Bahamas AG Speech for Homeowners Protection Bill
Mar 27, 2017 - 8:52:26 PM
Nassau, Bahamas - Senate Contribution by Senator, The Honourable Allyson Maynard Gibson QC Attorney General and Minister Of Legal Affairs Commonwealth Of The Bahamas On The Homeowners Protection Bill, 2017 Monday 27th March, 2017:
The public will be aware that Mortgage Relief and the protection of homeowners were, and remain a key plank in this administration’s platform.
It is a commitment made to the Bahamian people and despite many challenges in earlier implementation, a commitment from which we have never wavered nor toward which we have ever ceased working.
The Home Owners Protection Bill represents the legislative centerpiece of a comprehensive response to the Bahamian mortgage crisis, which was a direct result of the global financial crisis commencing in 2008.
When the Global economy began the shrink The Bahamas felt the effects resulting in loss of jobs and reduced hours for many of our citizens. This loss of income or reduced income meant that many homeowners could no longer service their mortgages. Homeowners who had paid their mortgage payments faithfully for years and years found themselves in arrears and at risk of losing their homes. Our government recognized that an intervention was needed. After careful and thoughtful deliberations we are proud that we were able to produce a very comprehensive mortgage relief programme that addressed the situation from many different angles in an effort to help as many families as possible.
This has always been a concern for the Government, as persons, in many instances due to circumstances beyond their control, were being faced with the prospect of losing their homes.
While getting persons back to work will provide much needed relief to many at-risk homeowners, the Government has always recognized the need for some assistance mechanism that would close the gap in their ability to service their debts and reduce the risk of loss.
This remains the driving rationale behind the Government’s launch of the revamped Mortgage Relief Plan.
Although the level of success is not uniform for all institutions The Ministry of Finance continues to encourage institutions to fully participate in the programme.
According to the latest available statistics in February 2017, 1679 borrowers were deemed eligible for the programme and 1464 of these borrowers have been contacted and of that amount 441 borrowers have completed all of the requirements for enrollment in the programme.
These are very encouraging numbers and although Hurricane Matthew stalled the momentum it did not reverse it.
We already have a Mortgage Relief Plan that is up and running and has been since the middle of last year. This plan is an agreement between the government and the Banks and lending institutions that encourages Banks to work with homeowners and the government provides an incentive to the Bank based on how many persons they were able to assist. This plan also includes a debt counseling component. The object of this plan is to catch a defaulting homeowner before the party gets to the point where the Bank is exercising its power of sale.
Secondly, we will be implementing the Money Lenders Rules which addresses fairness to the borrower from the inception of the loan.
Lastly Madame President we now present the Homeowners Protection Bill 2017 which seeks to concretize safeguards and protection for the homeowner who is faced with foreclosure. This is a landmark piece of legislation in the area of mortgages. As you well know Madam President as it stands presently Banks and lending institutions are able to oust the Conveyancing Law of Property Act in the mortgage agreement. I think we all can agree that in this area playing field is not level between the lender and the homeowner, who simply wants to put a roof over his family’s heads.
This Bill applies to all mortgages where the dwelling home of the borrower is used as collateral for the loan. Families are protected under this Bill even where a loan was gotten for a business and the family home was used to secure the loan. We recognize and appreciate that not every element in this Bill will be popular with the Banks and lending institutions but we canvassed their opinions and concerns we were able to find middle ground on many issues. Ultimately, Madame President we had to do all we can to ensure families can keep a roof over
their heads. When a family is able to purchase a home it brings some stability to that family and stable families means we will have stable communities.
Where a Bank or lending institution is ready to exercise its power of sale through the courts or non-judicially it must give notice that includes items that will be of assistance to the homeowner such as:
1. the nature of the breach of any covenant of the mortgage;
2. the amount of arrears the mortgagor owes, if any, as well as all sums due under the mortgage;
3. the amount of any administrative or other costs, including any property tax and insurance costs, necessarily incurred by the mortgagee and chargeable to the mortgagor;
4. the actions the mortgagor must take by a stated time to cure the breach and avoid foreclosure and sale of the mortgaged property;
5. the rights of the mortgagor under this Act including the right to apply to the Court for relief;
6. the willingness of the mortgagee to discuss the breach with the mortgagor, with a view to entering into an agreement with the mortgagor regarding redress thereof, including modification of the mortgage terms if possible;
7. contact information for the mortgagee, including an address to which a mortgagor may come in person and a telephone number.
A mortgagor or a member of his immediate family, Madame President, who is living in the dwelling house and has been contributing to the mortgage payments may approach the court for relief. This allows the spouse, parents or children of the mortgagor to make representation to the court and assist in saving the family’s home. This is a very important development Madam President. Notwithstanding privity of contract the law is catching up with the modern society and family dynamics within today’s society.
The Court now has the power to-
1. adjourn the proceedings; or
2. on giving judgment, or making an order for delivery of possession of the mortgaged property, or at any time before the execution of such judgment or order:-
1. stay or suspend execution of the judgment or order; or
2. postpone the date for delivery of possession, for a maximum of six months.
Where the Court exercises its powers under this Act it may also impose conditions as it thinks fit with regards to paying the principal and interest and any arrears and remedying any other default.
The court may exercise these powers where it is satisfied that the homeowner is likely within six months, to be able to — (a) pay principal and accrued interest at a
specified time; (b) remedy a default consisting of a breach of any other obligation arising under or by virtue of the mortgage; or (c) pay arrears.
Madame President, Clause 11 of the Bill gives the parameters in which a Bank may exercise its power of sale. The Bank or lending institution must try to sell the mortgage property at market value six months before it can entertain a bid lower than market value. Notice must be given to the homeowner that the property may be sold for less than market value. When the property is sold the proceeds of the sale will be applied the sums due under the mortgage. If there is a surplus that will be given to the homeowner. If proceeds of the sale is less than the mortgage debt the remaining mortgage debt of the homeowner will be discharged if at the date of the sale the homeowner has paid a sum equal to at least one half of the principal and accrued interest to the bank or lending institution or the homeowner has been in occupation of the dwelling house for a period not less than fifty per cent of the original mortgage term.
This Bill, Madame President, places a duty of fair dealing on the lending financial institution. This Bill prohibits the Banks and lending institutions from selling the mortgage property to its directors or employees or family members of its directors or employees.
This Bill may have taken longer than we anticipated but it was important to do proper research and see how other jurisdictions addressed this same problem. We are pleased, Madame President, that from now on all homeowners will have better protection under the law since this Bill applies to mortgages of dwelling homes entered into before or after the coming into force of this Bill as long as Court proceedings had not been started.
In summary, this is landmark legislation. It’s highlights include:
1. Banks must give specific notice before exercise of their power of sale
2. Persons contributing to mortgage payments, not just the mortgagor may approach the court for relief
3. The court may make orders to vary the mortgage payments
4. Banks are under a duty of fair dealing – directors or employees and their relatives may not purchase mortgaged property
5. Under certain circumstances when the pwer of sale is exercised and the sale does not realize the principal and interest the mortgage may nevertheless be discharged
6. Mortgagors may choose their own lawyers and surveyors and banks may not add the fee for another lawyer or surveyor to the mortgage
7. Under certain circumstances transfers of mortgages are free of stamp duty
8. there are heavy penalties for violating the provisions of the Act
This Bill together with the Mortgage relief Programme provide the most significant intervention to promote and maintain homeownership ever in The Bahamas.
These interventions have come from an administration whose Prime Minister continues to work 24/7 365 in the best interest of The Bahamas and Bahamians.
Madame President, we were very careful not to enable persons who are irresponsible and feel they do not have to honour their commitments. This Bill seeks to assist that responsible homeowner who simply fell on hard times and needs an opportunity to readjust and regroup.
I thank you for your attention.
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