Ashford W. Meikle, Business Reporter

Milverton Reynolds, head of the Jamaica Mortgage Bank, says it is up to the Ministry of Finance to announce the terms of the housing bond. - File

The Jamaica Mortgage Bank (JMB) has raised $1.1 billion from a housing bond it recently floated, which sources say has been taken up by two local and one hemispheric institutions.

Wednesday Business sources said at least $500 million was sourced from the National Housing Trust (NHT), that one of the country's largest building societies had taken up a similar amount, while the remainder of the bonds was financed by US$2 million ($132 million) line of credit that JMB has with the Economic Development Bank of Venezuela.

While the source was unable to say which of the building societies was providing the additional capital of $500 million, it is believed that money raised from the NHT will be used specifically to revive the bank's secondary mortgage business.

JMB's Milverton Reynolds on Tuesday declined to confirm the details of the bond saying it was the prerogative of the Ministry of Finance to approve and publicise the specifics. He confirmed, however, that his agency had raised the funds.

"The Ministry of Finance has to sign off on that but, yes, we have been we been successful," Reynolds told Wednesday Business. "The commitments have been made and we are in the process of getting the MOF's approval. This (the bond) is part of our plans for this year to finance both private and public sector housing developers."

Healthy finances

He stressed that the bank's success in raising the capital was due to its healthy finances.

"We have been able to raise these funds solely on the basis of our balance sheet. We have not sought nor have we needed to get guarantees from the government or the Ministry of Finance," said the mortgage agency executive, a one-time managing director of the NHT.

The bank's 2005 audited financial statements point to a 10 per cent increase in its asset base, which now stands at $2.78 billion.

But while the entity remains profitable, its net earnings plunged by 68 per cent from $226.7 million to $73.6 million.

The JMB boss said that the bank was looking to revive its dormant secondary mortgage market business, which was the foundation operation of the JMB when it was founded 30 years ago.

"Right now we are not active in that market at all [but] we intend to re-enter the field," said Reynolds.

Under the secondary mortgage market, the JMB buys a bloc of mortgages from building societies and other mortgage lenders, which is securitised by the properties of the individual mortgagors. The funds paid by JMB for the block purchases essentially provides mortgage lenders with liquidity for other loans.

But, as Reynolds pointed out, the depressed real estate market of the mid to late 1990s - caused by the collapse of the financial sector - saw building societies awash with cash as they retreated from the mortgage market.

As they retreated, the societies began to invest more in government paper chasing after returns that ranged as high as 30 per cent on government securities.

JMB now feels the time is right to relaunch into secondary mortgages saying that a burgeoning home ownership market had seen the entry of new lenders, such as the credit unions.

For example, up to the end of June this year, mortgage loan portfolios at building societies totalled $39.5 billion, a 21 per cent increase over the previous year when the figure stood at $32.6 billion.

The figure does not capture mortgages granted by insurance companies, credit unions and other financial institutions.

For its own part, of the $8.4 billion spent on housing benefits by the government last year, the JMB was responsible for 1,598 units, representing a $875 million investment.

Reynolds indicated that up to August this year the bank had provided $2.1 billion in construction loans to developers.

"We are looking to negotiate additional low-cost financing," he said. "The secondary mortgage market is something that needs to expand and ... the bank can do a lot more and will be seeking to do a lot more in this area."

- ahsford.meikle@gleanerjm.com