Commercial banks will not ease their conservative lending stance and risk profile assessment for persons seeking to purchase or build a home, even if it is a government-backed development, Bahamas Clearing Banks Association (BCBA) President Kenrick Brathwaite said.
Parliamentarians passed a resolution yesterday for the government to develop 83 acres of land off John F. Kennedy Drive, adjacent to Prospect Ridge, into 250 lots for “young professionals” to build homes.
Prime Minister Dr. Hubert Minnis said young Bahamians would be able to apply for the purchase of the lots by this summer.
Asked if he believes banks will, in this depressed economic climate, ease their risk assessments with lending right now because the land purchased would be in a government development, Braithwaite said, “Traditionally, the answer is always no. If you look at all the government subdivisions, there have always been challenges. This is slightly different in that it’s under the premise of it being for professionals and being in an area that has not predominantly been low income.”
Minnis said in the House of Assembly yesterday that a number of banks were “anxious to come on board” and have provisionally indicated that purchasers would not have to come up with any down payments to the banks – which he said is often one of the challenges with young Bahamians being able to afford property.
Refraining from responding directly to the prime minister’s comments, Braithwaite said, “Banks make decisions based on risk. Once we have assessed a risk and the level of the risk is acceptable to us, then we will say yes to it. We’re not going to say yes to a government guarantee. We always say we don’t want to be in the land selling business or the liquidation business. We want to give it to a customer who will pay their loans. That’s our primary concern, to give loans to a customer who will pay their loans. A government guarantee, depending on who you speak with, may not be a risk mitigator. Now, if you believe that mitigates your risk, then as a bank you have a right to make that decision.”
The lots, which would be on average 9,500 square feet, cost $40,000 for residential and $50,000 for commercial or multi-family. The prime minister said purchasers would immediately gain more than $100,000 in equity because the value of the lots in that area is $150,000 or more.
Minnis said the banks his team have not spoken to have called the government to say they would like to be a part of the program.
Braithwaite said while generally the housing resolution is “a wonderful idea” to help young people afford property in The Bahamas, banks have to be concerned about a customer’s long-term ability to repay a loan.
“When you look at the Homeowners Protection Act, it tells us as a bank that we have to be careful now because that in itself has provided more challenges for us. There are things in the Homeowners Protection Act that will actually make it more difficult, ironically, for persons to qualify for a loan. We have to be concerned with long term ability to pay. Yes, you will say to us that we’ve always been concerned with that, but we have to be more concerned with that now because the Homeowners Protection Act puts some stuff in it that gives the homeowner a whole lot of power,” he said.
“I’ll just be the devil’s advocate – if I’m going to look at someone who’s going to build or buy a home, one of the things that is paramount to me now is to consider in the long term what is the possibility that the property will increase in value or decrease in value. If the answer is decrease in value, then I’ll probably say I need more equity or I’m not going to touch it. Because based on any possible liquidation for delinquency down the line, I need to know that the area is protected in such a way that there is land appreciation. Land appreciation says two things to me – one, if we foreclose, we will get the price that we want and two, in most cases the customers won’t allow you to foreclose because there is land appreciation, so they want to pay. So, that dynamic in itself is different from the usual government subdivision.”
Although the resolution does not say specifically that the land is for professional young Bahamians, the prime minister has used the term “professional” on multiple occasions when referring to the project. It is for first-time property buyers only and purchasers must build on the properties within two years.
“Now, I would say that it should have been taken a lot further. I think when you use the word ‘professional’, that comes with its own challenges because is that someone who has a degree? Is that someone who is at a certain level at a bank or an insurance company? How do you define professional? When I say in the bank professional, I may mean something a lot different from what the government thinks. So, when you say we are ready to jump on it, we first of all need to be on the same page as to what the word professional means,” Braithwaite said.
“But, generally, I think it’s a wonderful idea to allow young Bahamians who can afford land to get land. And the crazy thing about it, when you use the word young professionals, people think you are buying it yourself, but does it really matter if your father bought it for you so that you can have a piece of land to build a house? As long as you can afford it going forward does it really matter? It doesn’t matter does it?
“Truly, I think the concept is wonderful. The area is wonderful – you would expect there would be land appreciation in that area. I don’t like the word professional, I prefer young people, but it’s a wonderful thing to give young people land.”
The post Banker: Despite govt backing for lots, banks will maintain conservative lending appeared first on The Nassau Guardian.
source https://thenassauguardian.com/banker-despite-govt-backing-for-lots-banks-will-maintain-conservative-lending/
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