The revisions made by CIBA detail the procedures local banks must follow when borrowers find themselves unable to make payments on loans, such as potential alternative repayment options, or also possible repossession of property. All members of CIBA — including retail banks Butterfield, Cayman National, CIBC FirstCaribbean, Fidelity, RBC Royal Bank and Scotiabank — have to adhere to those procedures. (Neither the Civil Service Association Cooperative Credit Union nor the Cayman Islands Development Bank is a CIBA member.)
In a story that appeared in Wednesday’s Compass, CIBA President Mark McIntyre said the expanded banking code should provide clarity to customers and lenders when financial difficulties develop.
We applaud the bankers’ association for its proactive measure to outline best practices for member institutions. While it is, of course, a far more serious and personal crisis for individuals who are faced with the prospect of losing their home — foreclosing on property is the least desirable outcome for the lending institution, as well. As was demonstrated during the financial crisis that led to the global recession, massive waves of debt defaults can send tremors through the financial sector, and shake the foundations of the banking industry itself.
Mr. McIntyre offered sound advice for clients with mortgages: “If people are in financial problems, please talk to your bank. The bank is not in the real estate business. We don’t want to sell property. Our preference is to renegotiate the terms.”
Also in the story, Mr. McIntyre expressed frustration at “noise in the marketplace that banks are somehow behaving inappropriately” when it comes to foreclosures in recent years. Mr. McIntyre phrased the issue a bit more delicately than we would. We, in fact, would say that a relatively small number of relatively loud people, on radio talk shows, in print publications, and — most troubling — in the Legislative Assembly, have attempted to portray our local banks as villains who lay snares in order to snatch people’s homes right out from under them — presumably, somehow, in order to make a few quick dollars.
That sort of thinking, of course, ignores the costs associated with banks diverging from their core function — that is, banking; and the reality that foreclosures in Cayman are, statistically speaking, fairly rare occurrences.
While we empathize with people who encounter hard times and lose their homes after years of making mortgage payments, it is also important to understand that banks are business entities, and mortgages are partnerships that have been agreed to, and signed, by both parties in full awareness of their terms. Even in the worst-case scenario of a foreclosure, all that can be said of the bank is it is attempting to recoup expenses it has already incurred.
In Cayman, the institutions that hold mortgages are not faceless conglomerates, and should not be conflated with the litany of providers that comprise our international financial services sector. Cayman’s lenders are local banks, and are vital components of our local business community and the workings of our country’s economy.
We hope the community, and our political leaders, will perceive the recent expansion of CIBA’s banking code for what it is: a symbolic and practical gesture of goodwill to the people of Cayman, and a good-faith effort by local banks to preserve people’s mortgages and to keep them in the homes they love.