Mort­gage ma­nia

Jamaica Gleaner - - NEWS -

Sec­ondary and re­verse mar­kets be­ing con­sid­ered for Ja­maica

EVEN AS he seeks to pro­ceed with cau­tion with re­gard to pol­icy changes be­ing con­sid­ered for the real es­tate in­dus­try, Prime Min­is­ter An­drew Hol­ness is of the view that Ja­maica is ripe for the in­tro­duc­tion of a sec­ondary-mort­gage market and re­verse mort­gages.

Speak­ing at the An­nual Real Es­tate Sym­po­sium, hosted by the Real­tors As­so­ci­a­tion of Ja­maica, Hol­ness an­nounced that the pol­icy and in­sti­tu­tional frame­work for a sec­ondary-mort­gage market and re­verse mort­gages was be­ing crafted by tech­nocrats across var­i­ous govern­ment agen­cies.

The prime min­is­ter ar­gued that the pol­icy changes are needed to un­lock the growth po­ten­tial of the real es­tate market.

RE­DUCED MORT­GAGE RATES

In mak­ing the case for a sec­ondary-mort­gage market, the prime min­is­ter pointed out that mort­gage rates would be re­duced sig­nif­i­cantly if mort­gage len­ders had the free­dom to of­fer mort­gage-backed se­cu­ri­ties to in­vestors.

“We are now con­sid­er­ing how to get more liq­uid­ity into the mort­gage market so that mort­gage rates can come down even fur­ther. We are look­ing very closely at pol­icy anal­y­sis to­wards de­vel­op­ing a sec­ondary-mort­gage market. That will ul­ti­mately have the ef­fect of bring­ing

down mort­gage rates,” he told real­tors.

A sec­ondary-mort­gage market al­lows for the sale of mort­gages on the fi­nan­cial mar­kets. The sec­ondary market is often used to re­duce the risk to mort­gage com­pa­nies when home­own­ers can­not af­ford to pay their mort­gage.

Hol­ness, how­ever, made it clear that the Govern­ment would be pro­ceed­ing with cau­tion given the risk of sub­prime lend­ing. The 2008 global fi­nan­cial cri­sis has been blamed on sub­prime loans, which were of­fered to peo­ple in the United States who did not have the means to re­pay them. The loans were pack­aged as mort­gage-backed fi­nan­cial prod­ucts and sold on the sec­ondary market. The even­tual de­fault on the loans rocked fi­nan­cial mar­kets and led to the near bank­ruptcy of large banks and mort­gage len­ders, which had to be bailed out by the US Govern­ment.

“There are sev­eral pro­tec­tion mod­els that have been de­vel­oped for sec­ondary mar­kets, so we are look­ing at those very care­fully,” Hol­ness said.

Turn­ing his at­ten­tion to the po­ten­tial for the in­tro­duc­tion of re­verse mort­gages to Ja­maica, the prime min­is­ter pointed to the sig­nif­i­cant value of real es­tate in older com­mu­ni­ties that have ex­pe­ri­enced de­te­ri­o­ra­tion in their hous­ing stock. Re­verse mort­gages would al­low the own­ers of these older homes to con­vert the eq­uity in their home to cash.

Hol­ness fur­ther an­nounced to the real­tors that draft­ing in­struc­tions had been is­sued for a Town­house Act, which is ex­pected to ad­dress is­sues of prop­erty up­keep and gov­er­nance of com­mon ar­eas.

He also an­nounced that reg­u­la­tory changes that would see the merger of the rent board, the real es­tate board, the strata cor­po­ra­tion, and other real es­tate reg­u­la­tors were also be­ing con­sid­ered.

Prime Min­is­ter An­drew Hol­ness

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