Matthew had “stalled the momentum” of the Mortgage Relief Plan, but did not reverse it. He added that the Homeowners Protection Bill was designed to aid those delinquent borrowers who could not be helped through the former programme, via loan restructurings, reduced interest rates, extensions and principal and interest deferments.
Denying that Mortgage Relief was “a bail out for the commercial banks”, Mr Halkitis pointed to the global recession’s deep-rooted impacts on the mortgage and housing markets.
While mortgages issued in 2008 totalled $545 million, by 2010 this pace slowed to $396 million. It further declined to $303 million and $287 million in 2011 and 2012, respectively, before ‘bottoming out’ at $198 million in 2014.
Mr Halkitis said mortgage issuance had increased to $302 million in 2015, and was “trending” towards that mark for 2016.
He acknowledged, though, that the decline in mortgage activity “has been a real drag on the economy”, with the value of construction starts falling “precipitously” from $306 million in 2009 to $95 million in 2012.
“This lack of capital creation has placed an obvious drag on the Bahamian economy,” the Minister added.
Interest rates on mortgages, though, had dropped from 9.25 per cent in 2009 to 6.47 per cent at year-end 2015, and now 6.34 per cent.
The reduction in price and debt servicing costs has yet to have the desired effect, as the Central Bank’s statistics for the 2016 first quarter showed “a marginal increase” in new mortgage applications to 451, compared to 413 during the prior quarter.
Mr Halkitis said 66 per cent of these mortgages were to acquire existing dwellings, and not new construction, which limited the impact for the construction market.
He added that total loan arrears stood at $1.139 billion or 19.1 per cent of the commercial banking industry’s total, with mortgages some 55 per cent of this number.
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