Gov’t asking banks to extend loan moratorium period to one year
Premier Andrew Fahie is calling on all banks in the British Virgin Islands to extend their moratorium period on personal and business loans to up to 12 months.
Speaking at a press conference on Tuesday, the Premier said government has been actively negotiating with banks for more favourable agreements to help residents endure the economic fallouts related to the COVID-19 pandemic.
The Premier had initially requested local banks to extend their moratoriums for up to six months, but because of the continued impacts caused by COVID-19, he said he believes one year is a more plausible period.
“We cannot continue to act in COVID-19, which is something that is not normal, and apply normal procedure to it. So I am asking the bank and discussing with them to stretch from your normal three months and six months, and go straight into the one year so that the moratorium could more effectively help the people of the Virgin Islands,” Fahie said.
The Premier said the government has also asked the banks to review the “penalties [on these loans] to ensure that people get proper relief”.
The Finance Minister further said “government is continuing discussions with them” on the matter.
Last month, six banks across the territory announced that they were offering various moratorium packages to their customers, with some lasting up to six months.
These banks included FirstBank, Banco Popular, National Bank of the Virgin Islands, VP Bank, Scotiabank, and CIBC First Caribbean International Bank.
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Personal and business loans … I guess that includes personal mortgage loans and business mortgage loans too.
what about student loans?
First Bank – Do you hear???
Keep fighting for us Hon. Premier we’ve got your back once you’ve got ours?
After one year how will the customer be in a position to pay the loan with all the added interest unless it is waived from the loan
The accumulated interest element will be cleared first out of any future payments and once fully cleared the principal amount of the loan will start to decrease with the principal element of the monthly $500 payment.
So as an example if you have a $100,000 loan now at 6% per annum interest with monthly payment of $500. Then the 1 year accumulated interest of $6,000 ($100k @6%) will be paid in the 1st 12 $500 monthly payments – $500 x 12 = $6,000. So after clearing this accumulated interest, the 13th and onwards principal element of your $500 per month payment will go to reduce your $100,000 loan amount.
The outcome is to delay payments or to aid with the customer cash outflow of $500 per month for one year but you still have to pay that accumulated interest and the full principal amount borrowed along with future interest on the loan
This is just a simple example which has not considered compound interest which is interest on owed interest. Also, if under normal circumstances your loan payoff date was 2030, then you most likely has that date extended to say 2032
Rubbish
The only thing Government can waive is tax, Electricity and water. A break was given on water and you can forget about the other two because electricity can’t survive with out revenue and the Government can’t either. People who are in a position to continue pay their bill just need to do so in order for us to keep some sort of stability.
A moratorium is not what we need. The banks can forgive the interest on debt for one year. In that way as a homeowner I can significantly reduce my tenants rent. A moratorium only places the debt on the back end of one’s loan, making it just as difficult.
You are correct and therein lies our biggest problem! The Premier thinks he knows everything and unfortunately they are totally clueless when it comes to banking and business. I can guarantee you that he doesn’t fully understand what a moratorium is, especially how it affects persons with mortgages. How will delaying the inevitable help anyone.
The banks need to waive the intetest and tbat will be a big help. When they do a moritorum they are only helping themselves.
This is not true. The Premier wrote to the banks and asked the banks to waive legal action and penalties for 12 months – not loan payments. Each bank is working with their own clients as we are all in it together. But each bank is controlled by the BVI FSC and deferring loan payments for 12 months has regulatory implications, which have not been looked at.
Regulatory implications as in what? Loan valuations and credit risk?
Come better on your blog – the small man can’t understand without full information.
Like it or not, the small go belly up the big go belly up too. Like it or not, there are numbers in the masses. The restaurants, schools and other establishments in America went belly up when they were told to shut up shop. The ripple effect? The farmers and large meat producers and production plants going belly up too. The lil workers were told to go home because no one flying or traveling. In time, the airlines and cruise lines done talk about bankruptcy … the banks and other financial systems time coming too. The “food” supply chain going turn bottom up
And it looks like the only way to halt it right now is for humans to take health risk in this global pandemic and get the global economy started again. The problem is not in one area, it is GLOBAL.
The Premier himself spoke about the 1yr moratorium at his press conference yesterday.
God will deal with you all oppress expat (7%)you was once foreigner in Egypt.
The crime is 6 and 7% and more interest. The rest of the world is paying 1-2% on home loans.
We are being ripped off.
A moratorium is a postponed payment . This should be explained to the public . If the banks extend that liberty/ courtesy the landlord still has to pay the loan . If the loan is slated to end Dec 2020. A moratorium of three months means the loan ends March 2021 . 6 months – July 2021. Some tenants have the impression the landlord does not pay the loan .The is only done if the banks give “FORGIVENESS LOAN “ please the powers that be -?do not mislead the public . EDUCATE . This is not saying one should not SHOW compassion or sympathy. Let the true facts be known . Irma did this already to a lot of loans – process .
Wrong, period. The total outstanding is due the last day of the loan. NO EXTENSION. So stop the bad rumors
Which bank extended the loan after the moratorium many used after Irma? Banco did not offer me that.
The Banks don’t offer….One has to go BEG BEG BEG. @Rubber Duck you are so right. The mortgage rates are the problem and no Government is addressing that.
I had to apply for the 3 month wxtension at Banco
@ Foot soldier, fact fam. Its a temporary solution to a permanent problem. Can you imagine have your interest payment will be like after the year. Some think is a good thing it going to do more bad than good.if it was a loan freeze then u can sing for joy ppl. Wake up understand the meaning of measures put in place. No all that glitter is gold and not all the smell good is good.
Undoubtedly, these are tough economic times inflicted by Novel Coronavirus (Covid-19), an unexpected event, that is imposing severe pain and hardships on VI individuals, businesses, as well as on government. These hardships include workers layoffs, businesses shutdown and lack of revenue, lowered government revenue……..etc. Many of these entities have mortgages, loans……etc with local banks.
Moreover, banks, profit making businesses, are being asked by government to defer mortgagors, individual loan holders, and businesses loan payment for a year (banks can’t behave as just takers; they must show some corporate social responsibility). Nonetheless, government plea with banks is making the assumption that banks have the reserve capacity to hurdle this difficult time. Assuming that banks have the reserve capacity to weather the storm, what happens at the end of the 1 year, if banks go along?
Will the deferred principal and interest (if interest is not waived) be a balloon payment? Will the payment for deferred payment be interest only and deferred principal added to base loan? Will government be guaranteeing the loans, ie, if borrowers default government (taxpayers) will assume the responsibility for loan?
To help borrowers with loans with collateral,i.e., mortgagors government may want to consider establishing a loan guaranteeing unit within MoF or Financial Services. This could be a source for adding to the land bank initiative. Non-collateralized loans will needs other planning.
@Diaspora, “To help borrowers with loans with collateral,i.e., mortgagors government may want to consider establishing a loan guaranteeing unit within MoF or Financial Services.” This will help borrowers and banks but won’t it adversely impact the national debt to GDP ratio, and FEMP with the UK? Further, government would be getting in the real estate business. Government is awful in managing buildings.
Banco tried to make my 3 month moratorium on my mortgage, a BALLOON PAYMENT, payable in 3 installments together with the regular monthly mortgage pmt. So the mortgage payment was $3000.00 per month, deferred for 3 months, and they wanted me to pay $6,000.00 per month on the 4th month, and $6,000.00 on the 5th month and $6,000.00 on the 7 month AFTER IRMA. When I said no, that is impossible, then they said, the $9,000. plus interest would be due the last day of the loan together with the other $3,000.00 owed that month. so the last month of the loan $12,000.00 is due and payable. Plus interest, and bla bla bla. Look, just be careful and be sure you understand EVERYTHING when dealing with a bank. Hint, they are not your friends. It is called business for a reason and they are living large off us.
The economy needs to “mushroom” it can donso by having those who are working and being paid to continue their payments. Let their monies flow. Cause if they can get a break they will take it…
Give the help to businesses terribly affected by this and persons who are unemployed.
If the bank gives help to everyone for a year well damn….no mushroom to harvest.
Bank customers (borrowers) are facing tough economic times and needs some relief, if only temporary relief to get through this rough patch. The economy has grounded to halt, unemployment rising, cost of living spiraling, inflation on the rise, stagflation may be possible (inflation and unemployment increasing at the same time), misery index may be occurring (inflation rate plus unemployment rate exceeding 7%), food insecurity showing its ugly head, weaknesses of a non-diversified economy, dangers of a consistent trade deficit(import more than we export)………etc.
Banks definitely would be incline to help but do they/can they maintain capital requirements, ie, will they have the ability to pay depositors. Banks should help but there is a lesson here for mortgagors. A real estate friend reminded recently that qualifying for a mortgage does not necessarily mean that one can afford a mortgage.
Many may be offended by the following statement but I’m in the business to keep it real. Many VI residents like to build homes not for their utility but as conversation pieces, for show………etc. For example, I was driving a visiting friend of a family member around Tortola and as we drove by a particular residence, the friend of the family member asked what hotel is that?
Moreover, this pandemic should clearly demonstrate that the service-based economy is small and fragile and can be easily rattled. And mortgagors should be deliberate, cautious and smart in their borrowing.
@Manda School Grad, I went to ESHS. Lol. Lawd, meyson you mashing on some corn-afflicted toes and those dogs going be howling. This pandemic is deadly but it is also an eye opening keeping it real lesson for us individually and collectively. Specifically, don’t build something that cause one to go in a more month than money situation.
The economy is small and fragile and it may not take just a pandemic to project it into a tail spin. Tourism, the near total life blood of the economy, can be riled by a number of factors, ie, health situations, crime, natural disasters, economic and environmental shocks, lost appeal as an attractive and attraction destination. Let’s not continue to fool ourselves that the BVI is a wealthy locale; it is not. A few big houses, big job, a few millionaires/billionaires…….etc is not wealth.
Government tell banks to extent how long they planning to stamp duty tax the same year as well.
#lookingoutfortheyouths