A leading bank in The Bahamas has restructured $80 million worth of mortgage loans in the past 18 months, according to its top executive.
Kevin Teslyk, managing director at Scotiabank (Bahamas) Limited, wished to reassure clients that the institution has been “very proactive” in these difficult times.
He said the bank launched a Mortgage Rehabilitation Unit in the thick of the financial crisis to assist distressed Bahamian homeowners and prevent widespread defaults on loans. That program appears to be a partial explanation why Scotiabank (Bahamas) has not approved a single client for the government’s Mortgage Relief Plan since it was instituted in September.
Noting that the institution started “very early on”, Teslyk said Scotiabank (Bahamas) employed a number of techniques, such as lengthening the amortization period and adjustments to interest rates. Any solution would depend on the specific circumstances of the client, he explained, and the main objective is to show flexibility.
“We’ve had really good success,” he said. “Our experience has been that only 5 percent to 6 percent have shown some form of default after the restructuring. That’s a really good result, in the sense that 95 percent are still going. It shows our decisions are sustainable, rather than short-term solutions.”
The bank has dedicated 16 individuals to the Rehabilitation Unit. Eight individuals are located in a central location, while the rest are spread out through Scotiabank’s various branches.
“Prior to the introduction of the current Mortgage Relief Program in September 2012, Scotiabank has been assisting its customers that were adversely affected by the economic downtown since 2009,” he said. “As part of this effort, Scotiabank (Bahamas) Limited formally launched a new Rehabilitation Unit – a dedicated team providing an individualized approach to evaluating customers’ personal financial positions with a view to delivering a customized solution to rehabilitating a customer’s delinquent or non-performing mortgage or loan.”
The managing director confirmed that the bank has been solely responsible for $80 million in mortgage loan restructuring in The Bahamas, comprising more than 500 customers.
“Scotiabank remains committed to proactively working with both its customers and The Government of The Bahamas in providing customized solutions for the current market,” he added.
However, the question remains – what’s left for the government’s $10 million Mortgage Relief Plan?
Teslyk noted that most financial institutions in the country have encountered similar issues with the program.
Alex Storr, the chairman of the Bahamas Mortgage Corporation (BMC), has also noted that the government’s plan needs revision.
He said that BMC has received very little interest since September.
“We need to qualify more people,” he explained. “We are looking at who applied and the reasons why they could not be allowed to receive relief under the plan. So we have put together a list to Cabinet for approval.”
Teslyk said that stakeholders are prepared to have discussions over the coming weeks on how the program can be “tweaked”. Although he couldn’t go into too much detail prior to a meeting with the Ministry of Finance, he did indicate that certain deadlines could be extended or eliminated altogether.
For example, under the current plan, Bahamians that have fallen into arrears after August 31 are not permitted to apply. These more recent loans could be serviced with the $10 million plan.
Teslyk said earlier this week that it had received 59 applicants for the program. Half of them were turned down due to insufficient cash flow to service a restructured loan. The rest were not considered because of program technicalities, such as those that were already in arrears prior to the financial crisis.
By Jeffrey Todd
Guardian Business Editor