Dramatic spike in foreclosures

The number of people losing their homes to foreclosures in the Cayman Islands has almost quadrupled in the last five years.

There were 116 forced sales in 2015 according to data from the Cayman Islands Real Estate Brokers Association’s multi-listing system. That compares with just 30 in 2011.

Realtors say the dramatic jump suggests a more aggressive approach from banks to dealing with bad debts in the past two years.

It has also been attributed to a time-lag in cause and effect from the global financial crisis, with banks waiting, in some cases for several years, to foreclose on properties where the mortgage is not being paid.

Kim Lund of RE/MAX said the company is handling an increasing number of forced sales, which he said is surprising given the general improvement in the economy.

“You would think these sales would fall off, as people should be able to pay their mortgages in a stronger economy. This would seem to indicate that the banks are becoming more aggressive with getting properties sold, where mortgages are still not performing.”

The flip side of that, he said, is that buyers have more disposable income and are less risk averse.

“As the economy strengthens, there are more purchasers willing to invest in foreclosure properties to improve these properties for rental income or capital appreciation. Purchasers feel this investment will pay off over the next several years, due to the improving economy.”

Michael Day, president of CIREBA, said the circumstances vary in every case.

In some instances owners were collecting rent and not paying the bank and there was very little sympathy for the buyer. In other cases owners had fallen on hard times and could no longer afford to pay the mortgage.

“There are some very sad cases. I would much rather see people work something out if they can rather than have the property listed.”

Mr. Day believes the banks do try to work with homeowners where possible, and suggested the increase in forced sales likely represents a “flushing out” of properties that have been in danger of foreclosure for some time.

“It is sad, but you have to look at it from the bank’s perspective as well. If the mortgage is unpaid for a significant amount of time, at some point they have to deal with it.”

He said it is a misconception that forced sales were put on the market at bargain rates for a quick sale. He said the realtor has no part in setting the price, which is determined by two independent valuation experts.

Tara Nielsen, who runs Acts of Random Kindness, a charity that provides support and financial assistance to people going through hard times, said she has noticed a significant increase in the number of calls and emails asking for assistance with mortgage payments and arrears.

She believes the increase in foreclosures is partly a “trickle-down effect” from the 2008 financial crisis, with many people struggling to get by for several years before eventually being forced to give up their mortgages.

Ms. Nielsen believes people now are struggling more than she has seen over the past decade since ARK was established.

“For those that have kept their homes but are desperately struggling to make the mortgage, they generally live without power and water for a long period until they have to give up completely.”

The Cayman Islands Bankers’ Association did not respond to questions from the Cayman Compass this week. Association President Mark McIntyre previously expressed frustration at what he described as “noise in the marketplace that banks are somehow behaving inappropriately” regarding foreclosures.

The association revealed in 2015 that it had significantly expanded its banking code to outline how banks deal with customers in financial difficulty.

According to the code, banks are committed to commencing legal proceedings for the repossession of a property only when the lender has made every reasonable effort to agree to an alternative arrangement with the customer whose loan or mortgage is in arrears.

Mr. McIntyre told the Compass at the time, “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.”