Mrrnsmx PaPzI: No. $4 /g PP,OX?SED PPJ0:'XTY ENJ?ITLEpIEW! INDZ &mAi BRA^ OF ,w,CA -.-

NATIONAL XVJSING TRUST L a N SYST,E,M,

Members of the Honourable I I o u s e of Repromntatives w i l l m doubt be

aware t h a t a rwiaw and fosmaxlakion of housing policy has recently been

effected and under the ammggmg,nts proposed it has been decided that the

WaGional Elousirag T r u s t all be u t i l i sed a s a main vehicle fo r t h e financing

of housling loam to oor&ributors (that is, employed persons, selfccamplayed

persons and voluntary contributoxs) under the l ~ t i o n a l EIousing Trust: A c t .

The Tnxsk, therefore, ~dll devote its resources t o mortgage f i m i w and

the servicing of auch mortgage loans. Them resourcest w i l l i n the main be

available for financing the purcfias@of hcntsea by ind3-viduals who qualify

fo r hmes t o be W e o v e r W e under housing develapnant programes effected

or to be ef fecked by the Ministry of Construct%on (Housing) . The bansf i-

c h r i e s uMer such houdng development programmes u r i U pertain basically t o

the low iname groups i n the soaiety.

2. A revliew of the method of the allocation of housing loans t o the

above categories of persons has Ltlm been undertaken. This is mast important

a s it is essent ial tha t a f a i r and equitable syskem fo devised of qualifying

persons for maartgage Zaans t o be made avectlable by t h e National Housing Trust.

It is considered tha t the erristing system is ina&spate and f a i l s t o deal

with the problem on an efficient: basis. The existing system is based on e

random selection syeteiu dE the names of Nffi contributors and suefers from

many defects for t h e following reasonst

(1) Substantial fyustration t o contributors who am unable t o plan to;mrds meeting e l i g i b i l i t y c r i t e r i a for moxtgage loans since selection is effected by way of chance or lo t t e ry only. t?hile this system offers a theoretically even chance of s@loction t o contributors, its uncertain- ties are noO compatibls with orderly planning by TWT contributors t o ~ m r d s tho goal of house otrmerahigt

(2) The syf&om is costly i n tha t invariably t h e number of applicakions are axcc3ssive i n regard t o m-ailable houses but, nore important, frequent mselections are nocessitatod a s the random selection system might throw up candidates not e l ig ib le fo r NflT mortgage loan financing1

(3) Under the present ar;angements, no particular weight is given t o long period ragulat M E contributorst

(4) The process does not favcwr lower income c o n t r i h t o r s a s these are thrown up by t h e present selection process purely by tho c3h!&we factor aLready indicated1

(5) The lo t te ry system discriminates against persons on grounds of age, as persons at age foey-five (45) years are not

.) ,.. / I . .

ent i t led t o a NIPf' loan although he or she inay have been a corlRxibutor from tb inception of the NIT systm.

-. The existing chanco o r lo t te ry system is therefore t o be replaqed

by a more orderly a d rational system. The new system, a s indicated below

u ~ i l l be dependent on a number of factors including the creation anti develog-

me* 05 a savings instrument t o be called mortgage bonds. Mortgcge bonds

are t o be issued by the Jamaica Mortgage Bank and t'd.11 be waranteed by the

Ooverrmrant of Jamaica. Interest earnings on mortgage band$ held by indi-

viduals v d l l ba free f3mm income tax. The tenuro of the bonds w i l l be f ive

years. Individuals w i l l be able t o wrchase matgage bonds direct ly from

the Jamaica Mortgage l3hnk and other inst i tut ions a s arranged by tho Jamaica

Mortgage Bnnk, It: is expected tha t X-lT contributors who a f t e r ssven years

have become el igible fur return contributions w i l l invest these i n mortgage

bonds.

4. Accordingly, a new selection method has been devised for W-IT

mortgage loans based on n '"ioiority entitlement index:' which has been de-

signed t o trllocate .-points t o loan applicants based on certain specific," ,, priori t ies . The p i n t s system devised re la tes t o three basic factors.

namely: NHT contributions measured i n terms of the nuxnber of fifty-two (52)

week per'i6ds f a r vrhich such contributions have been made, level of earning

or incone of tho applicant and t h e face value of mortgage bonds ( to be

ica Mortgage Bank) held over specific periods.

i o r i t y entitlement index" v d l 1 enable applicants t o qualify

for a NEPr mortgage loan when they obtain a certain number of points. , - L4k 1

aggregate points medied t o qualify for a housing loan 'are 200 o r over. The

entitlement points system t ~ i l l operata a s f o l l ~ ~ r s :

{i) for every 52 weekly N-Ffi contributors

(ii) fo r ehec level of earning or incoane enjoyed by t h e applicant a t the time of application, the following -points 11111 he attributed :

. . 20 points

(a) persons earning $100 per ureek or l e s s .. 100 points

(b) -p?rsons eeurning $101-$200 per week 90 paints

( c ) persons earning over $200 per week . . SO pints

(iii) entitlement points w i l l be attributed t o mortgage )Ilt$Lpolders on the basis of the . face value of tho bonds hold and the th? o w r which the holding has been effected. The following indicates, on the basis of

face value/. . . . . .

- 3 -

face value and time held, t he points a t t r ibu ted subject t o a maximum allovrable number of points l imited t o 100:

(a) f o r each $50 faco value of bonds held f o r 0-2 years . . 10 points

(b) f o r each $50 face value of bonds held f o r 3 years .. 2 0 p o i n t s

(c) f o r each $50 face value of h n d s held f o r 4 years . . 30 points

(d) f o r each $50 face value of bonds held f o r 5 years and over . 4Opoints

6 The system proposed should be l e s s cost ly a s reselect ions should

seldom a r i s e , i f a t a l l . It w i l l a lso a s indicated, give due m i g h t t o t h e

period over ~vhich tlho applicant for the mortgage loan has been contributing

t o t h e NHT schemb and t r i l l therefore encourage such contributions. It w i l l

a s seen from paragraph 4, favour; the l ~ w e r inccnne contr ibutors . and w i l l

encourage savings towards t h e purchase of housing uni t$ through giving some

p r io r i t y entitlement t o contributors who hold mortgage bonds - a savings

instrument t o be developed and i s h e i l by the Jamaica Mortgage Bank - and

the length of time over which bonds a r e held. A t t he m e time, a fixed

weight has been determined f o r mortgage bond holders so t h a t t he wealthier

contributors cannot simply through t h e purchase of propsed mortgage bonds

have an overwhelming position. The system is expected t o be f lex ib le

enough t o be able, i n due course t o take account of other savings Instruments

while still re ta ining a b i a s towards tho lower income E;IHT contributors.

The system is t o be combined with appropriate e lectronic data processing

arrangements t o f a c i l i t a t e select ion and min idse undue waiting and f rus t ra -

t ion . It w i l l be dependent on in t e l l i gen t computer terminals a t head of f ice

counters and a t appropriate NKT branch offices.

7. A s indicated i n paragraph 4 above, qual i f icat ion f o r NNT mortgage

financing w i l l begin where 200 points o r over a r e a t t r ibu ted t o the applicant

on t h e bas i s of the entitlement points system. I n order t o c l a r i f y t he

matter, a few i l l u s t r a t i o n s of t he p r io r i t y i n d e x ~ t i o n system a re given i n

t he attached appendix.

8. It w i l l be seen from t h e examples i n the appendix t h a t substant ia l

p r io r i t y i s placed on the period over which NHT contributions have been

effected. Also, t h e leve l of earnings weigh less a s income grows. The

range var ies be twen 80-100 points with t he higher leve l of points being

a t t r ibu ted t o t h e person with t h e lowest earnings o r income. It w i l l be

seen from Cases A & B that NHT contributions of f i ve years and over and

earnings/

earnings of $100 P.M. 0' lesa will aut0knat:ically qualify applicants a s 200

points o r over c a a d be realised as indicated. Tho remaining cases * . . I I

i l l u s t r a t e the need fo r mortgage bonds t o suppleme* the points a t t r i M t e 6 I , L 2 I

t o WJ! contributions and earnings i n the pr ior i ty indeiation system as such

cordributfons become l e s s and earnings increase or decrease a s the case m y

be. other than Cese A relat ing t o a person effecking W contributions

fo r s ix years, the other cases i l lus t ra ted range over NI-TT c!ontribution

periods of f ive years t o one pear. A Surrmbary Table is attaahed &t the end a,, - . M

of the Appendix.

9. f t is proposed t o require tha t only local residents contributing

t?.a the NEE scheme w i l l be e l ig ib le for &FIT financed mortgage loans t o pur-

chase a Ministry of Construction (Housing) house. r3ot~evor. because of tire

large Jaraaican population overseas (for example i n the united :tingdom. 13 S A.

and Canada) it is proposed t o a t t r a c t savings t o Jamaica vie the issue of

mortgage bonds and t o give e l i g i b i l i t y t o participation by J m i c a n s resident . I

U V ~ ~ B B ~ S i n the indexation system ~rhere a resident Jamaican beneficiary vho '

is a NKP contributory is named amom the part ies applying for a NIT! mortgage

loan. I n such cases, the overseas partner w i l l need t o save not less than

$2,000 i n mortgage, bonds. The system w i l l not only a t t r ac t uni lateral

tzansfers i n foreign ezzchange but r v i l l a lso f a c i l i t a t e home-ovmrship via

family partnership arrangements7 for example, via s i s t e r s . or s i s t e r s and

brothers o r other family combinations. These combinations must: pertain i n

whole o r i n part t o resident Jamaican beneficiaries who may be partners with

t h e i r overseas re la t ives on a joint tenancy or tenant-in-common arrangeme*

Savings via mortgage bonds from tho overseas partner while not l e s s than

$2,000 w i l l have t o extend t o the f u l l downpayment on the house t o be pur-

chased. The effect t r i l l be akin t o a uni lateral t ransfer a s the mortgage

bonds w i l l be re t i red on makutity t o meet t h e dawnpayment and no foreign

exchange o u t f l o ~ ? ~ w i l l resul t from redemption of the bonds i n such circum-

stances, Jamaican resident overseas t r i l l be able t o remit funds fo r t h e i r

bond purchases via t h e i r commercial banks i n the country i n which they

reside subject t o Exchange Control P!gulations i n e d countries.

10. It w i l l be recogdsed tha t while under the proposed indexation

system, applicants at t r ibuted 200 points o r over vmld autometically qualify

f o r NHT mortgage financing consideratPon has tosbe given t o a post inde:~ation

selection system vrhere loan applicants are attributed equal points. . '

This/. . . . . I

II i . - I 4. "

A

This w i U a r i se largely becatam the supply of houses m y ko loss than the

demand. Accordingly, trhere applicants are equal both i n terms of points and

time and date ( th i s can ar i se a s persons t.tJ.11 ba approaching a l l bvanahas of

NHT on a daily basis) such applicants v d l l bc furkher s i f t ed on the basis of

thosc l iving or tmrlcing within four (4) miles of the housing schamo t o which

the applications for loan financing apply. This approach should Peci l i ta te \

persons l iving o r wrlring closely t o such housing schemes, prove less dis-

ruptive t o t h e i r f m i l y and social arrangements an8 loss cost ly and taxing

on the public or personal transportation systems. Workplace addresses v i l l

be easi ly subject t o confirmation by employers. Homo addresses or places of

residence of applicants v ~ i l l , hot.?evar, need t o be verified against: postal

addresses, registrat ion on voters lists o r through refarence to water o r

e l ec t r i c i ty meters, etc. A further factor i n the post in6exation selection

system where a l l the factors indicated above are still equal for any tga o r

more loan applicants w i l l be to @ve pr ior i ty t o the appXicanR: with the highest - nutnber of weekly WI!F contributions. I n t h i s conneckion, it should be rec

membered tha t the points system give wcbight t o EZTF contrikutions only on the

basis of v h l e number multiples of periods of fifty-two (52) !reeks contribu-

tions. his f ina l selection process wil l , however,take account of and count

each rwek of EWT contributions made by competing applicants. It is conaidered

that this post indexation system w i l l @XIBUre the integri ty of the proposed

"priority entitlement index': selection procass.

11. The I~onouxable House of Representatives is accordingly invited t o

note the above proposals on the "priority entitlement index"' system and the

post j.&exation process,as outlined i n t h i s Ministxy Paper.

MfNISTRY OF FXl?iiI?CE & PLANNXNG - FILE NO. 256/30

CASES AUTOMATICALLY QUAU:FIXNG NCkJ

Case A - Ms. Jams Bryan

~ r , Bryan is assumed t o aave been c0rrt:rikruting t o NlW for six years (312 weeks) an8 t o earn $100 pew.

The points attributed t o Mr. m a n are as followsr

Poi*s Attributed

(i) Points attributed t o NHI! contributions (312 weeks = 52x6 = 6x20 points) . . 120

(ii) ~ o i n t e attributed t o earnings (100 points for earnings of $100 pow.

OX b388) . . 100 - Total Points . . 220 -

Total points i n access of 200 pints. Applicant qualified.

Mr. Whybe i e assumed t o have been oontributing to Mfi 20s five years (260 weeks) and t o earn $100 pew.

Tho poir&s attributed t o Mr . Whyte are as follows: Points

Attributed

(i) Points attributed t o NEPP aontributions (260 vmcks = 52x5 - 5x20 points) l 100

(ii) Points attributod t o earnings (100 points for earnings of $100 p.w. or less) . 100

Total pints equal t o 200 points. Applicant qualified.

Cam C - Mrs. Elsie caznpbell

Mrs. Caxu-pbctll i s asswed t o haw been oontribslting t o NH2 for five years (260 wadw) t o earn $150 por week and t o hold $50 faae valuo of mortgage W s Eor olla yea+.

The points attrihated t o Mrs. Campbel l are as follows: Points

Attributed

(i) Points attributed t o ERfi oonkributione (260 weeks 52x5 = 5x20 points) . . 100

( i i ) Points a t t r W t o d t o earnings (90 points for earrzfngs of $102 - $200 p.11.) . 90

( i i i ) Points a t t r h t e d t o moztgage bonds held (0-2 years a t face Value ':of $50 for mortgage bonds hold = 10 poinks) .. 10

Total points ?$x . . - Total points attributed equal t o 200 poings. Applicarmt qualified.

APPENDIX CONT'D

L Case D - Mr. J ~ Q S Smith >: : , I .

MT. W t h is assumed t o have been contrilxlting t o P3ZIT for fivo years (260 weeks) t o be earnings $220 per week and t o hold $100 face value of wrtgage bonds for l?i years.

The points attributed t o M r . Smith are as follovrs: Points

Attrilxxtod

( i) Points attributed t o NWT contributions (260 weeks = 52x5 5x20 points) . . 100

(ii) Points attributed t o earnings (80 points for earnings i n excess of $200 P.UJ.) • • 80

( i i i ) Points attributed t o mortgage bonds held (0-2 years a t face value of $SO = 10 pinks, therefore for $100 face value 1 :LO0 - = 2 multiplier, points

50 t hae fo re 10x2) . a0 - Total Points 200 -

T&al points attributod equal t o 200 poinks. Applicar$. .qualified.

Case I - ass Antoria Henry

Miss Henry ie assumed t o have been contributing t o Mfi for four yaars (208 weeks), t o ba earning $100 per week and t o hold $100 face value of mortgage bonds for two years.

The points attributod t o Miss Henry are as follm?s: Points

Attrikruted

( i ) Poinks attributed t o NHT contributions (208 weeks - 4x20 points) . 80

( i i ) Points attributed t o earnings (100 points for earnings of $100 per week or less) . . 100

( i i i ) Points attributed t o mortqage bonds held (0-2 years a t face value of $50 = 10 points, therefore for $100 face value = 1100 = 2 ntultiplierf points therefore 10x2) . . 2 0 -

Total points 200 - - Total poinks attributed eaual t o 200 points. Applicant qualified.

APPENDIX CONP'D

Case F - Mr. FJiUiam Taylor

Mr. Taylor is assumed t o have been cocjzributing to NHT for four years (208 weeks) t o earn $155 p.w. and t o hold $150 face value of bonds for one year.

The points attributed t o M r . Taylor are a s follows; Points

Attributed

( i ) Points attrZbutad t o NHT contributions (208 v7eaka = 52x4 = 4x20 points)

( i i ) Points attributed t o earnings (90 points for earnings of $101 - $200 per wok) . 90

(11%) Poil"as attributed t o mortgage bonds held (0-2 years at: face value of $56 = 10 points, therefore for $150 face value = '150 = - 3 nnxltiplier; points therefore 50 (10x3) .a 30

Total Points 200 - - T o t a l points attributed equal t o 200 points. Applicant wa l f f ied .

Case G - Miss FJoxkly tJilliams

Miss W i l l i a m s is aswlmod t o have been contributing t o NHT for four years (208 weeks), t o aarn $240 p.t.1. and t o hold $200 face value of bonds for l'i years.

Tho p ~ i n t s cttributed t o Miss W i l l i a m s are a s follows: Points

Attributed

( i) Pofnts attributed t o NHT contributions (208 weeks = 52x4 = 4x20 points) . 80

( i i ) Points attributed t o earnings (80 points for earnings i n sxcess of ($200 per week) . 80

(iii) Points attributed t o mortgage bonds held (0-2 years a t faae value of $50 = 10 points, therefore for $200 face value - .m 4

4 multiplioxt points therefore 5 (10x4) w e 40

- Total Points 200

Total points zttributed equal t o 200 points. Applicant .qualified.

Case N - Mrs. Susan Summers

Mrs. Summers is assumed t o have been contributing t o Ml!f f o r three yoars (156 weeks), t o earn $100 per week, and t3 hold $200 face value of mortgage bonds f ~ r one yeax.

The points a t t r ibuted t o Mrs. Suxners are a s follows: Points

Attributed 11--

(i) Points a t t r ibuted t o r-@E contributions (156 weeks = 52x3 = 3x20 points)

( i i ) Points a t t r ibuted t o earnings (100 points for earnings of $100 per week o#l2ss) "..- 8 .

( i i i ) Points c?.,ttributcd t o mortgage bonds (0-2 years at f .ace value of $50 = 10 points, thcreforo f o r $200 face value = 200 - 4 multipliert pints therefore 50 10x4) . .

- Total Points 200 - - -

Total points a t t r ibuted oqual t o 200 points. Applicant qualified.

Case I - Mr. Raymad Burton

M r . Burton is assumed t o have been contributing t o NHT for three years (156 vfeeks); t o earn $170 per week and t o hold $250 face value of mortgage bonds for 14 years.

The points a t t r ibuted t o Mr. Burton a re a s follows; Points

Attributed

( i ) Points a t t r ibuted t o NHT contxibutions (156 weks 52x3 = 3x20 points)

(3i) Points a t t r ibuted t o earnings (90 points f q r ea rdngs 3f $501 - $200 per treek) . .

( i i i ) Points &WShMW t o mortgage b o d s (0-2 years a t face value of $50 = 10 points, therefore fo r $250 face value = ..:250 5

"-

5 multiplier; points therefore SO 10x5) .

-.c.---

Total Points 200

Total points a t t r ibuted oqual t o 200 points. Applicant qualified

Case J - Mr. Joseph Milton

Mr, a l t o n is aswaned t o have been contributing t o EJkPP for three years (156 weelcs) t o earn $240 per week and t o hold 9300 face value of mortgage bods for two yews,

The points attribolred t o Mr. Milton are as follows: Points

~ t t r i b u t e d

(i) Points attributed t o EJHT contributions (156 weeks = 52x3 = 3x20 points) . . 60

(Zi) Points attxibut&t t o earnings (80 points for epsrdngs of aver $200 per t ~ ~ k ) • • 80

(iPi) Points attributed t o moxtgage bonds (0-2 years a t fa- value of $50 * 10 points, therefore for $300 faoe valuo ~ ' 3 0 0 - 6 multipliort points therefore 50 10x6) • . -

Total Points 200 - - Total points attributed oqual t o 200 points. Applicant qualified.

Miss Towers is assumad t o have been contributing t o NHP for two years (204 weeks), t o earn $100 per week and t o hold $300 face value of mortgage bonds fox one year.

The points attributed t o Miss Towers are a s follows: points

Attrilated

( i ) Points attributed t o IWT contrSbolt:lons (1Q4 WCS~S .e 52x2 .. 2x20 points) • 40

(41) Points attributed t o earnings (100 p i n t s for sadngs of $100 par % r e e k or lass) .

(iii) Points attributed to moegage bonds (0-2 years a t face value of $50 = 10 p i n t s , therafoxe fox $300 faae value = 300 6 ml t i p l i s s ; pints therefore SO 10x6) • -

Total Points 200 - Total pints attributed equal t o 200 pints, Applicant qualified.

APPENDIX CONP'D

Case L - M r . Francis Lawis

Mr. Lewis is aslauaod t o haw beon contritxrting t o NHT for t w o years (104) woks), t o earn Sf55 per week and t o hold $350 face value of mortgage bonds for 1*~ years.

The points attributed t o Mr. Lewis are a s follows: Points

Attributed

(A) Points attributed t o MET contributions (104 weeks = 52x2 - 2x20 pofnts) . - 40

ti&) Points attributed t o aarnSngs (90 points fox earnings o f $101 - $200 per rveok) . . 90

(iii) Points attributed t o moa'gage bonds (0-2 years at: face value of $50 = 10 points, therefore for $350 fa- MLUQ = 350 = 7 multiplier# poinCs therefore 50 10x7) . . 70

TotaZ points attributed equal t o 200 points. Applicant qualified.

&sq M - M r . Ecic Johnson

Mr. Johnson is assumed t o have been c o n t r h t i n g t o MHP for two yams (104 weks), t o earn $260 per week ard t o hold $400 fsoe value of2 mortgage bonds for two years.

The pints attributed t o Ms. Johnson are as followst Points

Attr&baCad

(i) points atixlbuted t o ~ f i T contxibueions (104 waeks = 52x2 = 2x20 points) . . 40

(ki) P o i n t s attributed t o earnfngs (80 points for earnings in excess of $200 ger tre&) . . 80

( i i i ) Points attributed t o mortgage bonds (0-2 years a t face value of $50 = 10 points, therefore for $400 face value = .400 = 8 multiplier; points therefore 3 10x8) . 80 -

TotXil Points 200 1111

Total pints attributed equal t o 200 poirrks. Applicant qualified.

APPENDIX CONP'D

Case N - Miss Noma Newton

Miss Newton is assumed t o have been contrihrting t o NHT for orp year (52 weeks), t o earn $100 per week and t o hold $400 f a c ~ value of mortgage bonds for one year.

The points attributed t o Miss Nevfon are as fo l20~sr Points

Attributed

(i) Points attrjikutod t a NHP contributions (52 weeks = 52x1 = 1x20 points) 8 . 20

(ii) Poinke attributed t o earnings (100 pollnts for earnings of $100 per week or Less) . .

(iii) Points attributed t o mortgage bonds (0-2 years at fnce value of $50 = 10 points, therofoxe for $400 fnce value = 400 = 8 m l t i p l i e r t points thareforo 50 10x8)

- Total Points 200 - -

Total pints attributed e q u l t o 200 points. Applicant qualified.

Mr. Ornsby is assumed t o have been contributing t o lPIET for one year (52 weeks), t o earn $175 per week and t o hold $450 face value of mortgage bonds for 1% years.

The pints attributed t o M r . Orrrsby are as followst Points

Attributed

( i ) Points attributed t o NfPP contributiom (52 weeks = 52x1 = ZX20 p3inte) . 20

(ii) Points attributed t o earnlngs -- (90 points for earnings of $101 - $200 per week) .

(iii) Points attributed t o mortgage bonds (0-2 years a t f a c ~ value of $50 = 10 points, therefore f a r $450 face value = 450 = .- 9 multiplier# mints therefore 50 10x9) . . -

Total Points 200 - - T e a l points attributed equal t o 200 points. Applicrint quazified.

APPENDIX C6NP8D

caw P - Mr Phr511ip Parsons

Mr. Parsons i s assumed t o have been contributing t o NHT for on year (52 treeoks), t o earn $270 per ~ e o k and t o hold $500 face value of mortgage hnds for two years,

The points attributed to Mr. Parsons axe as fallowst Points

AttrSbuCed.

(st) Points attributed t o NKP contributions (52 weeks = 52x1 = 1x20 points) . . 20

( i i ) Points attributed to earnings (80 points fox earnings i n excess of $200 per week) . a

(iii) Points attributed to mortgage bonds hold (0-2 years at face value of $50 = 10 points, therefore for $500 face value = 500 = - 10 mlt ipl iext points thcefore 50 10x10) -

Total Points 200 _L -

Total points attributed equal t o 200 points, AppZicant: qualified.

October 28, 1982