putting the bank back in the mortgage business, paying a premium to shareholders to do so and spinning off the real estate arm.

If the deal is done, the bank will also bring, within a year, $50 million more mortgage money to the market, and, the most liberal mortgage lending policies to Bermuda's financial services industry in history.

Bermuda Home will continue to operate under the current management. No jobs will be lost.

But after decades of onerous mortgage policies among Bermuda lenders, the Bank of Bermuda will lead a new policy of up to 80 percent mortgages, and for terms of up to 30 years.

The fall-out could usher in a new era of home ownership, making the purchase of Bermuda property far more affordable, even to less-advantaged families.

The move comes four-and-a-half years after the bank's lending and deposit subsidiary, Bermuda Mortgage & Finance Ltd., merged with mortgage lending, deposit and real estate independent, L.P. Gutteridge Ltd. (LPG) to form Bermuda Home.

The then controversial deal left the bank with 25 percent and 26 percent of Bermuda Home common and preferred shares, respectively.

Yesterday's announced plan was to buy back as much of the remaining 75 percent of the company as possible. And shareholders have been offered a sweet deal to make it happen.

Bermuda Home common shares and preferred shares were last priced at $10.50 and $12.50, respectively.

The bank is offering $14.50 for each common or preferred share -- a $4 (38 percent) and $2 (16 percent) premium over current market value for the common and preferred shares, respectively. Original Home shareholders would end up with a 22 percent per annum return.

For the deal to work, the bank needs to acquire a minimum of half of the nearly 3.5 million shares they don't already have. A total of 1,720,620 common shares are required. It is a deal that can happen soon.

If the bank acquires all of the outstanding stock, it would pay about $49.5 million for the common shares and about $10 million for the preferred shares.

Bank of Bermuda president and CEO Henry Smith said, "By going directly to the shareholders, it should be much quicker, if we get shareholders tendering at that price.

"It should be faster than going the normal route of amalgamation. So we are hoping this offer will be taken up very directly.'' Senior vice president, retail clients, Alan Richardson said, "We're simply hoping that the very large premium above the last traded price will be a very positive inducement for shareholders to accept immediately.

"We can certainly commence the pay-out to shareholders as early as December 22, providing the minimum condition is met.'' The bank intends to become a one-stop shop for financial services.

Mr. Smith said, "We have had a great demand from our customers to provide mortgages and long term deposit options as part of our overall retail banking service.'' Within a year of the acquisition, an extra $50 million would be made available for mortgages at more favourable terms than currently exist. The bank will be looking particularly at first time home buyers.

It would mean lower down payments (down to 20 percent of the purchase price) and longer mortgage terms (up to 30 years).

Mr. Smith said that apart from more mortgage funds, the deal will bring greater security for depositors. But he said the bank began looking for a doorway back into the mortgage business nine months ago. And Bermuda Home seemed the only way.