|McWeeney: Mortgage Plan is ‘genuine effort’|
Guardian Business Editor
Published: Sep 21, 2012
A top banking executive says the Mortgage Relief Plan and Borrowers' Protection Bill represent a "genuine effort" on the part of the government to help Bahamian homeowners avoid foreclosure.
Managing Director at Bank of The Bahamas (BOB) Paul McWeeney told Guardian Business he supports the efforts being made, despite mixed reviews from other members of the banking community. In fact, executives in the industry have often refused to individually comment on the process.
For his part, McWeeney said the government has shown a willingness to negotiate and accommodate the private sector during these difficult economic times.
"I'm sure the Borrowers' Bill will change quite a bit before it is laid before the House of Assembly. The point is, we (at BOB) did what is necessary to protect and enhance the integrity of the balance sheet," McWeeney said. "I think the government's intent is genuine and they want to help people who are having difficulties. We will review the program on a monthly basis to making changes where appropriate."
However, the managing director noted it is a government program, and these officials will ultimately make any final decisions.
The Mortgage Relief Plan, now in effect, places a number of specific criteria on applicants, which effectively limits the number of qualified Bahamians to around 1,100. Prime Minister Perry Christie noted recently that this could be extended to 1,500.
The process involves the division into two loans. The first represents what the client can afford based on their current circumstances. The second is the difference between this new figure and the original debt owing.
While the first loan functions normally, the government provides up to $7,500 towards the other debt at no charge, and subsequent payments and interest charges are suspended for three years.
"The government will contribute money to it, so the $7,500 principal repayment gives us reason to be more aggressive," McWeeney told Guardian Business.
He expressed optimism that it at least gets the ball rolling on a number of loans in arrears.
The Borrowers' Bill, however, presents another set of challenges.
Under the original legislation, the Supreme Court can grant relief to a borrower from consequences of a breach of covenant or the non-payment of the principal or interest of a loan. In lays out in broad terms how it can effectively trump the decisions and protocols of banks.
Michael Halkitis, the state minister of finance, revealed to Guardian Business earlier this month that the bill has received extensive consultation recently from the Clearing Banks Association. While likely to be presented in the House of Assembly in October, the final version, similar to the Mortgage Relief Plan, could be significantly altered to suit all parties.
McWeeney said the Borrowers' Bill should ultimately motivate the banks to be more aggressive in its restructuring, and hopefully lead to greater reward for responsible institutions.
"It will be a positive influence," the executive said.