by Rick Lowe
Here's the new twist according to the Speech from The Throne:
"The plight of homeowners in financial distress must be addressed if a stronger economy is to be restored."
"My Government will therefore work with the clearing banks and other institutional lenders to develop a financially sustainable mortgage relief programme aimed at assisting distressed homeowners in saving their homes from foreclosure. Participation in such a programme would be voluntary."
Mr. Hubert Ingraham (FNM), former Prime Minister stated in an interview with The Nassau Guardian that; "it appeared as if the government had scaled back its mortgage relief proposal. He said the plan presented in the Speech from the Throne seemed more practical, unlike the version that was talked about before the PLP won the general election." Read the entire article here…
The "revised" mortgage relief programme seems less dictatorial than what they were suggesting on the campaign trail, but it remains unworkable without adding more to the national debt that the country cannot afford.
What intrigues me about this "Helping people at gunpoint" is that banks are being made the scapegoats.
First, a mortgage is a legitimate contract agreed by both the lender and the borrower, incorporating terms for non-payment that were all agreed to up front before funds were advanced.
Second, the banks are being demonised in this matter as "profiteers" that are cold hearted. The banks are not the only people to "profit" from mortgages now in distress. Why not ask property developers, architects, real estate sales people, lawyers, accountants, the government et al to return the profit/money they made from each sale? And,
Third, if the programme will now be voluntary for banks, one assumes the derogatory noise in the market about banks by the political class will cease?
It merits repeating that it must be incredibly tough for people to lose their homes (and my sister might lose her property so I understand first hand) but to throw reason out of the window in these contractual matters, is whimsical at best.
To paraphrase Penn Jillette, voting for our government to use force to get banks to give money to people who happen to be in arrears with their mortgage is immoral, self-righteous, bullying, laziness.
We will know soon enough if rational thought has slipped in to change the original concept of the mortgage relief plan. But all the promises during the campaign make it very difficult to step away from providing "relief".
Details of the PLP's mortgage plan from their 2012 election "Charter follows:
[1] Work with the banks and other institutional lenders to agree to a 120-day moratorium on foreclosures. This 120-day moratorium would allow for the appropriate consultation to take place within the financial sector and with the Central Bank and it would also allow for the necessary legislative authority regarding the items below to be put in place.
[2] Obtain the banks’ agreement to a write-off of 100% of the unpaid interest and fees for those mortgagors who are facing foreclosure. This should be acceptable to the banks, as they would already have made provisions against these losses. Therefore, writing off the unpaid interest and fees would have no immediate financial impact on the banks. As for the delinquent borrowers, they would benefit from the fact that their outstanding balances would fall substantially. Essentially, delinquent except that that Government would have a lien against the mortgaged property to the extent that the Government’s guarantee to pay overdue interest on their behalf is called under point 5 below.
[3] Actively encourage a reduction in the interest rate on the mortgages in question to Prime + 1%. This would be substantially below the rate that most borrowers are paying, reflecting the impact of the government guarantee described below.
[4] Actively encourage the banks and other institutional lenders to extend the loan repayment period under defaulting mortgages to the maximum allowed by the financial institution.
[5] In return for the banks agreeing to the four elements above, the Government, for its part, would guarantee the interest payments of the affected borrowers for 5 years until 2017.
[6] To assist borrowers who might be unable to meet interest payments and to help ensure the sustainability of the Government’s guarantee, we will create a special fund into which borrowers participating in this initiative will pay a reasonable annual service fee based on their outstanding loan balances. The collective contributions to the fund will assist the Government in covering the interest costs of those participating borrowers who may fall into delinquency.
[7] Pass legislation necessary to ensure that homeowners who have accumulated savings in their pension funds can access those funds in order to save their homes from foreclosure.
[8] Pass legislation necessary to protect homeowners from foreclosure where they have already paid back more than a certain percentage of their mortgage loans. This will require close consultation with the banks and other interested parties. Once borrowers have reached a certain level of home mortgage debt repayment, they should have some assurance that they will no longer be in danger of losing their homes. This legislation would also afford the Supreme Court powers that resemble the laws in force in England, enabling a forced sale or foreclosure of homes to be stopped or suspended when the court decides that it is just and equitable in all the circumstances to do so.
[9] Pass legislation to give greater protection to borrowers in relation to interest, add-on charges and other bank fees; and to bring under regulation unregulated lenders. This new legislation will also bring under stricter control and supervision the system of salary deduction so appallingly abused by certain financial institutions.
[10] Extend the “first homeowners” exemption from stamp duty to persons who lost their first home in foreclosure but are trying to buy a home once again.
