EVERTON HANSON, General Manager of the Jamaica Mortgage Bank (JMB), has stressed the need to modernise the housing finance market in Jamaica. He said that this can be done through the utilisation of the secondary mortgage market and mortgage-backed securities which can provide a wider range of investment options.
Mr. Chanson was addressing the weekly meeting of the Rotary Club of New Kingston last week Thursday at Le Meridien Jamaica Pegasus Hotel, New Kingston.
Mr. noted that the need for secondary mortgage markets is urgent, based on the fact that, "despite the relative strength of the primary mortgage market, and the generally well-developed and diversified network of financial institutions, such as private building societies and the National Housing Trust, there is still inadequate funding for the housing sector". It is estimated that somewhere between 15,000 and 20,000 housing solutions per year are required over the next five years to cover the existing backlog as well as for satisfying new demands, Mr. said.
Mortgage funds
Secondary mortgage markets, Mr. told Rotarians, will benefit the housing sector in Jamaica by "essentially bringing the mortgage and capital markets together, facilitating the transfer of capital within the financial sector from areas with surplus of those with deficit. A secondary mortgage market would therefore bridge the gap between short-term borrowing and long-term lending".
The JMB head pointed out that access to primary mortgage funds is somewhat inadequate in Jamaica partly because building societies by their very nature of operations are limited by the levels of savings and savers (shareholders) which are given priority for loans. Additionally, mortgage funds available from other lending institutions are generally at prohibitively high interest rates.
So far, the larger building societies in Jamaica have been the main participants in the secondary market. The market has been relatively dormant in recent years because of a number of factors. Mr. noted that these included the fluctuating fortunes of institutions that would normally invest in mortgage-backed securities, new laws which require building societies to keep a higher percentage of their assets in mortgages, the high distortion in mortgage rates and the deficiencies in the legal frame work to handle mortgage-backed securities.
Mr. emphasised, however, that these problems are not insurmountable and expressed confidence that demand for these instruments will increase when the economy starts growing.
