A proposal by leading attorney Peter Champagnie, King’s Counsel, that Jamaican banks consider offering reverse mortgages to elderly homeowners has arrested the attention of the Special Select Committee of the Senate now examining proposals for an Elderly Care and Protection Act.

Champagnie had mooted the idea in response to an article by the Jamaica Observer in which a representative of the Matilda’s Corner District Consultative Committee in the Corporate Area, appearing before the parliamentary body at Gordon House in Kingston, had complained that a number of seniors in strata communities were at risk of losing their homes because they can no longer afford maintenance fees.

In zeroing in on what she described as “the problem of accommodation”, the representative called for more involvement on the part of the Commission of Strata Corporations in defending such individuals.

The attorney, in responding to that article said, “the concept of reverse mortgages should be a portfolio that’s offered by banks”.

“That is, an elderly person in such a situation should be able to get the cash value of their property in hand/or in their account — which would sustain their existence until death — and after which the property would go to the bank,” Champagnie said in a social media post last Wednesday, which was endorsed by numerous individuals.

Tuesday, Patricia Duncan Sutherland, president of the Women’s Movement of the People’s National Party and Opposition spokesperson on social transformation and protection, in a submission to the committee said, “I think it is something that we should explore and put some guard rails around.

“The reverse mortgage has been tried many times in Jamaica but I think we need to look at a framework that would make it work, because a big asset that the elderly have is their home but they don’t want to lose it; they want to be able to leave something for their children too. So, if we can be able to put some guardrails around the extent to which we can give a reverse mortgage on a home… and then you can look at it in the context of intergenerational mortgages as well and how you look at that,” said Duncan-Sutherland, who is also a banker.

While noting that Jamaicans might take time to warm up to the idea, Duncan-Sutherland said the National Housing Trust (NHT) might even have a role to play, aside from commercial banks.

“So you have an asset and you are going to live much longer than it takes you to pay off the house, so you can get your value out of it with a reverse mortgage where the bank will pay you and hold the asset…Now the issue with it…lots of Jamaicans have a challenge with borrowing but I believe our culture is changing because our consumer credit is growing in Jamaica and people are looking to borrow. And I believe it is something that the NHT themselves — because there are some of those homes that the commercial banks wouldn’t participate in that activity — but the NHT could look at it and, depending on the context of the ownership — whether they have children or not, because in some cases there are no children — that could continue and it could go back into the NHT pool for resale,” she opined.

Duncan-Sutherland said in the cases where there are children, banks can “work through how you put a cap on it in terms of the amount that you can take off the equity of the house”.

“I do believe that the reverse mortgage [provision] is going to require quite a bit of conversation because it is going to require a mindset change. It is not one where they would pay back that mortgage, at the end you will that home, whoever gets it now has that mortgage to pay; so it goes to the children, like an intergenerational mortgage. I am actually aware of a few Jamaicans who have done it to support their income — and it’s of course a discussion they have had with their children,” she told the committee.

Opposition Senator Sophia Frazer-Binns, in commenting on Duncan-Sutherland’s submission, said the proposal might be more attractive to seniors if avenues for continued economic engagement were part of the considerations.

“The issue with the reverse mortgage, we’ve tried it but we have just not been successful. And I think a part of it has to do with just our culture as a people but moreso, it has to do with the insecurity that our elderly feel…because most of them become retirees at the point when they would consider their first mortgage and because of that, the proposal of the need for greater economic engagement of the elderly becomes even more important — because if the elderly feel secure that they are going to earn enough to cover these payments then the vulnerability that they feel entering into a mortgage situation would be far less,” Frazer-Binns, an attorney, noted.

“I know it is something to be discussed at another place with another grouping; however, I think it is something that, should it be discussed for the elderly, it should involve the discussion around how do we engage the elderly economically, because that also brings about some kind of independence and also some kind of security,” she said further.

Government Senator Dr Saphire Longmore in weighing in on the discussion, said a number of individuals have reached out to her regarding the reverse mortgage proposal.

“I think it is definitely something to consider to allow for persons who have earned such equity to be able to liquidate some of that, within restrictions, and to have that collaboration with a will and future planning that becomes available to them in real time so that they are not incurring debt in their later stages. So, most definitely, that is something I would hope we can expand on,” she said.

The proposal also found favour with Opposition Senator Gabriela Morris who, in expressing a desire to hear more about the facility, said “it sounds as if that may be a way to encourage generational wealth”.

Committee Chair Sherene Golding-Campbell, in taking note of the suggestion said, “that’s definitely going to require deep research and conversation as to the mechanisms… it would be interesting”. Adding that it would, “require [a] mindset change”, Golding-Campbell told Duncan-Sutherland she would be interested in hearing some case studies on the facility.

In 2016, then president and chief executive officer of Sagicor Group Richard Byles urged the Government to consider implementing a reverse mortgage programme as an additional source of funds for retirees. Byles said a reverse mortgage would empower a wide cross section of Jamaican seniors who are homeowners, as it does not require a monthly payment and would make up for any shortfall in pensions due to inflation.

Byles recommended that the Financial Services Commission should look into the regulatory guidelines that would be required to develop such a programme.

“Many pensioners own a house and they should have the option, under the right regulatory framework, to be able to extract the equity from their houses and to use it as they see best,” he noted then.

In 2021, Petal James, chief of branches at JN Bank, said a reverse mortgage can provide much-needed funds for seniors whose net worth is mostly tied up in the value of their home.

She further explained that the proceeds from this loan can be used to supplement the borrower’s income and pay monthly utility bills, as well as medical and other living expenses.