Five-Month Loan Wait Dampening Realtor's Outlook
By NEIL HARTNELL
#Tribune Business Editor
A Bahamian realtor yesterday voiced concern that renewed market "optimism" could founder over tightened bank lending policies that are taking up to five months to issue mortgage approvals.
Gino Maycock, a broker/appraiser with Colonial Realty, told Tribune Business that such long wait times were creating "a level of uncertainty" over whether real estate transactions will occur and purchasers can access the necessary financing to complete the deal.
With COVID-19 vaccines "on the horizon", and the Bahamian economy slowly re-opening despite skyrocketing infection rates and lockdowns in major source markets such as the US and UK, Mr Maycock admitted there was a high chance that risk-averse commercial banks and other lenders could dampen a real estate rebound by further restricting mortgage lending.
"I'm actually quite optimistic on the outlook with a vaccine on the horizon, and the hotels and countries gradually opening up," he told this newspaper. "The interest in sales and rentals hasn't changed a whole lot since COVID. Demand and interest has not really gone anywhere. It's kept steady. Buyers want to buy and sellers want to sell.
"The only challenges we have had were with the timeframe the banks were taking to process and confirm approvals for mortgages and loans. We went from a norm of seven to 14 days to... I've had a client of mine waiting for as much as three to four months for an approval. It was kind of crazy there. In some cases we've experienced up to the five-month mark.
"It's a delay more than anything," Mr Maycock said of the impact. "For the purchaser they have to keep resetting the whole transaction just to avoid losing their deposit, and for the seller they keep on asking: Will it happen? Is it going to happen? Do I have to put it back on the market? Will it get the same, a better or lower offer?
"I wouldn't use the word 'unrest', but there's a level of uncertainty around whether the transaction will occur or fail..... The only real change was the banks; the terms and conditions, and the willingness to lend on the base and premise they once did prior to COVID-19."
Bahamas-based commercial banks have become especially risk averse to mortgage lending following the hit suffered in the aftermath of the 2008-2009 recession, when total credit in arrears peaked at $1.2bn. Many lenders were stuck with distressed properties they could not offload due to the absence of qualified buyers, leaving a 'bad loan' overhang that lasted for almost a decade.
Now, as the industry grapples with COVID-19 loan deferrals and having to determine how many will fall into the non-performing loan category, banks are going to be even less willing to extend mortgages to anyone other than the most qualified applicants.
Mr Maycock told Tribune Business he had already witnessed banks increasing the sums that mortgage borrowers must pay as a downpayment on their purchase, with one client having to raise this from 10 percent to 15 percent of the acquisition price.
"We're going to experience some changes in the market, but don't know what they are and how they are going to impact buyers and sellers," he said of the mortgage market. "There's a chance there will be some changes to come, and we all have to wait and see.
"What we don't know is the perspective of the lender. There's a chance they may revisit their lending policies. What these new policies might entail is to be seen and heard. We're hoping there are no changes, but there's a good chance there may be after all we've gone through. I have quite a number of transactions pending confirmation of [loan] approvals."
The Central Bank recently revealed that mortgage and consumer loan delinquencies soared by $91.8m in two months with many Bahamian households and individuals unable to meet their debt servicing obligations, due to job and income losses, after loan deferral initiatives came to an end.
Mortgage loan delinquencies increased by a further $37.4m during November, although their consumer equivalent actually dropped by $3.6m. When added to the $58m rise in mortgage and consumer loan delinquencies from the previous month, this contributed to a more than $90m jump in a 61-day period.
"Banks’ credit quality indicators deteriorated during the month of November, reflecting a rise in short-term delinquencies, attributed to the negative effects from the ongoing COVID-19 pandemic. Specifically, total private sector arrears grew by $45m (6 percent) to $796.2m, elevating the relevant ratio by 80 basis points to 14.2 percent," the Central Bank said.
"A breakdown by loan category showed that the growth in short-term arrears was led by mortgage delinquencies, which expanded by $37.4m (8.5 percent) to $476m, as the $41.3m (25.7 percent) rise in the short-term segment outstripped the $3.9m (1.4 percent) fall-off in non-performing loans.
"In contrast, consumer loan delinquencies declined by $3.6m (1.5 percent), owing to an $8.2m (8.3 percent) reduction in the 31-90 days category, which eclipsed the $4.6m (3 percent) increase in the long-term segment."