Home-loan foreclosures are expected to soar this year

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The rate of home-loans in foreclosure is set to soar this year as the Island’s residents continue to struggle to pay their mortgages.

This according to Capital G boss Ian Truran who sees cash-strapped homeowners facing increased financial challenges on a daily basis.

Seven out of 2,800 loans on Capital G’s books are already in foreclosure this equates to about $7 million of $800 million in loans.

Although these non-payment cases have continued over several years rather than peaking suddenly, Mr Truran is expecting the figure to rise sharply this year as people bear the brunt of the failing economy.

Proud householders are now finding themselves having to go to their loan officer to explain that they can’t pay their bills.

Capital G is repeatedly hearing from people who say they have no legitimate source of income and family members are too stretched to assist.

Mr Truran was responding to this week’s Royal Gazette story reporting the Bermuda Monetary Authority noted a “sharp increase” in non-performing loans during the last three months of last year.

Non-performing loans in which borrowers were 31 days or more behind with repayments represented 5.7 percent of the total combined loan book of Bermuda’s banks, compared to 3.7 percent at the end of September.

The figure had hovered around the three percent mark since the end of 2009, but increased significantly in the fourth quarter.

Mr Truran, Capital G president & CEO, said it was “a sign of the times” and the situation would get worse before it got better.

He said some customers not only faced a reduction in cash flow, but had also been dealt the additional blow of suffering a reduction in property value.

Mr Truran said: “Certainly it is a sign of the times that in the year to come we will see an increased challenge for homeowners who are cash strapped.

“According to international standards our foreclosure number is low, however on a small island like Bermuda when any foreclosure occurs we know about it.”

Customers are going to the bank with a number of reasons why they have no cash. This includes the loss of employment and a reduction in rental property value leading to them not receiving the income expected.

Mr Truran said: “Unemployment numbers are at a record high. Our Island’s population is reducing and there are vacancies in rentals.

“Some Bermudians are also forced to take less income. These are all valid reasons contributing to late and/or non-payment.”

Foreclosure is the legal process by which an owner’s rights to a property is terminated, however Capital G says it is a “last resort” and they work with customers to prevent this from happening.

They encourage customers to contact their loan officer as soon as they foresee difficulty paying their repayments.

Each customer is treated on a case-by-case basis and it is possible that the burden can be eased with customer payment holidays or interest free payments for a specific period of time.

Mr Truran said the worst thing homeowners could do was to stay quiet and not tell anyone about their financial issues.

He said: “All borrowers should be proactive when building a relationship with their loan officer.

“In regards to Capital G’s loan books, foreclosure is an absolute last option.

”We have no interest in taking a customer’s home if possible. We have no desire to be a landlord and we work with our customers to a degree.”

HSBC Bermuda also confirmed the economy was “presenting a challenge” for its customers, however it would not disclose figures due to confidentiality.

An HSBC Bermuda spokesperson would only say: “HSBC Bermuda has always and continues to work with customers who face difficulty with their finances.

“HSBC Bermuda encourages any of its customers experiencing financial challenges to speak with one of our many financial services experts to review the solutions available to them.”

The Bank of Butterfield did not respond to our request for comment.

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Published Apr 6, 2011 at 9:24 am (Updated Apr 6, 2011 at 9:23 am)

Home-loan foreclosures are expected to soar this year

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