|Mortgage Relief Plan revealed|
Guardian Staff Reporter
Published: Aug 16, 2012
Approximately 1,100 Bahamians will likely be eligible for the government’s Mortgage Relief Plan, which will be introduced during the first week of September, Minister of State for Finance Michael Halkitis revealed yesterday.
During a communication in the House of Assembly, Halkitis also revealed the details of the plan, which is expected to help people facing foreclosures.
He later told The Nassau Guardian how many people would likely qualify for the plan.
Once the plan takes effect, applicants will have a six-month window to apply.
Halkitis said in order to participate in the plan, applicants must occupy a primary residence; the mortgage must have originated prior to January 2009; the outstanding mortgage amount can not exceed $500,000 and the applicant has to have had an acceptable credit history prior to June 30, 2008.
Additionally, the loan must be delinquent due to documented financial hardship caused by involuntary unemployment, under-employment or chronic illness; the mortgagors must have sufficient, sustainable documented and verifiable income to support the restructured payments and the lender must have a valid first and possibly second charge mortgage.
The property must be clear of other mortgages, liens or encumbrances, Halkitis added.
The minister said individuals wishing to participate in the plan will have to apply through their lender.
He said the lender would review each applying borrower's circumstances and determine what an affordable mortgage is, given the reduced income of the borrower.
"The difference between this affordable amount and the actual mortgage would be the gap, which would be addressed by the plan through rewriting the mortgage loan into two loans — a serviceable loan and a deferred loan," Halkitis said.
He added that the government will contribute an amount equal to one third of the difference between the actual mortgage balance and what the client can service, up to $7,500, to permanently reduce the balance of the deferred loan and the client's total mortgage debt.
Halkitis said the lender would rewrite the remaining difference as a separate loan at zero percent for up to three years.
The debt would continue to be secured by the same real estate security; however, there would be no principal payment requirement for a minimum of three years.
If at the end of the three years the borrower is still unable to pay, the loan could be rolled over into another no interest facility.
Halkitis said the government will also waive any stamp tax associated with registering the documents related to the plan.
He pointed out that the borrower remains obligated for the full amount and the mortgage remains registered on the property for the full amount.
The minister warned that any breach of the agreement, such as failure to disclose relevant financial information or delinquent payments on the restructured debt would result in the full amount, inclusive of the deferred amount, being due in full immediately.
"The plan, we believe, would significantly increase the probability of a person with reduced circumstance maintaining their home until their own personal circumstances improve. The size of the commitment under the plan could be up to $22,500 for eligible borrowers,” Halkitis said.
"For example, an individual with a total mortgage of $140,000 inclusive of $5,000 in late fees with only sufficient income to support a mortgage of $112,500 would have a difference of $27,500.
“This individual in normal circumstances would be facing the real risk of losing his or her home. With the plan in place the individual could now apply to his lender to participate in the plan.”
Halkitis said the guidelines of the plan will be published on the government's website (www.bahamas.gov.bs) and on the website of all participating institutions.
"We believe that we have, with the stakeholders, crafted a plan that will bring relief to homeowners and the associated benefits to society, and that is financially responsible,” Halkitis said.