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Gibson defends record as housing minister

Former Minister of Housing Shane Gibson yesterday dismissed as “pure political mischief” claims that his tenure represented the most “chaotic fiscal years” of the Bahamas Mortgage Corporation.

Gibson was responding to BMC chairman Senator Dr. Duane Sands, who said in an interview with The Nassau Guardian that the financial position of the corporation deteriorated tremendously between 2002 and 2007, with the most dramatic decline occurring in fiscal years 2006 and 2007.

“That is utter nonsense,” Gibson told The Nassau Guardian.

Gibson said that Sands was obviously not familiar with the corporation’s system.

He argued that with the government guarantee fund, mortgage insurance fund and collateral, the corporation could cover its losses when it came to delinquent accounts.

As of September 2011, the corporation had on its books $77 million in loan arrears.  Thirty percent of those loans ($54 million) were more than 90 days overdue.  Of the most delinquent loans (greater than 90 days), 65 percent of those were placed on BMC books between 2002 and 2007.

While some of the delinquent loans could be attributed to the downturn in the economy since 2008, the spikes seen in previous years told a different story, said Sands.

Gibson pointed out that as minister he was not directly involved with mortgage applications, but challenged Sands to prove that there were applicants who were approved for mortgages but were not qualified.

The former minister said that during his tenure the loan application process went through the proper channels, including the board and a credit committee.

In addition to a high number of loans in arrears, the corporation is also facing a significant debt obligation.  BMC has financed its debt by selling bonds, and not by enhanced revenue collection.

It financed the national low-cost housing program by the issuance of bonds, which are secured by government guarantee and deposits/investments constituting a sinking fund for ensuring parity between issued bonds and instruments for redemption.

According to Sands, the bond sinking fund is undercapitalized by more than $90 million. The state of the sinking fund dramatically worsened in 2005-2006 when the deficiency exceeded $100 million, he said.

As for the “contingency” that could not be reconciled and has placed BMC in a position where it has to reimburse 822 mortgagees a total of $2.6 million, Gibson explained that the fee was related to landscaping costs.

He dismissed the claim that the fee could not be reconciled.  He said the Free National Movement government “has a way of not being able to find a paper trail”.

“We wanted to use the same model that the (Grand Bahama) Port Authority uses, where all houses must be landscaped and sidewalks constructed. That contingency was for landscaping.  We did not want the subdivisions to look unfinished,” said Gibson.

He said those homeowners charged contingency fees would have received pallets of grass.

Sands said the corporation is not able to reconcile the contingency fee, of $800 to $5,000.

According to Sands, the BMC’s accounting records are not adequate to reliably confirm when or if these funds were ever reconciled.

“There is no evidence that these contingencies were ever reconciled to actual charges,” he said.

Of the 822 affected mortgages, 106 are now closed, 333 are in arrears, 357 are current and paid up-to-date and 26 mortgages were initiated through BMC but were privately financed. The corporation is now in the process of reconciling those accounts.

Gibson said Sands was a “political wanna-be” who was trying to damage the reputation of someone who had contributed to national development.

He said that what marked his tenure as Minister of Housing was the number of homes that were constructed between 2002 and 2007.

“I am most proud of the 1,300 families that were able to live in homes that the PLP (Progressive Liberal Party) built,” Gibson said.

Sands was heavily criticized by the PLP recently after the corporation served an eviction notice on a family who was not able to make its mortgage payments.

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