Mortgage Relief – The Deeper Issues

FORECLOSUREAs debate continues and unanswered questions remain about the Prime Minister’s actions to save his highly paid friend’s home from repossession, there are deeper issues to the debate on failed “mortgage relief” promises that are not being discussed. Instead of the government deceiving Bahamians on the campaign trail about what it would do to stop struggling mortgage-holders from losing their homes, what should have been looked into is how the government, in true and actual consultation with the financial services sector, could introduce legislation and/or adopt policies that may help to provide some protections for Bahamians in the mortgage process.

Some of those ideas could have included a consideration that if a mortgage-holder has paid a majority of his/her total principal over time, repossession would not take place should the mortgage-holder fall into a legitimate situation at some stage where he/she may be unable to make full payments. Protections in law against predatory lending (the practice of lending money under fraudulent pretenses or under unfair or abusive lending terms) could also have been considered. Also, there has been little discussion on the extent to which lending institutions do or are willing to renegotiate the terms of non-performing or under-performing mortgages, what such renegotiation could amount to in real terms and to what extent possible incentives might encourage banks to do so. And with growing numbers of foreclosures on the market sitting abandoned, it would be useful to know the impact this has on neighboring property values and the country’s overall housing and real estate sector.

When the government came to office, it changed its “mortgage relief” plan promised on the campaign trail and announced a different version of that plan in its Speech From The Throne. That is likely due to the fact that what it promised on the campaign trail was never something it would have been able to do, which is instruct commercial banks not to demand collection or redemption on their non-performing mortgages. In order for the government to have been able to keep the promise it made while campaigning, it in reality would have needed to pay off everyone’s mortgage arrears with taxpayer dollars – something the government simply cannot and ought not do. Record unemployment and underemployment has hit Bahamians and the lending market very hard. If genuine public/private sector consultation and research was carried out on the issue of “mortgage relief” by the current government, the matter may have had a better chance of becoming something useful for struggling mortgage-holders, instead of it simply being a carrot tossed out to them as a means of attracting and securing votes.

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