Effective immediately, Jamaica Mortgage Bank (JMB) will be reducing the premium rate for mortgage indemnity insurance (MII) coverage by up to 29 per cent.
The MII, rates which were seven per cent of mortgage loans, will now be cut as low as five per cent, said JMB General Manager Courtney Wynter on Monday.
Wynter explained that for individuals with lower risk, the new premium will be 5.5 per cent of the mortgage.
This discount, he noted, is passed on to homebuyers by mortgage lenders who subscribe to the MII and who build the insurance charge into the cost of the loan to individuals.
“The reduction in the MII rate will lower the upfront transaction cost or lower the cost of the mortgage for those who choose the option of adding the premium to their loan,” Wynter said.
The MII portfolio is currently estimated at $600 million. The rate cut is meant to stimulate demand for the MII facility, alongside other changes to the insurance programme, said the mortgage banker.
The JMB has removed the limit on the appraised value of residential property that will be insured; as a new offering, lenders can now provide mortgage insurance on new commercial properties with appraised values of up to $100 million; and the one-time administrative fee for MII transactions will be cut from $2,500 to $1,000.
“The fund has the capital strength to facilitate such a reduction in the short to medium term,” said Wynter, “but we believe the long-term growth will offset any reduction in premium revenues.”
JMB’s primary business line is housing construction finance, but it also provides mortgage indemnity insurance through the MII Fund that it operates.