Na­tal­ie?Brig­gs

Fam­i­ly No 1:John and Mary have a ba­by on the way. They cur­rent­ly rent an apart­ment in west­ern Trinidad for close to $4,000 a month. They have been liv­ing there for the past two years. They have been mar­ried for 4, but have been to­geth­er for clos­er to 10.Both are ed­u­cat­ed pro­fes­sion­als in their ear­ly 30s with a com­bined mont­ly in­come of above $20,000, have good cred­it and a track record of re­pay­ing their loans. But Mary says it seems this is not enough to qual­i­fy for fi­nanc­ing for a home of their own. Their first for­ay in­to the world of mort­gages was an eye-open­er. The ini­tal in­sti­tu­tion they ap­proached would on­ly give them on­ly $400,000, an amount that would not pur­chase the type of house John and Mary would want to start a fam­i­ly.

Fam­i­ly No 2: Sarah and Mitchell, al­so in their 30s, are on the wait­ing list at the Hous­ing De­vel­op­ment Cor­po­ra­tion (HDC). They have been there for sev­er­al years now, hop­ing that they would be one of the lucky few cho­sen to re­ceive the cov­et­ed keys to a house or an apart­ment. Their cur­rent sit­u­a­tion makes their need all the more des­per­ate. They lived at a house be­long­ing to Mitchell's par­ents but left when it was re­vealed that there were is­sues with own­er­ship of the prop­er­ty. They now stay at one of Mitchell's aunts, help­ing out by pay­ing a rent of $2,500. But Mitchell says the sit­u­a­tion is un­ten­able since the mon­ey rep­re­sents a size­able chunk of their com­bined $10,000 a month in­come and there is lit­tle left over for sav­ing to­wards the even­tu­al pur­chase of a home.To com­pound mat­ters, Michael and Sarah know al­most noth­ing about re­al es­tate or mort­gage fi­nanc­ing. Mitchell says he is putting aside some mon­ey and when the time comes, he'll see "what he can get", but he has no spe­cif­ic plan.

Hav­ing no spe­cif­ic plan is not a good strat­e­gy for ap­proach­ing home own­er­ship.Buy­ing a home is one of the most sig­nif­i­cant pur­chas­ing de­ci­sions any­one can make in his or her life. It stands to rea­son then, that those em­bark­ing on the jour­ney should be pre­pared for the ter­rain. But in­ter­est­ing­ly enough, they of­ten are not. Vi­sions of that front lawn and white pick­et fence of­ten dis­si­pate in the some­times over­whelm­ing re­al­i­ty of find­ing that bal­ance be­tween the house of choice and af­ford­abil­i­ty.Then, there is the process of qual­i­fy­ing for the mort­gage. What are the doc­u­ments re­quired ? What are the op­tions avail­able for fi­nance ? Is it hard­er for some peo­ple than oth­ers to qual­i­fy for a mort­gage or to find the prop­er­ty of their dreams? It may be.

John, Mary, Sarah and Mitchell, rep­re­sent a tiny por­tion of an en­tire swath of peo­ple, silent but emerg­ing, for whom home own­er­ship is be­com­ing in­creas­ing­ly out of reach. Earn­ing what would be con­sid­ered mid­dle in­comes, their com­bined in­comes pre­vent them from ac­cess­ing hous­ing schemes tar­get­ed to low­er in­come buy­ers. But it al­so bars them from ac­quir­ing homes at the oth­er end of the scale, where they of­ten can­not meet even the down­pay­ment re­quire­ment.They are called the "mid­dle" peo­ple.

HDC's Jear­lean John:

Quot­ing from the Labour Force Re­port of 2008, Jear­lean John, man­ag­ing di­rec­tor of the Hous­ing De­vel­op­ment Cor­po­ra­tion, says that the "mid­dle" earn be­tween $8,000 and $15,000 make up as much as 20 per cent of the those ap­ply­ing for HDC hous­ing. She says this rough­ly cor­re­lates with their pres­ence in the na­tion­al pop­u­la­tion.

TTMA's

In­grid Lash­ley:In­grid Lash­ley, chief ex­ec­u­tive of­fi­cer of the T&T Mort­gage Fi­nance elab­o­rates on the group pro­file based on her ex­pe­ri­ence."We have the mid­dle in­come, we have the mid­dle class and we have a new term called the work­ing mid­dle class. Mid­dle in­come would be those in the $10,000 to $22, 000 in­come brack­et. It is the young sin­gle pro­fes­sion­al, it is a mid­dle man­ag­er in the gov­ern­ment ser­vice. It is an en­tre­pre­neur with a start-up com­pa­ny of about three years. They are peo­ple who would gen­er­al­ly qual­i­fy for, or be in­ter­est­ed in, prop­er­ty val­ued some­where be­tween $800, 000 and $1.2 mil­lion. The is­sue, though, for the mid­dle in­come earn­er is that on their own, they can­not af­ford the re­pay­ment on the $1.2 mil­lion prop­er­ty."

Mary agrees. "The price of homes is steep. Es­pe­cial­ly when you are ac­cus­tomed to liv­ing in a cer­tain part of the coun­try. You have to think about mov­ing to Ari­ma, mov­ing to the deep south. I grew up in Diego Mar­tin. I would like to have a house, with a yard, not an apart­ment. A house with a piece of land is very ex­pen­sive."

The sit­u­a­tion is tak­ing its toll on the young pro­fes­sion­als. Mary says "I feel frus­trat­ed. It has made me en­vi­ous of peo­ple who own homes. I shouldn't have to be walk­ing around the place bit­ter and en­vi­ous. I should be able to put the ba­by in a house. And it's not that we can't af­ford to. There is no­body say­ing, look at these two won­der­ful­ly qual­i­fied young peo­ple. Look at them, we could lock them in­to a long-term loan agree­ment. They are per­fect can­di­dates." The sys­tem doesn't work like that. If you think of get­ting a mort­gage as a long dis­tance race, you'll re­alise the ap­pli­cant has to be fit, armed with their in­for­ma­tion and ready for the long haul.And as John and Mary are com­ing to re­alise, this race isn't al­ways for the swiftest.Many as­sume that young pro­fes­sion­als like these are a vir­tu­al shoo-in for any type of cred­it arrange­ment be­cause of their in­come lev­el.But a mort­gage is dif­fer­ent in the sense that it is typ­i­cal­ly larg­er than the av­er­age con­sumer loan and has a longer life, ex­tend­ing to be­tween 25 and 30 years, in most cas­es. The house stands as its own col­lat­er­al. Which means that if the mort­gagee de­faults, the lend­ing in­sti­tu­tion can take it away. But then it al­so will have the re­spon­si­bil­i­ty of try­ing to re­coup the loss, which may be dif­fi­cult de­pend­ing on mar­ket con­di­tions.

TBLS's Leslie Nel­son:Leslie Nel­son, chief ex­ec­u­tive of­fi­cer at the Trinidad Build­ing and Loan So­ci­ety, re­calls the eco­nom­ic tur­bu­lence of the 1980s."Peo­ple were es­sen­tial­ly tak­ing their keys back to their mort­gage com­pa­nies and go­ing to Pi­ar­co and jump­ing on a plane and go­ing."Learn­ing lessons from the pe­ri­od, lend­ing in­sti­tu­tions want po­ten­tial home­own­ers to be in­vest­ed in their prop­er­ty. This usu­al­ly means a down­pay­ment on the cost of the home of at least 10 per cent. The home John and Mary want is priced at $1.6 mil­lion. Ten per cent of that is $160,000. They don't have any­where near this amount and don't see them­selves ac­cu­mu­lat­ing it any­time soon. They have been try­ing to save it, but Mary says the ex­pense of day-to-day liv­ing keep get­ting in the way.

Lash­ley says the prob­lem here is not so much that John and Mary do not qual­i­fy for mort­gage fi­nanc­ing. The TTMF head says it is more a mat­ter of them not be­ing able to find prop­er­ties they want and that they can af­ford. She says the sit­u­a­tion is in­ten­si­fied by pri­vate sec­tor de­vel­op­ers who have not seen the mid­dle as an at­trac­tive seg­ment for which to build hous­es, a point on which the the HDC man­ag­ing di­rec­tor agrees.Tak­ing a guess as to why the pri­vate sec­tor has large­ly ig­nored the mid­dle, John says, "when you are in the pri­vate sec­tor, you don't con­sid­er the so­cial good. You are in busi­ness to max­imise prof­its. The HDC's man­date is to build so­cial hous­ing, where we will give you a dis­count.The pri­vate sec­tor will not do that." Mary thinks this is a fine and de­cep­tive line to draw across the is­sue in lay­ing the ma­jor­i­ty of the blame on de­vel­op­ers."I think there are chal­lenges on that side as well. The mort­gage peo­ple can't all just sit back and say it is all about the prop­er­ty. They make it dif­fi­cult as well."

All of the fi­nan­cial in­sti­tu­tions the SBG spoke to have sim­i­lar cred­it re­quire­ments for ob­tain­ing a mort­gage (see ta­ble). But Mary thinks the re­al prob­lem starts be­cause none of these lend­ing in­sti­tu­tions are ac­tu­al­ly com­pet­ing with each oth­er for the pub­lic's busi­ness. Com­par­ing T&T to the US, she says, "Banks ac­tu­al­ly fight us­ing in­cen­tives to get peo­ple to take mort­gages with them. Re­al­ly and tru­ly, a mort­gage is a prod­uct that the bank is sell­ing. It is not a favour they are do­ing. You have a choice as you do with milk in the gro­cery. Here, all the mort­gage re­quire­ments are the same. There is not one per­son who is com­pet­ing. Every­body re­quires a down­pay­ment of ten per cent. Every­body wants you to bring in a job let­ter. Every­body re­quires you to take a mort­gage for 30 years. There's no­body try­ing to com­pete, so you re­al­ly have no choice."She al­so be­lieves that the lend­ing in­sti­tu­tions do not make their loans as ac­ces­si­ble as their ad­ver­tis­ing sug­gests.

"We went to the bank the oth­er day (bank iden­ti­fied). They had some kind of sem­i­nar thing. They of­fered noth­ing, it was a kind of meet and greet, a mort­gage ex­po kind of thing and they ba­si­cal­ly telling you about all the things you al­ready know you need to have. There are no in­cen­tives, no help. There was a lawyer there, they had a mort­gage spe­cial­ist there, but they are telling you the same things writ­ten in the brochure. So there is very lit­tle help and nav­i­gat­ing the mort­gage world is dif­fi­cult if you have nev­er been in it be­fore."They should have some­body walk you through the process. It shouldn't be a sit-down con­ver­sa­tion on one day. I should be able to call some­body on a phone, some­one you don't have to ac­cess through a PBX. I find alot of the process­es at the fi­nan­cial in­sti­tu­tions ex­treme­ly bur­den­some. You are call­ing and you can't get through. And the banks al­ways make it seem that they are hap­py to have your busi­ness. 'Come in and get a loan. It is as easy as 1, 2,3'. But it is not."

But, ac­cord­ing to the banks, com­par­ing the US to the T&T mar­ket is a case of com­par­ing ap­ples to or­anges. Be­cause of the rel­a­tive­ly ho­moge­nous na­ture of the lo­cal mar­ket, there is lit­tle de­vi­a­tion in what fi­nan­cial in­si­tu­tions need to ask for. Al­so, they say they are legal­ly re­quired by the Cen­tral Bank to ask for proof of in­come and ad­dress. This is why they ask for job let­ters for ex­am­ple.Clear­ance from WASA of­ten has the po­ten­tial home­own­er scratch­ing their head. This is re­quired to en­sure that there are no en­cum­ber­ances on the prop­er­ty. One mort­gage of­fi­cer il­lus­trat­ed, "imag­ine you want to buy a prop­er­ty from some­one, on­ly to re­alise that they owe WASA thou­sands of dol­lars. It would make you think twice, wouldn't it."Mitchell is yet to get to the stage where he has found a prop­er­ty he likes and an in­sti­tu­tion to as­sist, but al­ready he's frus­trat­ed. He and his wife do not have the ad­van­tage of a steady cred­it and em­ploy­ment his­to­ry, like John and Mary. So they have chiefly re­lied on the HDC."It's just one big has­sle af­ter the oth­er. They keep send­ing let­ters ask­ing you to up­date your in­for­ma­tion, cur­rent job, salary, but noth­ing on when we'll be get­ting the house. Even peo­ple with hous­es have prob­lems. Some friends of ours re­cent­ly got keys to a place. They haven't moved in yet be­cause of the con­di­tion of the house," said Mitchell.

Pri­vate de­vel­op­ers

The HDC head is aware of the is­sues. The long wait in par­tic­u­lar. John says she goes to work for 5:00 am and meets peo­ple wait­ing to plead their case for a home. She be­lieves that the sit­u­a­tion is re­flec­tive of a lev­el of de­spair peo­ple feel re­gard­ing hous­ing."Even mid­dle in­come peo­ple are liv­ing in poor con­di­tions be­cause rent is so high. A mid­dle in­come rent is be­tween $3,000 and $6,000 and that is a size­able chunk of peo­ple's salaries...As peo­ple be­come more des­per­ate in terms of the pri­vate hous­ing mar­ket, they turn to the HDC."When asked if the HDC was will­ing to fill the gap that pri­vate de­vel­op­ers had left in the mid­dle, John in­di­cat­ed that she be­lieved every­one had a right to a home.The state agency has faced crit­i­cism in the past for mov­ing away from its man­date of pro­vid­ing homes for low­er in­come fam­i­lies and de­vot­ing re­sources to de­vel­op­ments like Fedelis Heights in St Au­gus­tine, which fea­tures sub­sidised units of be­tween $750,000 to $900, 000. On the open mar­ket, one of these homes would cross $1 mil­lion. John was hes­is­tant to say this rep­re­sent­ed a shift in the HDC's pol­i­cy."You can't say you are shift­ing and then the op­por­tu­ni­ty cost is low­er in­come peo­ple, who re­main vul­ner­a­ble. As tax pay­ing cit­i­zens, all of us, we are all en­ti­tled. Be­cause that is re­al­ly the re­quire­ment. You are a cit­i­zen of T&T. You are over 21. You don't own any pre­vi­ous land or house. My thing is you can­not close out a group who al­so can­not af­ford hous­ing on the open mar­ket."

Cre­ative so­lu­tions

Lash­ley al­so sees these de­vel­op­ments as al­ter­na­tives to the tra­di­tion­al hous­ing mar­ket. The TTMF CEO be­lieves that as time pass­es Fedelis Heights will be­come the mod­el for more HDC hous­ing like it, cater­ing to those of the mid­dle class and those of mid­dle in­come.Re­fer­ring to the 148,000 back­log of ap­pli­ca­tions in the HDC's data­base, John ac­knowl­edges that as a coun­try we need to find more cre­ative so­lu­tions to the hous­ing prob­lem. She sug­gests the adop­tion of a sys­tem used in Sin­ga­pore, where mon­ey is de­duct­ed from cit­i­zens' salaries from the time they start work­ing and put to­ward a house, which they will be able to ac­cess at a fu­ture date.Lash­ley al­so had some sug­ges­tions for the young cou­ples in their search for af­ford­able prop­er­ties. These in­clude sourc­ing aban­doned hous­es and "fix­er up­pers."She al­so says peo­ple should be­gin mak­ing a psy­cho­log­i­cal shift away from Port-of-Spain as 'mid­dle' peo­ple all too of­ten want to fo­cus on the East/West cor­ri­dor, where trans­porta­tion is eas­i­er, ac­ces­si­b­li­ty to the of­fice is eas­i­er. She notes that prop­er­ty be­comes cheap­er the fur­ther away it is from city cen­tres and sees po­ten­tial home­own­ers in the mid­dle seg­ment grav­i­tat­ing to­wards cen­tral Trinidad.

"Cunu­pia, Ch­agua­nas, even parts of San Fer­nan­do, Mara­bel­la, I think those along the high­way are the new hotspots, as you would call it."She thinks im­prove­ments in trans­port and in­fra­struc­ture should make this more fea­si­ble.Lash­ley al­so de­scribed the "granny suites" con­cept, one which she be­lieves will solve the prob­lem of young pro­fes­sion­als and cou­ples need­ing to find a house out­right. Here, par­ents and adult chil­dren share the home."We have come to a point where we want to be so in­de­pen­dent that we dis­re­gard our base. We have ex­am­ples of peo­ple who are tra­di­tion­al morta­gagers. Their par­ents have been tra­di­tion­al mort­gagers with us and they have now come to the place where the younger peo­ple take over the mort­gage, take over the prop­er­ty and ad­just the liv­ing place, so that the par­ents have their liv­ing space and they have their fam­i­ly and they have their own pri­vate space."It pro­vides for the old­er peo­ple hav­ing some­body to look for them as they be­come old­er. It pro­vides sup­port for the younger peo­ple so they have built in ba­by-sit­ting ser­vices and we get back to the place where our chil­dren have the nur­tur­ing of the wider fam­i­ly com­mu­ni­ty. The liv­ing cir­cum­stances are such that it is an arrange­ment that can work to the ben­e­fit of all."

Land­lords and ten­ants could al­so come to an agree­ment with each oth­er, says Lashe­ly. A land­lord who no longer wants the re­spon­si­bil­i­ty of a prop­er­ty could give the ten­ant the first op­tion for pur­chase. A por­tion of the rent would go to­wards buy­ing the house and af­ter a pre-de­ter­mined pe­ri­od when the ini­tial pur­chase price is re­duced, the ten­ant could then ap­ply for a mort­gage to fi­nance the re­main­der owed to the land­lord.

Rent-to-own arrange­ments

The TTMF head al­so sees rent-to-own arrange­ments be­com­ing more pop­u­lar. This is where rent for a prop­er­ty is, over time, con­vert­ed to a mort­gage.Asked if they ever ex­plored any of the al­ter­na­tives put for­ward, John, Mary, Mitchell and Sarah ad­mit­ted they had not. In most of the cas­es they had not even re­alised these were op­tions. Lack of knowl­edge about the ins and outs of the mar­ket, how to find ac­ces­si­ble prop­er­ties and non-tra­di­tion­al ways to fi­nance them is hurt­ing the mid­dle sec­tor.Mitchell, for ex­am­ple, did not know that he would still have to get a mort­gage for a pub­lic sec­tor house.Leslie Nel­son, of the Trindad Build­ing and Loan So­ci­ety, says this is typ­i­cal since in his ex­pe­ri­ence, as many of 50 per cent of the peo­ple who come in to the in­sti­tu­tion do not know what are the re­quire­ments for ob­tain­ing a mort­gage.

"We have in­di­vid­u­als who would walk in­to us and say that they want a house and they see a house that they like and they want to pur­chase the house, full stop. Most of the time, they have no idea that is what is re­quired, for ex­am­ple, at­ten­dent fees and doc­u­ments" But the prob­lems of the mid­dle are not in­sur­mount­able. Lash­ley ad­vis­es peo­ple to start plan­ning for a house pur­chase ear­ly."I al­ways rec­om­mend to peo­ple grad­u­at­ing from school that they es­tab­lish a strate­gic life plan. With that in mind, I say as­sume I leave school in 2014 and want to buy a house by 2020. So I start look­ing around in 2014, what kind of house am I in­ter­est­ed in. I have to think now, if I have to pay down on a mil­lion-dol­lar home in 2020, my sav­ings tar­get over the next five years is $100,000, based on to­day's cir­cum­stances."

And there are ad­van­tages to get­ting that head­start. Nel­son says, "con­ser­v­a­tive­ly, if you were to pur­chase a house with a time­frame of 35 years (to re­pay), the in­stall­ment at 25 years could al­most be 50 per cent less than it would be at age 45."Sev­er­al in­sti­tu­tions fea­ture pack­ages specif­i­cal­ly geared to­wards help­ing po­ten­tial first time own­ers save for their down­pay­ment. (See ta­ble) While cred­it cri­te­ria re­mains stan­dard across the board, there is a lev­el of flex­i­bil­i­ty in re­pay­ment terms at the dif­fer­ent lend­ing in­sti­tu­tions.What re­mains is–for peo­ple like John, Mary, Mitchell, Sarah and all of those who find them­selves in the mid­dle–to find the so­lu­tions that work best for them.

Mort­gage Re­quire­ments: In­grid Lashe­ly, CEO of the Trinidad and To­ba­go Mort­gage Fi­nance says it is a com­mon mis­con­cep­tion that mort­gage cri­te­ria are more re­laxed at some in­sti­tu­tions than oth­ers. She says even though there will be a lev­el of flex­i­bil­i­ty in re­pay­ment terms and in­ter­est rates, the fact is cri­te­ria are stan­dard across the in­dus­try and fall un­der three gen­er­al cat­e­gories:

Stage 1:At this pre­lim­i­nary stage, you as­sess how much house you can af­ford and how you can pay it off. The In­ter­net has al­lowed the po­ten­tial mort­gagee to now use mort­gage cal­cu­la­tors on most in­sti­tu­tions' Web sites. There, they can work out what they qual­i­fy for and what their month­ly loan re­pay­ment will be based on their cur­rent cir­cum­stances. Some in­sti­tu­tions still in­vite po­ten­tial home­own­ers to come in and have a dis­cus­sion at this stage.

Stage 2:

Many in­sti­tu­tions, at this point, will in­di­cate whether a can­di­date is "pre-qual­i­fied" or "pre-ap­proved" for a mort­gage. At this point, a more thor­ough check is made in­to the cir­cum­stances of the po­ten­tial mor­gagee, in­clu­sive of a cred­it/loan/debt his­to­ry. Here are the oth­er gen­er­al re­quire­ments:

�2 An agree­ment of sale for the prop­er­ty

�2 A let­ter of em­ploy­ment or cer­ti­fied state­ment of em­ploy­ment/ bank records for a spe­cif­ic pe­ri­od of time if self em­ployed

�2 Iden­ti­fi­ca­tion (usu­al­ly two forms)

�2 Proof of Ad­dress (e.g. util­i­ty bill, bank state­ments)

�2 Ev­i­dence of sav­ings

�2 A pro­fes­sion­al val­u­a­tion of the prop­er­ty to be pur­chased

�2 A deed for the prop­er­ty

�2 A WASA clear­ance cer­tifi­cate

�2 A record of tax­es paid on the prop­er­ty

�2 Clear­ance to build from Town and Coun­try/Re­gion­al Cor­po­ra­tion (if con­struct­ing a home)

�2 Oth­er proof that the prop­er­ty is free from en­cum­ber­ances as re­quired

�2 Down­pay­ment of ten per cent of the val­ue of the prop­er­ty

These cri­te­ria may dif­fer slight­ly de­pend­ing on whether one is pur­chas­ing a home, ac­quir­ing land or con­struct­ing a home. There are al­so sev­er­al fees as­so­ci­at­ed with this stage that the po­ten­tial mort­gagee must be aware of, such as le­gal fees and those paid to the val­u­a­tor. The prop­er­ty buy­er must al­so be pre­pared to pur­chase mort­gage in­dem­ni­ty in­sur­ance to cov­er mort­gage pay­ments in the event some­thing hap­pens to them.

Stage 3:Af­ter re­ceiv­ing the re­quired doc­u­ments and mak­ing the nec­es­sary checks the po­ten­tial mort­gagee is called in to sign a let­ter of of­fer. Funds are nor­mal­ly dis­bursed at this point.

RULES AND OP­TIONS

Many fi­nan­cial in­sti­tu­tions off­fer spe­cial pro­grammes to cus­tomers/mem­bers that may make it eas­i­er to pur­chase a home.Leslie Nel­son, CEO of the Trinidad and To­ba­go Build­ing and Loan As­so­ci­a­tion (TBLA), notes that stamp du­ties, le­gal fees and the val­u­a­tor's re­port could rep­re­sent as much as 10-25 per cent of the cost of pur­chas­ing a house.He says as most peo­ple are not pre­pared for these costs, the TBLA cre­at­ed its Down­pay­ment Sav­ings Pro­grammes (DSP)Un­der the DSP, as­so­ci­a­tion mem­bers ac­cu­mu­late the nec­es­sary funds in an in­ter­est bear­ing ac­count at com­pet­i­tive rates.Most cred­it unions sur­veyed al­so had spe­cial loan pack­ages for first time home­own­ers, where mem­bers were al­lowed to bor­row mon­ey for their down­pay­ment.

East­ern Cred­it Union, one of the coun­try's largest unions, has the "Home­ward Bound Loan." Here, mem­bers plan­ning to buy a home in with­in a par­tic­u­lar pe­ri­od of time can ac­cess up to $150,000 dol­lars to­ward their down­pay­ment.