For 50 years, the National Housing Trust (NHT) has had one purpose: Helping Jamaicans to acquire homes. Our partnerships, programmes, and financial decisions service that purpose.

The NHT’s mandate is grounded primarily in Section 4 of the National Housing Trust Act, establishing it as a housing finance and development institution, with two central functions:

1) promote and increase housing stock: To develop and support housing projects through acquiring land, developing housing schemes, and facilitating construction.

2) provide loans to contributors to assist in the purchase, building, or improvement of houses

These two mandates are complementary by design and must be managed carefully, particularly in an environment in which Jamaica faces a significant and persistent housing supply gap. The instinct to deploy more funds into mortgage financing is understandable, but in a supply-constrained market, it is self-defeating — more money chasing the same number of units drives up prices, placing housing further out of reach of the very contributors the loans are meant to help. The NHT must, therefore, ensure its capital works on both sides of the equation: Financing mortgages so contributors can access houses, and financing construction so there are enough houses for contributors. One without the other undermines both.

The NHT has deftly leveraged its position in the mortgage market to stimulate private mortgage suppliers, who already underwrite most mortgages over the NHT threshold, to take on the underwriting of the entire mortgage to include the amount that would normally be funded by the NHT. Importantly, the contributor does not lose the benefit of the subsidised NHT interest rate. For the NHT, it gets to keep (almost) all its funding to use for affordable housing. This is a win-win and a more efficient mobilisation of housing funds.

This type of arrangement is not unique to Jamaica. In India and South Africa, State housing agencies have adopted similar models through which agencies pay private mortgage financiers the rate differential between the market rate and subsidised interest rates.

WHAT IS THE EFMP?

The External Financing Mortgage Programme (EFMP) is a partnership between the NHT and mortgage financiers to include commercial banks and now credit unions. In practical terms, the EFMP allows you to access your NHT loan, whereby you already save, processed by an institution you already trust, with your NHT interest rate (between 0 per cent and 5 per cent) fully intact.

Accessing an NHT loan through a mortgage partner is not new. This arrangement has existed throughout the NHT’s history under different iterations — the Combined Mortgage Programme (CMP), the Joint Finance Mortgage Programme (JFMP), and now the EFMP. Each iteration brought improvements and simplified the mortgage process for the customer. Previously, many prospective homeowners had to navigate two separate applications — one for the NHT loan and another for additional financing from a bank or credit union. This meant multiple sets of paperwork, different approval timelines, varying loan conditions, and separate monthly payments. The EFMP simplifies that experience.

WHY THE EFMP MATTERS

Contributors requiring financing above the NHT loan limit were already going to private financial institutions for underwriting mortgage amounts above the NHT threshold. What the NHT has done through the EFMP is leverage that existing private sector presence in the mortgage market, extending it to cover the full mortgage, including the NHT tranche previously funded directly from its own resources. This is not outsourcing. It is a deliberate and deft mobilisation of private capital to do more of what the private sector was already doing, while freeing NHT funds to be deployed towards addressing the housing supply gap.

Recent commentary mischaracterises the substance of the arrangement. Mortgage partner institutions assume the financial risk on these loans. They deploy their own capital. They manage the underwriting, the administration, and the compliance. The NHT simply pays the partner institutions the interest differential to ensure that the contributor continues to benefit from the applicable NHT interest rate on the NHT portion over the life of the loan.

After three years, EFMP mortgage partners have disbursed over $33 billion in NHT loans. That is $33 billion the NHT did not have to pull from its own reserves, did not had to deploy upfront, and will instead put into its low-income housing programme. The $1 billion in interest payments as a result is not a loss; it is leverage.

BENEFITS OF THE EFMP IN PRACTICE

The liquidity the EFMP provides flows directly towards benefiting contributors, through both sides of the NHT’s mandate.

For mortgage borrowers:

• The NHT has maintained historically low interest rates, with close to 60 per cent of contributors qualifying for loans at 0 per cent.

• The Trust is better able to target and support the most vulnerable contributors with subsidies, including NHT Home Grants of up to $3.5 million.

• Post-Hurricane Beryl and Hurricane Melissa, the NHT was able to assist its mortgagors with moratoria (30,000 beneficiaries) and affected NHT and non-NHT homeowners with grants to effect repairs (over 5,000 beneficiaries).

For the housing supply, the housing programme has accelerated to approximately 40,000 housing starts at various stages of development. As that supply grows, so does affordability. More NHT units on the market means more contributors can access favourable financing terms, including the 100 per cent financing the NHT offers on its own schemes.

The EFMP is a win-win-win solution. The private sector funds and carries the mortgage. Contributors keep their concessionary rate over the life of the loan. And the NHT is able to deploy additional liquidity into increasing housing supply that will ultimately make housing more affordable.

Dwayne Berbick is assistant general manager for corporate communications and public affairs of the National Housing Trust. Send comments to the Jamaica Observer or dwayneberbick@nht.gov.jm.