The agency that insures mortgages as one of its functions is growing concerned that loan providers may be climbing too far out on a limb to secure market share, given some of the current financing deals that offer credit at or beyond the value of property transactions.
It’s referred to as the loan-to-value ratio, or LTV, which previously ranged up to 97 per cent.
General Manager of the Jamaica Mortgage Bank, Courtney Wynter, says the providers of mortgages that go beyond 97 per cent LTV could find themselves with bad loans on their books in a few years.
However, large lenders Victoria Mutual Building Society, VMBS, and JN Bank have pushed back to say that they are approaching risk management scrupulously to avoid that outcome.
VMBS is now offering a 100 per cent mortgage facility, while JN Bank has topped that with a 110 per cent financing offer.
“Obviously, these financial Institutions, being prudent lenders, have done their assessments and weighed the incremental risk against their capital adequacy positions and risk appetite, and have taken the decision to offer 100 per cent to 110 per cent loan-to-value ratio. I also assume that they will be very selective in their offerings,” said Wynter.
“My only concern would be the ease at which someone without any equity or stake in a property, especially in the early life cycle of that loan, could return the keys to the bank,” he said.
Asked for comment, JN Bank, the largest private issuer of mortgage loans, said in response that all risks can be managed and mitigated through the right controls.
“Using sound credit underwriting standards and credit risk-management practices commensurate with our risk appetite, JN Bank ensures that the relevant processes, systems and tools for measuring, monitoring and managing risks are implemented for every loan type offered to our customers,” the bank said in written responses to the Financial Gleaner.