Jamaican homeowners facing serious troubles

Friday, February 10, 2012

PRIOR to 2011 foreclosures were a rarity in Jamaica, according to the National Land Agency (NLA), but now the island has seen the rate shoot up by a phenomenal 2,550 per cent

The NLA, where foreclosure applications are filed and approved via the registrar of lands, disclosed recently that there were 212 foreclosures last year, up from eight in 2010. There were eight foreclosures in 2010; two in 2009; and none in 2008.

In this previously uncommon legal manoeuvre, a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

The process tends to take much longer in Jamaica than in the US, as a loan first has to be booked as a non-performing loan (NPL) after 90 days; after which it goes into auction; then a private treaty; before foreclosure proceedings, which can take up to a year to complete, can be initiated. Additionally, Jamaican mortgage banks generally work hard with borrowers to avoid foreclosures on properties, including renegotiations and rearranging of loans.

The most recent industry data from the central bank shows that underperforming loans have increased 46.3 per cent in the annual period ending September 2011.

Central bank — regulated entities — banks, near-banks and building societies — had just under J$28.9 billion in non-performing loans on their books at that date.

Auctioneer William Tavares-Finson is on record as suggesting that foreclosures had spiked because of low sales through the auction system.

Tavares-Finson said that between 2009 and 2011, the annual average for properties advertised for auction was just about 1,000.

In 2009, only 32 per cent made it to the block with 60 per cent withdrawn before the advertised auction date. Auction sales amounted to 2.3 per cent of the lot, he said.

In 2010, some 66 per cent of properties were withdrawn before auction, 23 went on the block, and sales were 1.5 per cent of advertised properties.

Last year, advertised properties declined by 12.2 per cent — 63 per cent were withdrawn before the auction, 30 per cent went on the block, and sales amounted to 3.9 per cent.

"What is on the increase is the number of foreclosures, with the banks seeking to take these properties on their books," Tavares-Finson said.