Eleven hundred Bahamians are eligible for the government’s highly touted mortgage relief programme, which has been finalised and will be put in place by the first week of September, according to government officials.

The plan is designed to assist struggling homeowners in danger of losing their homes.

State Finance Minister Michael Halkitis said this date allows lenders participating in the plan to prepare themselves for the task ahead.

“The requirements for eligibility to participate in the plan are as follows: owner occupied primary residence properties only, including owner-occupied duplexes; no vacant lots or revenue generating investment properties etc; mortgages that originated prior to January 1, 2009,” he said.

“Outstanding mortgage principal amount not to exceed $500,000, acceptable credit history prior to June 30, 2008, loan delinquent due to documented financial hardship caused by involuntary unemployment, under-employment or chronic illness.”

Mr. Halkitis said borrowers will have to sign a forbearance agreement and new loan contracts that outlines the extent of their obligation and the results of any breach.

“Individuals wishing to participate in the mortgage relief plan will apply through their lender,” he added. “The lender would review each applying borrower’s circumstances and determine what an affordable mortgage is, given the reduced income of the borrower.”

“The difference between this affordable amount and the actual mortgage would be the gap, which would be addressed by the plan through rewriting the mortgage loan into two loans; a serviceable loan and a deferred loan. The government would contribute an amount equal to one-thirds of the difference between actual mortgage balance and what the client can service up to $7,500 to permanently reduce the balance of the deferred loan and the client’s total mortgage debt.”

He added that the lender would rewrite the remaining difference, a minimum of two-thirds of the gap, as a separate loan at zero per cent for up to three years.

He explained that the plan would allow for the debt to continue to be secured by the same real estate security, however, there would be no principal payment requirement for a minimum of three years.

“If the joint government funding up to a maximum of $7,500 and lender deferral does not total an amount equal to the gap debt, the borrower would have the opportunity to cover the shortfall from the sources before being denied eligibility into the plan,” he added. “In any event, borrowers would also have the right to appeal any decision by the lender to a panel appointed by the government.

“The government will contribute an administrative fee of $100 per borrower to fund the costs associated with restructure of the loans. The government will agree to waive any stamp tax that would be incurred in registering the standard documents related to the plan and agree a protocol to provide a waiver of duty on any other documents which the lender might deem necessary to register for an individual to benefit from the plan.”

He added that the borrower’s financial circumstances would be reviewed annually to determine if their financial circumstances have sufficiently changed to provide for payments on all or portion of the outstanding deferred debt.

The plan makes provision for the borrower to remain obligated for the full amount and a mortgage remains registered on the property for the full amount.

Borrowers must also agree to all terms and conditions of the mortgage relief plan, which would be limited by a six-month deadline for application and is open to all regulated financial institutions.

Mr. Halkitis said the plan is expected to significantly increase the probability of individuals with reduced circumstances maintaining their home until their own personal circumstances improve.

Eligible borrowers could get up to $22,500 under the plan.