Home ownership is one of the basic requirements for social stability and inclusion in a fair society. Vulnerable individuals and their families face enormous obstacles to achieving the minimum quality-of-life standards that many others take for granted.
One of these obstacles is the list of demanding conditions that banks impose on those applying for a mortgage. Banks almost invariably require borrowers to provide a life insurance policy to ensure that the family will not necessarily have to sell their home to repay the bank if the owner dies prematurely.
Persons with a poor medical record have so far found it almost impossible to find an insurance company prepared to provide life cover for the duration of the loan because of the higher risk involved. One can understand the commercial logic of banks’ risk-based policies for granting mortgages to persons with a poor medical record. However, in such circumstances the state, in its mission to promote social stability in the community, has the moral obligation to provide shock absorbers.
The government has just done so with its announcement of the scheme New Hope, which will see the state stepping in as guarantor for those who lack life insurance cover. The scheme, which will use funds from Malta’s cash-for-passports programme, is a laudable initiative that should help those who risk being marginalised because of their medical condition.
The provenance of the funds has little relevance. The state has to find the ways and means to ensure that all possible measures are taken to promote social integration. While the government’s financial resources will always be too limited to address the multitude of social challenges that our society faces, it needs to prioritise the most urgent cases, underpinned by considerations of what provides the best social return.
A parent who suffers from severe medical conditions can find it almost impossible to provide his family with shelter security. This reality would probably have long-lasting effects on the family members, especially the children. It could perpetuate, from one generation to the next, the social exclusion of individuals living in a challenging social environment.
One hopes that the New Hope process will be made as simple as possible to encourage persons now practically excluded from the mortgage market to take the initiative, borrow money and buy a home.
Of course, obtaining a government guarantee instead of a life insurance policy would only be the first step in promoting more stability for vulnerable families. Banks are known to adopt reasonable measures when borrowing customers face difficulties in repaying the monthly instalment on their mortgage. But more needs to be done to break the vicious cycle that starts with the inability to repay an instalment and often ends up with families having to sell their homes to repay the bank.
The New Hope scheme covers step one, the need to provide banks with a life policy to protect vulnerable families when the borrowing relative dies.
There will often be instances when the borrower, a beneficiary of the scheme, suffers a relapse in their medical condition and loses their income. In such cases, the loan repayments will still fall due, at a time when the borrower’s family is at its most vulnerable. Enhanced stabilisers would need to be added on to the New Hope scheme to cater for such eventualities.
The gap between the haves and the have-nots in our community has been growing for some time. Schemes such as New Hope start to narrow it again by promoting greater social stability.