Home is where the heart is

“Hope springs eternal” could well be the slogan to be adopted by the thousands of applicants seeking housing assistance through the National Housing Authority (NHA) this year. The banking fraternity, through its official mouthpiece — the Bankers Association — has revealed that every effort would be made in the new year to find a solution to the problems which have perennially dogged the relationship between banks and NHA applicants seeking mortgage financing. Larry Howai, speaking for the banks said, “We will put together a team to come up with some possible solutions to work together with the NHA.” The team will comprise persons from the banking industry and the NHA, which would work “to provide affordable housing acceptable to both parties.”

The banks were responding to an early December censure by new Housing Minister Keith Rowley while addressing the heads of financial institutions. At the time Rowley pointed out that in nations, which transformed themselves into developed nations over the last 30 years, “the government makes policy and the private sector runs with it. It was not done by bankers saying ‘we are not interested in funding low-cost housing.” ’ This is not the first time Rowley waded into the banks regarding their policies about mortgage facilities for NHA houses. When he was Planning and Development Minister, he also criticised the banks as far as mortgage loans were concerned. The minister said he did not want to accuse the banks of complacency, but added that that is the thinking, which would prevail if the banks did not change their policy towards NHA house buyers. But Rowley did not only chastise the banks. He said that homeowners and potential homeowners must be responsible. “Their priority cannot be sneakers, fete and Kentucky.”

He also revealed that public communications would soon be developed within the NHA  with a mandate to educate potential homeowners on the importance of managing their financial affairs. Howai, Chief Executive Officer of First Citizens Bank, said his association would meet with the Housing Minister during this month. Richard Young, president of the Bankers Association and head of Scotia bank, said he was willing to sit down and discuss the possible ways in which his bank can assist in the Government’s housing initiative. Young explained it was not a simple matter of looking at an application form and giving approval for a mortgage. He said, “We need to understand if the credit is good. Remember that we have depositors’ funds to account for as well as a responsibility to our shareholders, so that every application has to satisfy a set of predetermined criteria.” Mark Singh, managing director of RBTT  Merchant Bank insists that, “anyone who qualifies can get a mortgage easily.” He added, “We have a long list of applications and as long as the criteria are met, we approve.” He explained that under the bank’s Approved Mortgage Company Status (AMCS), which covers mortgage loans between $250,000 and $500,000, can be lent tax- free and he added that “that portfolio has been growing significantly.”
Scotiabank’s CEO, Richard Young said his institution also had something called Tax Exempt Mortgage portfolio and added that all banks had half  a million dollars in tax exempt mortgages.

FCB head Larry Howai is on record, saying that the issue is the risks banks attach to people who want to buy NHA houses. He said they are perceived as higher risks and one of the arguments from the financial community was their cost of borrowing. “We need to find a formula in which we can all share the risks,” added Howai. Another banking jefe, Suresh Sookoo, Chief Executive Officer of RBTT bank admitted that local banks were consumer-oriented, but added that they could lend to NHA house owner hopefuls, once the types of borrowers are varied and so allows the risks to be  spread. Rowley said that external institutions were anxious to lend us billions of dollars, but his government was holding fast to its fiscal policy, insisting that the local financial sector be fully developed. Richard Young obviously agreed when he said, “A strong banking sector means a strong economy.” The minister insists that people want to buy houses, the houses are being built and there is money in the banking system, therefore every effort must be made to find the missing link between these three areas.

Notwithstanding the differences between the NHA on the one hand and the banking sector on the other and potential homeowners, one of the biggest obstacles to overcome is some methodology to satisfy the urgent need for homes without the banks compromising their lending criteria. It seems therefore that what is of the utmost importance is a meeting of the minds. But we have heard about these meetings before and since reports have not been forthcoming, it is left to speculate that not much ground, if any, has been covered, so far as a solution is concerned. The problem is by no means a simple one. With 40,000 people seeking homes from the NHA and some 25,000 of these earning under $4000 per month and the remainder unable to secure mortgage financing of any kind anywhere, a solution seems quite distant, unless the banking fraternity makes some radical changes to their policy, while at the same time the Authority revisits their own criteria regarding location and social amenities.

According to Rowley, the government plans over the next ten years to build some 6,000 houses while the private sector is expected to come up with another 4000 units. He said the present housing programme required “a lot of preparation, a lot of behind-the-scene work, a lot of office work, a lot of meeting of the minds between contractors and the agencies and the consulting groups.” It would seem therefore, there are great opportunities for banks in the housing sector, but if as RBTT’s Mark Singh insists, “We are here to lend. Once they qualify, we lend.” Then it might still prove to be difficult for those in the lower income group to ever own a house. The problems are myriad. Given all that has been said on both sides, it is now the hope of all potential NHA home buyers that the banks and the NHA would meet and somehow make mortgage financing for the lower income groups more available and quickly too.