'Mortgage Collapse Worse Than Greece'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net -

Nassau, The Bahamas:

Rattled Bahamian commercial bankers were last night nervously awaiting today’s tabling of the Homeowners Protection Bill in Parliament, fearing it will further depress economic recovery and a mortgage market that has already “collapsed”.

A paper on the Bill’s impact, produced by a top Bahamian banker, said that with “more than 20 per cent” of Bahamian homeowners either behind on loan payments or effectively in ‘foreclosure’, the only true comparison to this nation’s mortgage crisis was Ireland.

The banker, who requested anonymity in sharing his ideas with Tribune Business, noted that one factor behind Ireland’s mortgage arrears was the fact it “is one of the hardest places in the world” for banks to repossess mortgage collateral - the exact same thing that the Homeowners Protection Bill is seeking to do in the Bahamas.

Noting that 16.1 per cent of all Bahamian mortgage loans were non-performing as at end-December 2012, the banker wrote that this delinquency level was more than three times’ that of Greece - an economic basked case that has had to be bailed out by the International Monetary Fund (IMF) and European Union (EU).

The paper added that the Homeowners Protection Bill, which aims to “limit” Bahamian banks’ ability to secure mortgage collateral and/or sell it, fundamentally changed the risk/reward assessment the industry used in determining whether to grant credit.

As a result, Bahamian commercial banks would become more risk averse when it came to mortgage lending upon the Bill’s passage.

This not only threatened the Bahamian home ownership dream with marginal borrowers denied credit, the banker’s paper warned, but would in turn depress both the vital real estate and construction industries.

This would inhibit the Bahamian economy’s ability to escape recession, the banker added, noting that Central Bank of the Bahamas data showed the mortgage market had already “collapsed” - with net new advances for mortgages standing at $0 for both the December 2012 and March 2013 quarters, a six-month period.

Separately, other high-level banking sources yesterday expressed concern to Tribune Business that few, if any, of the recommendations made by the Clearing Banks Association (CBA) appeared to have been incorporated into the draft Bill likely to be laid before Parliament.

“They’ve [the CBA] been told, or made to believe, the Bill will be tabled today, and the concern is that a lot of their recommendations were not taken into consideration or did not find their way into the Bill,” one source told Tribune Business.

“A lot of what the CBA had recommended was not incorporated into the final draft of the Bill. It appears that the Government have their minds fixed on certain matters, and no matter what discussions take place, those recommendations are not favoured.”

The source added: “There’s some significant concerns if that is the final version to be tabled. It could have some significant implications as to how credit is conducted going forward.

“It may be much more difficult to lend. It may support the non-traditional bank lenders, helping them to find opportunities to extend credit to people not qualifying with the commercial banks.”

Dr Bernard Nottage, leader of government business in the House of Assembly, last week announced that the Homeowners Protection Bill would be tabled in the House of Assembly today, although it is unclear whether the legislation will make it to a Second Reading (debate).

Still, with the Bill granting the courts the power to postpone the sale of a mortgage property in default for up to 12 months, the banker’s paper said the risks associated with Bahamian home lending would increase, while the rewards decreased.

Pointing out that credit fuelled both consumption and investment, the latter creating jobs and economic growth in the Bahamas, the banker’s paper said: “Any steps that the Government takes that heighten lending risk, or reduce risk adjusted returns, will cause lenders to pull back.

“And the Government’s (and its allies) rhetoric is consistent with that outcome. It allows the Government to deflect any criticism for the lack of employment opportunities and focuses the population’s ire on the despised banking industry. It may be a popular political move but it is a poor economic play.”

The banker said the ultimate effect of the Homeowner’s Protection Bill, as is, will be to change the terms of the lender-borrower contract once the mortgage goes into default.

“It limits the lender’s contractual rights to seize the collateral or sell it, and interjects a legal process where the courts can, upon an application by the delinquent mortgagor, require the lender to provide additional ‘reasonable’ time to allow the mortgagor to become current on payments,” they added.

Yet with more than 80 per cent of delinquent Bahamian mortgage holders still occupying their homes, often for up to two years, the banker said the Bill was dealing with a problem that did not exist.

“This Bill presupposes that the lender is anxious to seize the collateral, or sell it, and can recover the principal balances,” the banker’s paper said.

“In a market where there are few, if any, ‘qualified buyers’ and nearly 4,000 delinquent homes, this tactic is not even in the top ten desirable options that a lender faces,” the banker said.

“The best option for the lender is generally to allow the delinquent mortgagors’ time to resolve their financial problems, to restructure the loan in the meantime, and allow them to live in their homes to prevent it being vandalised. This is not charity – it simply is financial sense.”

The banker’s paper said more than $4 million in monthly principal and interest payments was not being collected by Bahamian banks, given that 16.1 per cent of mortgage loans were in default, and 22.6 per cent in arrears.

“What this means is that over 20 per cent of Bahamian homeowners are in some kind of trouble, either behind on payments, or in foreclosure or in forbearance, which is when the lender isn’t collecting payments,” the banker’s paper said.

“Only the mortgage arrears in Ireland are comparable to those in the Bahamas. Greece is in an even worse economic crunch than the Bahamas - unemployment is at 27 per cent. The economy has shrunk by 25 per cent since the end of 2007. And even so, the percentage of Greek mortgages 90 days or more past due was only 5.1 per cent in November 2012.”

The banker added that the “disparity” between Greece and Ireland was caused by the latter’s policies that prevented banks from easily taking possession of delinquent mortgage collateral.

Turning to the Bahamian situation, the banker added: “During 2012, domestic banks increased their provisions for loan losses by $73 million, or 24 per cent, to $374 million. Banks also wrote off an estimated $225 million in delinquent loans.

“The growing delinquencies, write-offs and additional loan loss provisions have decimated bank earnings and bank capital. This has resulted in a growing risk aversion and pull back in lending to segments that show greater risk and lower returns.

“The Bahamian mortgage sector meets these criteria and, in the last few months, net new advances for mortgage loans have collapsed as lenders pull back to repair their balance sheets and restore their capital. There is a domino effect to this decision – homes cannot sell, prices decline, realtors, developers and builders all suffer and cut back. Ultimately, the businesses that depend on consumer spending – restaurants, stores, cinemas etc. all suffer.”

The banker warned that exacerbating this situation, as the Homeowners Protection Bill threatened to do, could “choke off the flow of capital to the economy” upon which recovery from the 2008-2009 recession was dependent upon.

May 22, 2013

Tribune 242

Caribbean Blog International

Peter Laurie, Jamaica Gleaner Guest Columnist:

I refer to the article by Mr Ronald Mason published in The Gleaner on May 5, 2013 titled 'Kick CARICOM to the kerb'.

I know many people will slam Mr Mason for his savage attack on CARICOM, but, let's face it, most of us who don't work for a CARICOM institution or a regional Ministry of Foreign Affairs believe that CARICOM has exhausted itself.

Mr Mason speaks from a deep frustration and bitterness that many of us who have been integrationists since the federation now feel. He has said it more forthrightly and honestly than most of us would have done.

Some of us will be peeved at the derogatory comments he made about Bajans and Trinis, but there's a kernel of truth in what he says. Bajans have as our saving grace a strong sense of self, which can often deteriorate into pompous arrogance: one's strength is invariably one's weakness.

As for Trinis, I won't comment - I'm married to one - other than to say that, as a lifelong introvert, I just wish they would stop talking so much, so fast, so often.

But let me deal with some of Mr Mason's specific assertions.

He says he's not a Caribbean man. Either he's lying, fooling himself, or cutting his ties. All of us born and raised in the Caribbean are Caribbean persons by dint of cultural geography.

I believe that Mr Mason's disavowal of his Caribbean roots is an expression of his disenchantment with the regional integration movement, which is perfectly understandable. Despite all the talk about "mauby, blood pudding and bake" as alien to his culture (as a Jamaican once told me, our Bajan national dish made of cornmeal is dog food in Jamaica: them lucky dogs!), he's seeking a divorce.

The value of Mr Mason's invective is that it trashes all the dishonest sentimentality that has accompanied our regional integration in the last few decades. Whatever cultural roots we share (and they are deep) is not a basis for economic integration. A single market and economy cannot be based on sentiment.

WON'T WORK IF NOT WIN-WIN

If integration is not a win-win game for everyone, it won't work (even granted that we can't all benefit in the same way and at the same time). It is quite understandable that Jamaicans should look north and west for their economic salvation (remember the Seaga-Reagan CBI?) And if that is their economic future, so be it. Right now, CARICOM functions at the level of the lowest - and slowest - common denominator.

Our political leaders have simply failed to make the case for integration in a common sense hard-headed way that our people might have embraced. And even when they point the way, they themselves betray their own vision. They have now timidly abandoned the process to the regional bureaucrats who mouth the usual platitudes and craft the absurd agendas and long-winded communiques that nobody reads.

Mr Mason is right. CARICOM is moribund. The question is whether it can be revived. The only sector capable of doing it is the private sector. Our new breed of innovative regional entrepreneurs (they are few but growing) would have to lead the way with joint pan-Caribbean investments motivated not by sentiment but by profit: but that is a tough ask in the present economic climate. Our media, labour movement and other elements of civil society would also have to play their part.

That is bottom-up integration.

What the politicians and bureaucrats have to do is get out of the way. The Westminster model of autocratic, bloated bureaucratic, kleptocratic democracy is bankrupt.

Email feedback to columns@gleanerjm.com and plaurie@caribsurf.com.

May 18, 2013

Jamaica Gleaner

Caribbean Blog International

By Anton Edmunds:

There was a hearing on energy in Latin America and the Caribbean in Washington in early April and the Caribbean was absent. This was not because the region was not on the agenda of the members of the House Subcommittee on Foreign Relations who posed questions to panels that included senior representatives from the State Department and other entities. In fact, the Caribbean seemed to be of major interest to the members considering the many questions posed about this space.

Yes, there were the obligatory questions on Petrocaribe, but more importantly there were questions on whether the administration has been doing enough to engage a key neighbour. For the Caribbean, the opportunity was missed to outline from a regional perspective, the importance of energy to Caribbean competitiveness.

In essence there was no one to discuss the enormous cost of electricity to the public and private sector. There was no one to talk of the need for improved disaster preparedness support for the existing distribution network, and no one to press for proven technology deployment of energy efficiency technology and renewables.

There was also no one to request that the requisite funding mechanisms to deploy new technologies in the small markets of the region be made available and finally, there was no one there even to talk up the region’s recent and much vaunted achievement in the energy front - the CARICOM energy policy. This policy sets a goal of 2027 as the date for the region to source 47% of its energy needs from renewable energy sources.

On that last point, it should be highlighted that the very development of regional energy policy has been supported in part by funding from the United States. Maybe the region could have been there to express thanks for some of this support and ask for more. Instead, the Caribbean and its energy policy and needs were left to parties with minimal knowledge and interest in the region.

We must ask ourselves why the Caribbean does not see this type of opportunity as beneficial to advance its own interests. While this hearing was specific to energy, it is important to point out that one is given the impression that the modus operandi of the region is to be more absent than present when there are hearings on issues important to its future. Even more apparent is the continued absence of Caribbean advocacy on Capitol Hill, which is the impression of congressional representatives and their staff.

Was the Caribbean absent from this hearing because the region is unaware of this and other briefings of relevance to its interests? Maybe, though there are list-serve mechanisms that allow one to track hearing schedules. Quite possibly, it was that no one had in their budget the monies to fly to Washington to testify, though a response to that would be that the region has embassies in this space and effective representatives who could present comments. At the very least, one would expect that the Caribbean or a relevant entity in Washington representing it could submit comments to the record. Well, alas, at last check, this has not been done.

Rather, what we experienced is a continued trend of the region to ignore opportunities to advocate for its own interests and highlight positive steps that it is taking to address critical obstacles that it faces. Sadly and most importantly, it allows policy to be constructed on behalf of the region without its input by entities and individuals with limited knowledge, when it is questionable as to whether they even care.

Even in the cases of those who do and are well intentioned, the lack of Caribbean input will result in less than fully formed programs and regional dissatisfaction that the Caribbean was not consulted.

Here is a quick primer on how the system works – the Congress appropriates money and the administration spends it. Without input in requesting support, monies are not allocated for one’s needs and, clearly, without engagement in the design stage, one can hardly expect programs that address its needs. The Caribbean regularly misses the opportunity to advocate for its interests on both counts.

Back to the hearing and heartening was a response by State Department Deputy Assistant Secretary Matthew Rooney that sought to delegitimize the often stated and ill-conceived notion that the Venezuela–Caribbean relationship on energy was one driven by political leanings of Caribbean leaders. Rooney explained the truthful and practical realities that the region faced at the height of oil pricing that led many in the Caribbean to depend on Venezuela.

Helpful was the commentary of Representative Jeff Duncan that the US should look to its near neighbours as a market for energy considering its newfound supply stocks of LNG, noting that energy security of the US neighbourhood does help assure economic stability. It also helps protect the vulnerable US underbelly.

Disappointing, however, a response by the State Department's Special Envoy and Coordinator for International Energy Affairs, which one assumes was a misstatement. When asked about engagement with the region on energy issues, the response was that the government was working through the Caribbean Renewable Energy Forum (CREF) to engage the Caribbean.

While I acknowledge an affiliation with this group and believe that they provide a great forum on renewable energy issues in the Caribbean, any dependence of the US State Department on this once a year conference to engage the Caribbean shows two things: A clear lack of depth as it relates to engagement of the region by the State Department on energy other than through a proxy program run by the Organization of American States; and secondly, a lack of demand for attention by the region on the issue.

If the Caribbean is satisfied with a once a year speech by the energy czar of the US government on ways in which the region can work with its largest trading partner, maybe the region deserves to be where it is. I, however, would like to argue that the Caribbean is not at all satisfied with having to deal with proxies and that the region can work closely with the US to develop bi-lateral arrangements and agreements in this area.

I think that there continues to be scope for direct engagement of industry in this space and efforts to develop programs where pilot projects can be tested, especially as it relates to energy efficiency and renewables can be ramped up.

Finally, I would like to encourage the Caribbean to show up once in a while to advocate for its own interests rather than to complain after the fact or worse, act as a supplicant willing to depend on the token efforts led by intermediaries whose interests are not its own.

May 15, 2013

Caribbean News Now

Caribbean Blog International

By Dalia González Delgado:

ANNUAL U.S. State Department reports refer to Cuba as one of the countries which obstructs the exercise of religious expression. While the latest State Department report, in reference to the country, states that government respect for religious freedoms has improved, it notes that significant restrictions have remained in place.

However, many specialists have noted the increase of religious expression in Cuban public life. The adoption into the Constitution of the secular nature of the state in 1992 facilitated religious freedoms, and two Popes and other eminent foreign religious leaders have since visited the country.

These lists, drawn up by the U.S. government in an arbitrarily and unilateral manner, standing in judgment over others but not itself, have political motivations, given that, in the case of Cuba, these can be used to justify its blockade.

With a view to presenting authoritative opinions, Granma interviewed a number of Cuban religious leaders.

THERE IS NO ANTI-SEMITISM

In the Beth Shalom Temple in Havana’s El Vedado district, David Prinstein, vice president of the Jewish Community, confirmed that Cuba’s Jews were never persecuted.

"In the early days of the Revolution there was a distancing between different religions and the state; if you occupied a leadership position you could not be religious, but there was no persecution.”

Speaking from personal experience, he says that his parents were founder members of the Communist Party of Cuba, in which he was also active. “I never omitted from my resume that my family was Jewish. My parents were not practicing Jews but my grandparents, who came to Cuba from Poland, fleeing the Nazis, always went to the synagogue."

Currently, the Cuban Jewish Community has approximately 1,500 members. Prior to 1959, when the majority emigrated to the United States, there were approximately 15,000. There are five synagogues in Cuba, three in Havana, one in Santiago de Cuba and another in Camagüey.

"Although it is a small community in terms of numbers, it is strong in terms of what it does and the number of projects and programs in existence,” Prinstein confirms.

One challenge for Cuban Jews is adhering to dietary practices, given that they cannot eat pork, shellfish, scale-less fish, or web-footed poultry. They are assisted in respecting these regulations with allowances made for the only private butcher’s store in the country. "It was established in 1906, and was respected after the triumph of the Revolution," notes Prinstein, who describes relations between his community and the Cuban government as excellent.

"Even before the current Cuban Migration and Travel Law was introduced, we were always able to travel to international events to which we had been invited in Latin America, Israel and the United States.”

“We are not a country with anti-Semitic manifestations,” he concluded.

A NEW CHURCH IN CUBA

The Moravian Church, which emerged in 1457 in Eastern Europe, began to function in Cuba at the end of the 90’s. “We started out as a small group meeting together in a house, until we joined the Cuban Council of Churches in 2003 as fraternal associates,” Armando Rusindo, leader of the Moravian Church in Cuba, registered as an independent entity in January 2013, informed Granma.

However, they were able to engage in their activities earlier. Rusindo —who stressed that he was not acting as spokesperson for everyone, but referring to his personal experience— believes that tensions between religions and the nascent revolutionary government in 1959 were due to a mutual lack of understanding. Now he perceives “an awakening of faith among Cubans; something that can be noted by the number of people going to church.”

"The advances made are worthy of applause because I think that if, years back, we had been told that we were going to be able to broadcast Christmas programs on television, or use theaters and public venues for our activities, we would have thought that was a dream, but today it is a reality.”

However, he believes there are still roads to travel; “to constantly demonstrate what religion can contribute to a nation, by our example, conduct, dedication, and service, derived from our beliefs.”

THE FIRST ISLAMIC LEAGUE

There have always been Muslims in Cuba, but for 500 years of history, there was no Muslim religious institution, states Pedro Lazo, president of the Cuban Islamic League, which was officially established in 2007, although there were group meetings prior to that year. “We have been practicing since the 90's and we have never had a problem,” he affirmed.

Lazo adds that there are currently thousands of Muslims in the country, including Cubans and foreign students. Although no mosques have as yet been built, they all engage freely in religious practices such as Ramadan.

The Islamic League enjoys good relations with all other religions. “Our statutes establish that these relations must be excellent, like those we must have with our neighbors, based on respect, fraternity and cooperation in all contexts.”

Since the 9/11 attacks in 2001, the United States has attempted to portray Islam as a religion of terrorists. According to Lazo, this is also intended to discredit them, above all after the invasion of Iraq, but in Cuba they have continued their work normally, and have represented Islam in national and international events.

"Government authorities are in favor of people's total and complete religious freedoms, as confirmed both in the Constitution and in its actions.”

Lazo emphasizes the importance of respect between peoples, which only comes once their realities are understood. “Allah instructs us to respect what people believe in, even though we might not share the same beliefs. When you become capable of understanding the reality of others, you can respect them and then they will respect you.”

A CHURCH WITH SOCIAL RESPONSIBILITY

The Martin Luther King Memorial Center (CMMLK), a Christian-inspired macro-ecumenical institution, as its members describe it, was established in Havana's Pogolotti district in 1987.

Kirenia Criado Pérez, director of the Center's Reflection and Socio-theological Training Program, believes that the Memorial Center “has helped break down a polarity that still exists in the minds of some people, that Cuban society is one thing and the Church another.”

In her opinion, the CMMLK's social influence does not just come from Biblical, theological and pastoral training, but also from educational projects guided by the ideas of the Brazilian educator, Paulo Freire. "We advocate participation. We believe everyone has wisdom, which, when shared with the community, enriches actions.”

The Center also works in the area of solidarity, linked to Latin American movements, and is responsible for the Caminos publishing house. Moreover, it has been involved in building homes in Pogolotti. After Hurricane Sandy hit Cuba in October 2012, members created the “Your Solidarity Counts” project, which mobilized people on a nationwide basis, who not only made material contributions, but helped in clearing operations and rebuilding houses.

Kirenia Criado believes that, along with other institutions, the Memorial Center has helped people understand that “the Church is another social actor and as such, is responsible for the transformation of reality.”

"I do not believe that the Church can be the protagonist of anything, nor believe that it is an end in itself, because we don’t want a grand church, but a better society.”

Although she stresses that relations with Cuban authorities have always been highly respectful, Criado is of the opinion that more spaces for dialogue need to be opened.

"Cuba is in a process of change. Everyone is thinking about how to change the country, but not everyone wants to move in the same direction. The same thing is happening in the case of the churches. That's why it is important to understand one another, converse and get rid of old preconceptions.”

May 09, 2013

Granma.cu

Caribbean Blog International

BY RICKEY SINGH:

UNLESS bold and sustained efforts are made to have in place a new management system for effective governance of the affairs of our 15-member Caribbean Community (Caricom) within the next three years, the fear is that disintegration, instead of deepened economic integration and functional co-operation, could well be the sad experience by the close of this second decade of the 21st century.

Question any of our current crop of Heads of Government and the predictable response would mostly likely be a cynical dismissal of such a prognosis.

Of course, a follow-up question on what precise initiatives can be realistically expected, by say 2016, to stave off the emergence of a crisis in management to advance the major goals of Caricom -- the elusive seamless regional economy, for one -- is most unlikely to secure positive response, with any clarity.

It is doubtful that any Head of Government would wish to be presiding over his/her own domestic affairs when things start falling apart at the regional level.

Therefore, according to current thinking, in various quarters --including among private and public sector advocates of regional integration, as well as outstanding names in academe -- now seems to be the decisive "time for action" (to borrow a theme from the 1992 seminal Report of The West Indian Commission).

Basically, this entails Caricom's key decision-makers rising to the crucial challenge for significant changes to what's often alluded to as a "new management architecture" to replace what has largely been the experience for most of the community's 40 years of existence via a secretariat functioning in Georgetown with a controlling group of Heads of Government at the apex of decision-making and implementation processes.

When, therefore, Heads of Government of the Caribbean Community meet in Port-of-Spain for their 34th annual summit in July, one of the priority issues they need to seriously address is the quality of effective governance required to respond to the regional and international challenges facing our regional economic integration movement in this its 40th anniversary.

Portfolio responsibilities

For a start, they should perhaps engage in a critical re-assessment of what exists as a quasi-cabinet structure with Heads of Government responsible for specific "regional portfolios" and functioning as a sort of management committee between their half-yearly Inter-Sessional Meeting and the regular annual summit.

It is known that the Heads of Government are currently giving some consideration to a proposed five-year "Community Strategic Plan" (2014-2019) with a new management structure in mind.

That, incidentally, is after current and previous Heads of Government have repeatedly failed to effectively respond to a range of reports, with specific recommendations, from some of the best known intellectual minds of this region, and dating back to the 1992 West Indian Commission Report.

These Heads of Government would also be conscious of the spreading cynicism across the region over the ways they manage the affairs of the Community and which have contributed to weaknesses that sustain a prevailing yawning implementation deficit of decisions ritually embraced by consensus.

How useful, for instance, has the 14-member quasi-cabinet structure proven in enabling the Community Secretariat to carry out decisions from the layers of ministerial meetings and, more importantly, mandates from Heads of Government conferences?

The region's people, in whose name the Caricom leaders act, need to be sensitised to the modalities of functioning of the quasi-cabinet structure between high-level ministerial meetings and twice-annual regular conferencing of Heads of Government.

'Word Game'

A question of interest is whether there's any resemblance to the normal functioning of national cabinets our leaders head in their respective jurisdictions. Relatedly, is there a specific office, however modest, functioning on a regular basis, to provide relevant information/advisories on regional happenings relevant to their portfolio responsibilities -- whether on regional air transportation, trade and tourism, health and education, or sports and security?

And what happens, if anything at all, to interventions by those carrying delegated portfolio responsibilities between scheduled meetings of Heads of Government?

The sad truth is that, for all the rhetoric, Caricom is still far behind in making a reality of a seamless regional economy, the CSME, that it has been marketing as the "flagship project", but seemingly unable to deliver, despite changing inauguration schedules.

Not surprisingly, therefore, the Barbados Nation newspaper in an editorial last week titled, 'New Caricom Language', was scoffing at a "word game", that involves officials and politicians, suggesting that efforts are indeed underway to establish a new and relevant management structure.

As the editorial noted, "while apparently unwilling, if not unable, to make a reality of the long-promised plan for fundamental restructuring of the governance architecture of the community, there seems to be a language shift in emphasis from having management with executive authority to talk of a change process..."

To enable this envisaged "change process" for improved governance, as observed by the editorial, the Heads of Government agreed at their Inter-Sessional Meeting in Haiti last February to have designated government officials functioning as "change drivers" and to later assume roles as "facilitators of change" -- all with the intention, it seems, of improving management of the community.

Where will all this end while the "word game" continues on an new model of management, envisaged in the five-year "Community Strategic Plan" (2014-2019) and itself being a special project, consuming much time, energy and money?

The Caricom Secretariat in Georgetown, Guyana.

May 05, 2013

Jamaica Observer

Caribbean Blog International