Government loans that doled out US$2.5 million to financially distressed Cayman Islands homeowners during 2011-2012 cannot reasonably be called “loans,” auditors concluded after a review of the Save the Mortgage program.
“The reality is that the loans were closer to grants,” Acting Auditor General Garnet Harrison’s office reported Wednesday.
Demand letters for the loans, which can total up to $20,000 apiece and are allowed to be paid back over periods of up to 50 years, continue to be sent out, auditors said. However, repayment of the loans has been “low” and auditors noted a “high level of delinquency.”
During the 2013/14 government budget year, the level of loan repayment under Save the Mortgage began to decline. About 84 percent of the loans given out were “delinquent in some degree,” the auditor general’s office found.
No payments were received during the 2013/14 financial year for 52 of the loans handed out by the program.
In 2014/15, government received about one-third of the money it was supposed to be repaid, and no payments were made in that financial year on 78 of the loans handed out.
Ultimately, auditors found that the Save the Mortgage loans were “expensed” as government transfer payments, a reasonable decision given that a 50-year repayment cycle made the present value of the loans “minimal,” according to Mr. Harrison’s office.
“Despite the expensing of these ‘loans,’ the loans receivable continue to be tracked in a sub-ledger system and demand letters are sent on a quarter basis,” the report noted.
Community Affairs Minister Osbourne Bodden said Monday that 82 percent of those who received loans from the Save the Mortgage scheme ended up in foreclosure proceedings anyway.
Finance Minister Marco Archer has also pointed out that in 2013 – the year the program ended – the government recorded the highest number of completed home foreclosures ever in Cayman.
“The Save the Mortgage plan really just put off the inevitable,” Mr. Archer said. “Who was assisted? Was it the banks or the homeowners?”
Opposition Leader McKeeva Bush, whose former United Democratic Party government initiated the loan program with funds supplied by the Dart group of companies, has defended his administration’s efforts to help financially struggling Caymanians.
A private members’ motion filed last year by Mr. Bush asked the current Progressives-led government to intervene in the “worst cases” of mortgage default and to set aside “enough funds … to be able to save those houses involved.”
“[The government] can’t sit back and say they have $120 million in surplus, which we [referring to the former United Democratic Party government] got for them, while people are losing their homes. It’s nonsense and it’s heartless,” Mr. Bush said.