JMMB Merchant Bank Home Equity Loans Grow by Over 400%
JMMB Merchant Bank (JMMBMB) has significantly expanded its share of the home equity market over the last 3 years, according to JMMBMB’s General Manager - Client Relations, Moya Leiba-Barnes. So far, the entity has reported over 400% increase in the number of home equity loans it has disbursed, between January 2013 and March 2016, now boasting a portfolio in excess of J$1.65B; which accounts for approximately 13% of the bank’s current loan portfolio.
The company executive said with the recent extension of its loan tenure from a maximum of 12 years to up to 25 years, or up to normal retirement age of 65 years, whichever is lower; it is looking to grow its home equity loan portfolio significantly over the next financial year.
Branch Manager at JMMBMB’s Knutsford branch, Owen Ferguson, explains that the home equity loan offer is especially attractive for second-time mortgagors; as it affords those homeowners a lower monthly payment when compared to other loan options, while enabling them to pursue home improvement projects that provide a rental income and/or meet the needs of an expanding family. He further indicated that the rate provided is variable, as it is subject to market conditions and is negotiable based on individual circumstances.
“JMMBMB provides up to 70% of the property’s value for a second mortgage using the home equity loan”, shared Ferguson. He adds, “We provide a minimum of J$100,000 with maximum of over J$30M, for our home equity loans for both residential and commercial properties.” Ferguson further highlighted that the tenure and rate is also variable based on the amount being borrowed.
Mrs. Leiba-Barnes notes that as a way of rewarding clients, “Additional discounts on commitment fees are available to qualifying individuals who are clients of JMMBMB;” adding the caveat that the tenure of the loan, along with other factors, dependent on the borrower’s specific circumstances, will help to determine the amount discounted.
In explaining the process of accessing a home equity loan, Ferguson outlined that the loan entails several steps, starting with an initial conversation with clients to discuss their financing needs, followed by the submission and review of supporting documentation, which should include: valuation report, title for the property, land surveyor’s ID report, proof of income, national identification, taxpayer registration number (TRN), and proof of monies for closing and other associated costs, not covered in the loan proceeds. Applicants are typically advised on whether or not they have been approved within 24 hours of submission of all of the relevant documentation. In some cases, where necessary, clients are invited to submit other supporting documents.
In instances where the home equity loan is being used for construction, Ferguson said, “These loans are usually disbursed on the invoices provided; however, there is room to examine this process on a case by case basis, with the borrower.”
Debt consolidation remains one of the main reasons that borrowers seek to access the equity in their home, however, JMMBMB reports that there is an uptick in the number of loans being used to acquire a second property or land. In addition, home equity loans are also frequently used for major educational and medical expenses, to purchase large ticket consumer goods, travel expenses, finance small and medium-sized enterprises and taking advantage of other investment opportunities.
Owen Ferguson noted that, “Since a home is usually one of the largest investments made by individuals in their lifetime, it is important to secure this asset with insurance.” As such, Ferguson adds that all clients accessing the JMMB home equity loan can also access peril and life insurance through JMMB Insurance Brokers Ltd., at reduced prices.
JMMBMB Eyeing Mortgage Market for Growth
Additionally, Moya Leiba-Barnes indicated that JMMBMB as part of its strategic thrust is eyeing growth in the mortgage market for first-time home owners and individuals interested in second mortgages. A definitive timeframe has not been indicated by the entity, but she shares plans are being put in place. Currently, JMMBMB’s first-time mortgage borrowers can access up to 80% of the market value or cost of the home or property, whichever is lower.
JMMBMB for the period ending September, 2015, booked new loans totaling J$5.3B, which represented a growth of J$2.8B, or 34.2%, in that Bank’s loan portfolio. Over the same period, its stock of non-performing loans grew by a mere J$18M, to end the period at J$118M. Given the size of JMMBMB’s loan book, relative to its total non-performing loans, the Bank ended the period with a very attractive non-performing loan ratio of 1.05%, well below the industry/system average of 4.2%.