By INDERIA SAUNDERS, Guardian Business Desk

A retired banker believes the increasingly popular reverse mortgage would not work in The Bahamas, even as a new U.S. housing bill raises the amount seniors can borrow against their homes using that income vehicle.

"It sounds good to North Americans and Canadians," Al Jarrett, former chairman of the Bank of the Bahamas, told Guardian Business, "but I'm not sure we have a wide enough banking system and capital market to pull that off.

"It's a very complex mechanism that would require knowledge and training before you could do that because Bahamians by nature don't like anyone holding their property without them having ownership, even if they want the money."

His comments coincide with record jumps in reverse mortgages not only in Canada but the U.S. The program allows seniors to receive a monthly income for their home by effectively selling it, or promising to sell it to a financial institution at the time of their death.

Until that time they continue to live in the house. The deal usually involves a fixed amount, often 75- to 80-percent of the property's assessed value spread out in monthly payments that can go on for 10, 20 or 30 years. If any of that agreed upon amount is left over at the time of death, the heirs to the estate will receive that money as an inheritance.

There are, of course, fees attached and if the home is sold, the loan must be repaid with the proceeds, and any equity that remains goes to the borrower.

Such a program in The Bahamas could stand to transform the lives of many of this nation's senior citizens now scraping by on National Insurance payments too often failing to meet living expenses. The problem is compounded by a poor savings track record in this country. It's a worry for both pensioners and many financial analysts, especially given soaring cost of living expenses now being driven up by skyrocketing oil prices.

While Jarrett acknowledges the benefits attached to reverse mortgages, he asserts there are simply too many reasons stacked against it working here in The Bahamas, namely, the need for substantive legislative changes to banking laws and the challenges of overcoming the longstanding culture of passing property from one generation to the next.

"They work well in Canada when you have mechanisms in place to give people property rights," he said Tuesday, "but in a country where you don't have correct legislation and laws are lax in dealing with property and there are unscrupulous lawyers in the system, It will be very difficult to introduce something like that."

Furthermore given that the majority of local banks are internationally-headed, borrowers could find themselves in trouble if an institution was to quit the jurisdiction. The exist could leave an elderly person scrambling to find a new institution to take up the reverse mortgage with title issues thrown into the mix.

"These are all questions that need to be answered first," Jarrett said.

The former banker's statements come as U.S. reports point to an increasing number of senior citizens becoming targets for aggressive marketers of those income vehicles. Unscrupulous players have often taken advantage of retirees confused by the process and the fine print, according to members of Congress, government regulators and consumer advocates.

In the U.S., 107,367 reverse-mortgage loans were made in fiscal year 2007, up from 6,600 loans in 2000.

It's those impressive numbers and the maturity of our local insurance market that will likely result in at least one local company introducing reverse mortgages by 2010, said one analysts.