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VMBS loan delinquencies hit 6.7 per cent

Published:Friday | July 30, 2010 | 12:00 AM
Richard Powell, president and chief executive officer of Victoria Mutual Building Society. - File

Victoria Mutual Building Society's underperforming loans have almost doubled in the past three years, and is now at the point where regulators sit up and take notice.

From 3.68 per cent of its mortgage portfolio in 2007, past due loans hit 4.15 per cent in 2008 and rose again last year to 6.7 per cent.

The Bank of Jamaica says the tolerable limit for delinquencies at the building societies is five to 10 per cent of the portfolio, but that at five per cent a red flag is raised, requiring the institution to take action.

VMBS president and chief executive officer, in a statement to society members published in the society's annual report, brought the issue to the attention of shareholders while giving assurances that the issue was being addressed.

"In the second half of the year, we witnessed a worrying trend of increasing arrears in loan repayments on the part of mortgagors, as the impact of the adverse economic circumstances affected household incomes," said Powell.

On Thursday, the society said further that it had "deployed additional staff resources and implemented special measures designed to contain the delinquency levels."

The measures include interest-rate reductions on existing loans.

VMBS cut rates on existing mortgages in good standing by one percentage point on May 1, subject to a floor of 15.49 per cent.

It also made a similar cut to its borrowers who are funded by the National Housing Trust under the Joint Finance Mortgage Programme.

VMBS, on July 1, cut mortgage rates again, from 15.49 per cent to 14.99 per cent for new mortgages, while its savers are now eligible for mortgage loans at a price of 13.75 per cent, down from 13.99 per cent.

The company shed profit at yearend December 2009 - down from J$744 million to J$576 million - on the back of a J$600 million rise in interest expense that a J$300-million gain in operating revenue was insufficient to offset.