Dear Editor,

On Sunday June 23, 2013, your newspaper published an article entitled, “Revisit ‘second mortgage’ facility…” It highlighted concerns raised by Member of Parliament Paul Buchanan during his recent Sectoral Debate presentation, as it relates to pronouncements made by the minister with responsibility for housing, Dr Morais Guy, on a crucial service offered by the Jamaica Mortgage Bank (JMB).

Mr Buchanan made mention of the deduced involvement of the JMB in disbursing second mortgages. Given that the bank is not directly engaged in such a service, we respond under the assumption that he was actually referring to the JMB’s Secondary Mortgage Market (SMM) facility, which could have led to his misunderstanding of the matter. Among Mr Buchanan’s apprehensions are the suppositions of reduced financial resources being made available to the primary mortgage market and negative inflationary pressures caused by the SMM.

Under the SMM, the JMB is in reality facilitating the growth of the primary mortgage market through the purchase of mortgages from originating mortgage lending institutions (MLIs). In effect, long-term loans on the books of MLIs are then converted to cash, thereby replenishing the cash reserves of those institutions to on-lend to prospective homeowners. Loans purchased by the JMB are then bundled and sold to the capital market, providing the bank with liquidity. In addition, the JMB continues to offer low-cost funding to qualified developers within the primary market.

On the matter of inflation, though the Bank is not a direct participant in the mortgage market, it actually plays a noteworthy role in reducing the price of mortgages. This is done by creating a more competitive primary mortgage market by providing liquidity support, without which some MLIs would not have otherwise been further engaged in the mortgage market.

In this regard, it should be highlighted that the JMB’s exposure is less than 0.5% of the mortgage market. Even after acquiring the rights to the mortgages, the credit risk is still borne by the originating institutions.

The development of the SMM is one of the current core mandates of the JMB and therefore incorporated significant planning and foresight into its implications — implications which will result in tremendous benefits to Jamaican homeowners. This forms part of the broader mandate of the Ministry of Transport, Works and Housing to develop an environment that fosters the provision of affordable housing solutions at all levels of the Jamaican housing market.

Patrick Thelwell

General Manager

Jamaica Mortgage Bank