Jarrett urges NHT to retreat from retail mortgage market
Earl Jarrett, general manager of Jamaica National Building Society (JNBS), is calling for the National Housing Trust (NHT) to reconsider its role in the mortgage market as a rival to lenders.
The state agency, he said, should stick to wholesale financing, and leave the writing of home loans to the private market.
The NHT, which lends first-time homeowners a maximum J$4.5 million at rates ranging from one to seven per cent, provides 75 per cent of housing needs. In early February, its loan portfolio was valued at J$99 billion.
JNBS is the lead mortgage provider with a loan portfolio of some J$41 billion at December 2011. Its cheapest rate is 9.4 per cent.
Mortgage lenders have been lobbying for some time for the NHT to be less aggressive in the market, thereby opening up space for them to grow.
Expansion in partnerships
The push has included calls for NHT to outsource its mortgage portfolio, but while this has seen an expansion in partnerships in the structuring of loans, the trust remains the single largest provider of mortgages.
The building society sector, which is the primary seller of residential mortgages among private lenders, was worth J$87 billion by loans at December and J$185 billion by total assets held by four players.
"There is absolutely no reason why the National Housing Trust and the banks and the building societies should be competing in the same space, establishing branches across the island to deliver retail mortgage services," said Jarett while addressing a Realtors Association of Jamaica workshop in Kingston last Thursday.
"What we could do - as is done in other countries to have greater efficiency - is to have that agency deposit funds, on the basis they set, to the retail sector; and that the retail sector, working with you, could then on-lend to prospective borrowers in a seamless way to provide consumers with a better service," he said.
Jarrett otherwise commended the Government on plans to increase levels of support from the mortgage insurance fund that exists at the Jamaica Mortgage Bank.
It will "enable firms like mine to lend even higher percentages of the value of the home that is for sale, with the assurance that there is some balance in the mortgage insurance fund to support us," he said.
"I encourage all of us to lobby hard for those changes to be made, so that we can see greater levels of financing being made available, to ensure that the projects that real estate sales continue to increase."
The JNBS head cited an Inter-American Development Bank study on real-estate transactions in Jamaica which found that when all costs are aggregated - the cost of the surveyors, the valuators, lawyers and other professional services - "Jamaica ranked among the highest in the world in real-estate transactions and difficulty of such transactions."
If pricing were better structured, Jarrett said, Jamaicans would be more likely to move from starter houses to dream homes.
"What happens in Jamaica is that people buy a home and they stay in it forever. People stay for 40 to 50 years. There is no rotational movement, because the cost is too great. What we need is a constant movement upwards as people begin with starter homes and move upwards. One way in which that can happen is to drive down costs," he said.