Poor response to higher mortgage insurance ceiling - JMB
Jamaica Mortgage Bank (JMB) had hoped for a 15 per cent increase in its mortgage indemnity insurance portfolio after the insurable portion of home mortgages was increased to 97 per cent last year.
However, JMB chief executive officer Courtney Wynter says the legislative change that was meant to make home deposits more affordable has gained very little traction in the mortgage market.
The amendment to the 1960 Mortgage Insurance Act adjusted the proportion of the appraised value of property on which mortgage indemnity insurance could be granted from 90 per cent to 97 per cent. It was expected to lead to more persons owning homes.
But with little sign that mortgage lenders are touting the new threshold, the mortgage bank said it would be launching its own awareness campaign, urging Jamaican home buyers to explicitly request information on the possibility of 97 per cent mortgage financing when seeking a home loan.
"We have got a lot of interest and additional sign-ups, but we are not seeing the traction we expected. This is one of the reasons we are doing the campaign to have the potential homeowner lead" by encouraging lenders to facilitate them, he explained.
Through its mortgage indemnity insurance plan, the MII-2, JMB projected that once the ceiling for insurable risk was raised, it could attract more business.
JMB had hoped to snag the accounts of the National Housing Trust and the Jamaica National Building Society two big primary mortgage providers who self-insure.
Still, others such as Victoria Mutual, FirstCaribbean Jamaica, Sagicor, and FHC Credit Union have signed up and are participating in MII, Wynter said. As at March 2015, the value of the MII Fund was $1.2 billion.
"Today, we manage approximate 4,167 policies and hope to increase that by approximately 15 per cent within the next one to two years," said the mortgage banker.
This increase, he said, is projected to include both new companies signing up and current companies insured at the old level but which want to extend coverage.
Local mortgage companies traditionally self-insure 60 per cent of mortgages and buy insurance for another 22.33 per cent of the loan portfolio. With the change in the law, they can buy an additional seven per cent or even more if they reduce their ratio of self-insured coverage.
Wynter reiterated that the mortgage industry is about five to seven per cent of GDP, which means that the sector is underutilised as a growth strategy for the economy.