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The primary mortgage market in Trinidad and Tobago comprises the commercial banks, the trust and mortgage institutions, merchant banks and the insurance companies.

In addition to these private sector institutions, mortgage financing is provided by two specialized agencies: the Trinidad and Tobago Mortgage Finance Company Limited (TTMF) and the Home Mortgage Bank (HMB), as well as some pension funds and at least one credit union.

Most of the trust companies and merchant banks are affiliated to commercial banks. Some insurance companies provide mortgage lending to policy holders through their mortgage administration departments. However, the Insurance Act limits investments by insurance companies in mortgages to 20 per cent of total assets.

Major Mortgage Lending Institutions
In Trinidad and Tobago

Pension funds also invest in mortgages, but with similar limitations as the insurance companies. Most pension plans make mortgage loans directly to their membership through employee home assistance plans. However, most pension plan mortgage investments are made through funds administered by trust companies.

Some credit unions have begun to provide mortgage financing to their members; however, the involvement of credit unions in the mortgage market is still very limited.

Private sector institutions have provided the bulk of mortgage financing in Trinidad and Tobago. The private sector’s share in total mortgage financing rose from 66 per cent in 1995 to 77 per cent in 2005 (See Table 9).

For several years, the primary mortgage market was dominated by the trust and mortgage institutions which, in 2003, accounted for 47 per cent of total mortgage loans extended by the private institutions. These institutions, most of which, as noted earlier, are affiliated with the commercial banks, were a natural source of long-term mortgage financing since their funding came from longer-term deposits. In fact, since for most of the period the banks faced significantly higher reserve requirements than the trust companies, it was in their interest to channel both long-term deposits and the mortgage loans through their affiliated institutions.

During the period 1995-2003, the trust and mortgage companies accounted for 37 per cent of total mortgage credit outstanding, followed by the commercial banks at 12 per cent, and the insurance companies which had a 9 per cent share of the market. Pension funds held an average market share of 4.5 per cent over the period (See Table 9).

There have been two major structural changes in the mortgage market since 2003. First, with the reduction in the reserve requirements on commercial banks’ prescribed liabilities from 18 per cent in 2003 to 11 per cent in 2004, the financial incentive for banks to channel long- term funding and mortgage activity to their trust companies declined. Added to this, with intense competition in the mortgage market, banks have moved to rationalize loan administration in order to achieve efficiency gains. Accordingly, most of the mortgage accounts of the affiliated trust companies, along with new loan originations, were transferred to the parent banks. Trust companies now focus on trustee operations and investment management.

Second, with a significant increase in bank liquidity, banks needing to look for investment opportunities began to hold on to their mortgage loans rather than sell them in the secondary market. Table 3 illustrates the recent slowdown in the growth of secondary market activity and the switch to primary market activity by HMB since 2004.

Primary and Secondary Market Activity
for the Home Mortgage Bank Limited (TT$M)

Source: Home Mortgage Bank Annual Reports