Credit unions push deeper into mortgage market
Published:Sunday | February 5, 2012 | 12:00 AM
Avia Collinder, Business Writer
The Jamaica Cooperative Credit Union League (JCCUL) has relaunched its mortgage programme which assigns matching funds to the community lenders for on-lending to individuals who want to purchase real estate.
With the resuscitation of the facility last December — it was first implemented in 1978 — four credit unions have drawn down on the facility which offers money priced at 7.0 per cent to member unions for loans of a maximum J$10 million to individuals at rates determined by local unions.
General manager of JCCUL Glenworth Francis said that the facility will make long term funds available to credit unions for on-lending to their members.
He said the fund has J$361 million. The commitment by JCCUL to match this amount doubles available funds to J$722 million.
It is expected that take up will be J$200 million to J$300 million for 2012, he said.
"Most credit unions are members of the fund and therefore can access this facility. Since the re-launch of the facility in December a total of J$30 million has been taken up by four credit unions and there is another J$18 million being processed from three credit unions," Francis said.
The JCCUL mortgage rate to the credit unions under its umbrella is competitive with that being offered by the Jamaica Mortgage Bank (JMB), which last year sought to woo the credit union sector and other financiers with funds priced at 7.85 per cent equivalent to the cost of bonds last floated to finance its secondary mortgage market activities.
The JMB, which has a plan to on lend J$15 billion of mortgage funds over five years, says it issues capital at rates based on its marginal cost of funds, and then "we share the spread with retailers in a 50/50 ratio".
$40 million mortgage pool
Last week, Broadcast and Allied Credit Union (BACU) announced that it had a mortgage pool of J$40 million available for lending to its 2,800 members at 9.9 per cent interest for a maximum 25 years.
The funds were sourced primarily from the JCCUL. Members who are new will pay 10.95 per cent with the cheaper rate going to members of five years standing or older.
General manager Evette Wright-Williams said BACU offered as security to the JCCUL half of the total funds borrowed from the central body as collateral, noting as well that the interest charge was sufficient only to cover administrative costs.
"We are providing a service. We are now offering the mortgage product as an organisation which responds to the needs of its members," Wright-Williams said.
"The limit (J$40 million) will be reconsidered when take up is complete and also in relation to our liquidity position. The credit union currently has assets of J$290 million. The funds borrowed can also be matched against NHT funds to buy properties. We do pari-passu agreements with the NHT," the BACU manager said.
Borrowers must be able to complete payment before age 65 and must also provide five per cent of the sum required in share accounts at the credit union.
Francis said members of the JCCUL have been asked since 1978 to contribute per cent of their savings per month to a mortgage fund at the league.
"They can then borrow twice their contribution to the pool to make mortgages to their members. The additional 50 per cent in the pool is funded from the League resources thus enabling each credit union to access twice their contribution," said Francis.
"Of course the fund operates on the Credit Union principle of the pooling of resources for lending where every member will not be borrowing at the same time."
JCCUL has sourced funds from the NHT and JMB to supplement the pool, over the years.
"However, the current pool is financed from the credit union movement," Francis said.
The JCCUL mortgage fund was originally set up to assist those members who could not access mortgages from the other formal financial sources.
"However this mandate has been extended to all members to enable credit unions to offer a full suite of services to their members especially those members who do not have financial relationships with other financial organisations. In other words this facility allows credit unions to be a complete financial service provider for their members," Francis said.