General manager of Jamaica Mortgage Bank (JMB) Courtney Wynter is rejecting the findings of the auditor general (AG) that the state bank has a poor credit assessment process.
Wynter said via email to the Financial Gleaner that the mortgage bank was “prudent” in its lending practices.
In a report released this week, the auditor general cited a 68 per cent increase in non-performing loans over a six-year span and recommended the JMB improve its loan selection process to remain focused on its core mandate.
The fiscal watchdog cited at least two instances where borrowers had defaulted on JMB loans, which it said were hastily approved by management and the board. Among others, the AG referenced an instance, in February 2015, where the JMB approved a loan of $77.1 million to provide financing for the acquisition of 76.7 acres of land in Clarendon, “without fully assessing the financial capacity of the developer to repay the loan”.
But Wynter now says the JMB “has already received serious offers to purchase at least one parcel of the development lands held as security.
“This will result in that loan being fully repaid,” he said, adding that the bank expects full recovery of these loans with the pending deal.
Speaking to the AG’s assertion that the JMB needs to improve its loan application process, Wynter said the JMB “has never defaulted on any of its loan obligations and exercises prudent lending practices while seeking to achieve its mandate of facilitating home ownership in its many forms”.
The AG Department conducted the performance audit of the JMB to determine whether the agency is managing its loan activities efficiently and effectively.
It said inconsistencies in the JMB’s loan application policy between 2003 and 2015 may have contributed to the high level of non-performing loans which, by Wynter’s response, stands at 70 per cent in contrast to the 68 per cent noted by the AG’s report.
Up to March 31, 2016, JMB’s total loan portfolio stood at $1.7 billion, including allowance for impairment losses, with $970 million or 57 per cent outstanding for over one year, the AG said.
The AG, however, failed to note “that the majority (approximately 70 per cent) of the loans comprising the bank’s NPL portfolio consist of legacy loans granted prior to 2010,” Wynter said.
“Of these, one loan accounts for more than 45 per cent of the legacy loans and 32 per cent of the entire NPL portfolio,” he said.
The JMB has since obtained a court judgment ordering full repayment of this loan, he said.
“Upon collection under the judgment order, the bank’s NPL portfolio will be substantially reduced to a more acceptable level,” the general manager said.
He said the bank continues to take aggressive steps to recover all outstanding loans, including those highlighted in the AG’s report.
The JMB was established in 1971 to finance housing developments islandwide through the mobilisation of loan funds for on-lending to developers and other financial institutions.
Since 2003, the JMB has funded over 16,000 housing solutions
for Jamaicans, representing approximately 35.2 per cent of all government-assisted housing starts on the island up to 2016, Wynter said.
“A review of the bank’s record would indicate that for the period under the AG’s review, 2010-2016, the bank financed a total of 27 projects with a disbursement value of $4.6 billion to provide 1,750 housing solutions.,” he said.
Of those 27 projects, he said, “17 were successfully completed, delivered and fully repaid.
“Five of the remaining 10 projects are still in the ‘under construction’ phase and one is currently being repaid,” the GM said.
Four loans totalling $378 million have been classified as non-performing, “which is slightly above the international benchmark for the wider financial industry,” Wynter said.