Seventeen properties were foreclosed on in the Cayman Islands during the first three months of 2015, leading to concern among lawmakers that the Cayman Islands is headed for another bad year for home foreclosures.
In 2013, there were a record number of 65 homes, businesses or property for which foreclosure had been completed, Commerce Minister Wayne Panton announced Friday during a press conference about responsible household finance management.
The completed foreclosure figure decreased significantly in 2014, with 23 reported for the entire year. However, the number reported from January to March this year came close to the 2014 figure.
While overall completed foreclosures for Cayman are the lowest in the Caribbean region, Mr. Panton said that will be small comfort to families who are losing everything.
“It is clear to us that they do need some help,” Minister Panton said. “The impact of [foreclosure] is obviously considerable at a personal level. It also has an impact on the economy, it has an impact on driving down real estate property values.”
Finance Minister Marco Archer said the number one reason given by families who have lost their homes in foreclosure is the breakup of the family unit, particularly in cases involving divorce where alimony or child support is not received. The second most common cause is loss of employment.
“Given the relatively small number of foreclosures, the social impacts are greater than the economic ones,” Mr. Archer said. According to figures presented Friday, Cayman has recorded 192 completed foreclosures since 2008. Completed foreclosures include only the cases where banks have managed to sell the property. Mr. Panton said another 180 “historical” foreclosure cases, where the properties had not been sold, were identified.
The increased number of completed foreclosures early this year is a major community concern and has sparked the formation of a group known as Caymanians Against Economic Injustice, which held public meetings last week on the subject of home foreclosures. The group alleges, among other things, that banks are “rushing through” the foreclosure process – giving homeowners just three months prior to declaring them to be delinquent on their mortgages and seizing the properties.
Minister Panton said government representatives would be happy to meet with group members and discuss their concerns, but indicated he did not believe most local banks had been operating in such a “cold-hearted” fashion.
Moreover, Mr. Panton said he was unconvinced by the group’s argument that banks were actually making money on the sale of foreclosed homes or businesses.
“First of all, if a bank forecloses on a property and sells it … if they sell it at a price that is above the cost of the outstanding mortgage, they have a duty to pay the difference to the borrower,” he said. “It cannot be the case that the bank profits over and above. Banks are not in the business of having to go through the process [of foreclosure]. They don’t make any money that way.”
While he said he empathized with individuals who were losing their homes through the foreclosure process, Finance Minister Archer said government has never spent public funds to bail out failing home mortgages.
Mr. Archer said an effort to bail out mortgages was attempted during the 2011-2012 “save the mortgage” program. However, in that effort, the Cayman Islands government merely administered about $2.5 million given from the Dart group of companies. In 2013, the year that program ended, the government recorded the highest number of completed home foreclosures ever in Cayman.
“I think 80-odd percent of those [who participated in save the mortgage] lost their homes, so the save the mortgage plan really just put off the inevitable,” Mr. Archer said. “Who was assisted? Was it the banks or the homeowners?”
Mr. Archer also said the global recession in 2008/09 put a dent in the local property market, as it did in many other countries, a recession from which Cayman has never fully recovered.
Separate from any government-sponsored efforts, Ministers Panton and Archer have enlisted the help of a number of retired Caymanian banking professionals to provide personal financial advice to homeowners who are struggling with day-to-day living costs. “[We want to] assist people before they get into trouble,” Mr. Archer said.
A series of meetings are being scheduled to begin in mid-August, starting in Bodden Town, at which residents can seek advice from local banking professionals about balancing their checkbooks.
The locations and times of the public seminars will be announced later.