A different kind of justice

In a world where property is considered one’s most important investment, it’s no wonder governments work tirelessly to ensure their citizens have the means to eventually become homeowners. This means, we all have the basic right to have access to home loans from any bank, once our finances are in place and we have saved enough money.

A fraction of Malta’s population, however, faced a very different reality up until the beginning of September. Thanks to extensive data which had been compiled since 2017, the Housing Authority was able to identify several gaps in the economic realities of the national housing market, which imposed hardship on certain social cohorts. One of the major gaps identified here was the number of individuals with specific disabilities or underlying health conditions, which could not procure a life insurance policy. This, in turn, made it impossible for these individuals to access a home loan.

Speaking to TheJournal.mt, Housing Authority Chief Leonid McKay explained how “these individuals are not economically attractive customers for life insurance companies due to the higher risk incurred. Their requests are often declined outright or unaffordable premia quoted.” 

Leonid McKay

All this kick-started a series of consultations with several local commercial banks, which resulted in the New Hope Guarantee Scheme. Here, the Housing Authority itself will act as a guarantor instead of the life insurance policy.

“The fund of €3,000,000 provided by the National Development and Social Fund will be used as a guarantee”, McKay explained, further insisting that the Authority has already successfully negotiated a 1:10 ratio with banks. “As things stand, we can now facilitate €30 million in bank loans”.

The Authority has already successfully negotiated

a 1:10 ratio with banks.

McKay also explained how it is not the Authority’s intent to completely replace insurance companies in this matter. “Individuals who suffer from underlying health conditions shall attempt to obtain insurance from two different insurance companies and apply under the New Hope scheme if these requests are declined. The said guarantee will cover loan risks up to €250,000.”

If eventually, the beneficiary passes away, the heirs may choose between selling the property, re-mortgaging the loan in their name, or purchasing it through the Housing Authority’s Equity Sharing Scheme.      

“Despite the extensive groundwork required, this scheme is not aimed towards a wide spectrum of society”, McKay explains, also confirming that according to feedback collected from insurance companies, as many as 50 life insurance requests are turned down each year.

“This initiative is a testament of the Housing Authority’s ethos to ensure that nobody, not even small cohorts of vulnerable individuals, is left behind in the social and economic progress being achieved”, the CEO said. 

The Housing Authority will from now monitor how the scheme works in practice to further improve it, perhaps by making it possible for applicants to benefit from both Equity Sharing and the New Hope Scheme.

While successfully promoting greater social stability, the beauty of this scheme is that it also provides a solution to the current market failure while providing additional data which until now has been unavailable. “We’re confident that we will help the market to adapt whilst learning about new health conditions”, the Housing Chief concluded.

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