Response to the news of the Bank of Bermuda's planned acquisition of Bermuda Home was immediate and upbeat from Bermuda's real estate industry.

Senior manager of Coldwell Banker JW, Bermuda Island affiliate, Arthur Jones said, "That's very good for Bermuda -- a big leap forward. It is always beneficial to a community if you can increase home ownership. This will give more Bermudians an opportunity to purchase a home on a more affordable basis.'' "It signals a confidence by the bank in Bermuda's people. When you consider everything else that is happening in Bermuda, this demonstrates their confidence.

"For them to spend that kind of money and commit to this type of lending, too, is the complete opposite of what you might expect a reactionary big business to do with a new Government. There's no question about that.

"It is great news for Bermuda's real estate buyers. That's for sure.'' Bank of Bermuda president and CEO Henry Smith said making an offer directly to the shareholders of Bermuda Home, rather than the norm of trying to achieve ownership through an amalgamation, removed potential conflicts of interest that would arise from having directors, executives and officers who have served with both companies.

"Through this route,'' he said, "the 4,154 shareholders of Bermuda Home can independently make their own decision whether to sell shares or not.'' The creation of Bermuda Home in 1994 was controversial. Realtors said the banks should not be involved in real estate on one hand and financing real estate on the other. Some said LPG had a similar conflict. A legal challenge to the banks was pending in the courts at the time.

Mr. Smith deliberately stepped around that controversy yesterday by announcing an intention to sell off the real estate arm, Bermuda Realty.

It may end the controversy. Bermuda Home is the last organisation that has both a mortgage financing arm and a real estate division. "We have no interest in being in the real estate business,'' he declared, adding "We propose to work carefully with existing Bermuda Home management to divest Bermuda Realty in a manner that safeguards as much as possible the interests of its customers and staff.'' Senior vice president Alan Richardson, said, "We have been looking at various options for re-introducing mortgage products for nine months, and we believe that the acquisition of Bermuda Home makes good business sense. The bank is already a major shareholder of Bermuda Home and we have a common client base and a common shareholder base.'' Bermudians have long complained that more reasonable mortgages were available in the UK, the US and Canada. Local lenders claimed it was because mortgage providers there, were better able to lay off the risks to other financial institutions for the servicing of the debt.

Those putting mortgages together, turn around and sell off the business to people who do nothing but specialise in long term debt. There is no long-term lending market in Bermuda to buy the mortgages. Without a secondary market for the mortgages, banks here find themselves in for the long haul, holding a bag of debt they would prefer to sell off. But Mr. Richardson conceded last night that nothing in the market had actually changed, except that the modern day bank management was now prepared to adopt a less conservative lending stance.

He said, "This change is as a result of the response and feedback from customers. People are saying that it's not affordable to buy property. So we are listening to our customers. But we have also created a much larger financial base from which to accept more risks.

"The prevailing lending rates will still apply, but if a customer wanted to pay the mortgage over say 15 years, we would reflect it favourably in the rate.''