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.
Comments
Well_mudda_take_sic 6 years, 5 months ago
Having Sir Snake replace your banker as the holder of your mortgage loan is like having the devil himself replace your banker......and we all know how that is likely to work out for the poor financially distressed homeowner at the end of the day! Small wonder grown men now having to deal with Gateway Financial (the devil) as their mortgage holder are crying their eyes out!!
TheMadHatter 6 years, 5 months ago
They are correct that greater participation by commercial banks would help - but how about participation by the schools? Teach kids about this stuff so they don't get hoodwinked into foolishness (with balloons tied on them in the mall) the moment they can "show a pay-slip."
We also need legislation to establish a credit rating agency (like Experian) so that banks can make better decisions about who is and is not qualified, and also legislation to establish official bankruptcy (and enable the magistrates courts to do this for any amount below a million) so that banks are put on notice to stop their predatory lending practices on the poor - or else the courts will tell them too bad too sad for them.
There is a lot that can be done and should be done. This, however, is a good start, and I applaud this good news.
bogart 6 years, 5 months ago
Lets be realistic, if another company can find a solution then why couldnt the Bank.
Banks should be forced to clean up the mess caused by giving marginsl loans and using indemnity insurances which they know will result in massive job losses caused by extreme Hurricanes.
Coupled with predatory lending to reach huge loan targets and applications slanted in their favour for easy qualificstion and now today readjusted seems especially difficult to qualify is proof.
Lack of protection by govt is also to blame and an Financial Conduct Authority as creatted in England 2013/4 independly staffed must be immediately established to protect customers and monitor banks activities including audits.
Having a Central Bank with goovt appointed Governor and Boatd of Directors who seem incapable or regulating Banks and moreso its own Govt majority Bank of the Bahamas with its too govt appointed Board of Directots.
The interests of the nations financial sector must be put above the interests of the govt to appiont its own connected Boards.
Serious investigation is needed to look into the causes and effects of the entire mortgage debacle instead of getting rid of the evidence by selling off, already common sense is that if one rebuyer can find one single solution so can the bank. Lets open up the investigations and when fraud is found dont fire the officers....JAIL THEM Then again this may reveal too much to the public why public investigations do not happen as is now coming out of the BPL audit and invrstigation.
TheMadHatter 6 years, 5 months ago
Right on point my brother.
TalRussell 6 years, 5 months ago
Comrades! Does anyone knows exactly how does Frankie Wilson's 'Gateway Financial Vehicle (GFV)" works? i has an itchy feeling how I thinks it works but likes hear from someone with firsthand knowledge how GFV does works?
Dawes 6 years, 5 months ago
Not 100% sure, but i believe GFV buys the loans at a discount from the bank (per example above at 25% of the value). This means the bank makes something back off an item that would have been a bigger loss. GFV then goes to the mortgagee and will try to renegotiate the monthly payments to an amount they can afford. As long as this is above the 25% value of the loan they will make the difference. This happens all the times in other countries, however this may be the first over here. That the banks don't do it is a cost benefit analysis by them. It is more beneficial for them to get it off their books then continue trying to receive payment.
bogart 6 years, 5 months ago
Very very simple TalRussell
Basic mathematical model
Applicant proof of income, defined as salary at least confirmed job, tips usually a percent 50% of verifiable and management letter tips bearing in mind that during vacation thete is no tip, 50% rental income also verify expenses/maintenance, no pension allowed, no child dupport or alimony jnless certified almost guarrenteed, consider dividends for support.
Epeenses all yearly bills insurancres divided by 12, monthly bills, maintenance of families, clothing, donations, nib, car, etc loans, cards etc Project expenses to now include new home expenses plus repayments.. VERIFY APPLICANT IS TELLING TRUTH. SIMPLE times the expenses by 12 months and this should equal salary. NOW, in many cases this will show a big savings as applicants lower the values to qualify. VERIFY, WHAT APPLICANTS DO NOT SPEND THEY MUST SAVE. SIMPLEDo a balance sheet of assets znd liablilies and assets will show up and less liabilities showes surplus. Examine to verify. If cannot find what should have been saved and did not tturn into assets then there must be extraordinary expense like medocal or assisting in family deayh expenses. At this point of examination the applicant confesses in default with usual outside child support, gambling, asue. KNOWING THIS, the still currently used TDSR total dest service ratio of 45%of income amount (stillusedratio from over 20 yeats ago when numbers were different) plus the interest rate put into mathematical repayment formula to show repayment of principal and interest....amortized over any number of years to fit within 45% total loans repayment ratio.max loan period to ginish on or before retirement. This is wrong too as 45% is npt the same for high income earnets because normal expenses can be repaid if you make $16,600 permonth like 200k pa 45% is used for mortgage indemnity insurance to repay difference in equity requirement from sale.provided bank maintains terms of contract. Variables a company can use is interest rate, and length of years of course being more. Any other repayment possibility to fit means that there was a defect in the calculation of the first. Variable used is likely lower interest to guarrantee a repayment for investor above that which can be gained on the market. Investigations are needed into included, omitted ,deceptive/lies, analysis that did not give a mprtgagor a chance to succeed which is fraud and due care and attention or plain negligent by the bank who should know this mathematical analysis. Credit bureau is what banks do themselves and give bankers references everyday. Govt passing the buck.
CatIslandBoy 6 years, 5 months ago
WTF! Maybe Tal understands what you just wrote, because Tal is much smarter than me. I'm totally baffled! Is it just me?
bogart 6 years, 5 months ago
Simple procedures a,b,c of a mortgage process to show why bank mortgage customers should not fail and why if an outside company can succeed with restructuring so should the banks and areas of possible negligence which the govt should investigate in this massive failure. Sorry its lengthy but I am passionale about financial wrongs done to Bahamians like this and 100% increase in bank fees.
ohdrap4 6 years, 5 months ago
I understand that you had to condense your thoughts and there are some predatory practices by banks including the practice of not verifying what the customer says.
In the absence of a credit rating, many lie at the bank, so the balance sheet does not balance.
A common practice in the Bahamas is to get a friend to adulterate a salary letter for you, couple of years ago a woman got caught and lost her job. again balance sheet is ficticious.
People alternatively duck bills at the end of the month and cuss out should someone remind them to pay their bill, be it the bank or the HOA.
So the customer has a part to play. they want things they cannot afford.
bogart 6 years, 5 months ago
Absolutely correct.!!!.. Bahamians are not familiar with annual 1040s tax forms, REITs, etc.,however bankers have the ability to also not give a loan when its success is bleak, speculative or marginal and will cause default. What you dont spend you should save or find it or else your bucket leaking. Banks fo not lose as they have the money for best lawyers for Court and Judgement. When control was lost to overseas countries bankers were forced to be bankers and salespersons to meet targets or else no salary increase. We need a Financial Condict Authority or Financial Services Authoroty like England. To bring order.
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