Home buyers saddled with debt as repossessions continue

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House repossessions are leaving consumers saddled with debts they cannot repay, according to a lawyer who has called for the Bermuda Monetary Authority to help out.

With bailiffs reportedly kept busy carrying out repossession orders, lawyer Keren Lomas told The Royal Gazette that the buyers are bearing the brunt of the aftermath.

“The banks loaned in a less than conservative manner at 90 to 95 to 100 percent, acting on the belief that the property prices would rise,” Ms Lomas said. “As a result of the economic crisis and the devaluing of property, it appears the consumer is bearing disproportionately the risk of that borrowing.”

She said house buyers end up saddled with enormous debt after their mortgage deals go sour.

“The bank that took the risk on lending does not seem to be impacted like the consumer.

“The consumer can’t rent an apartment with nobody to rent it to, and therefore can’t pay their mortgage. They go into default; the bank takes possession; the bank can’t sell the property, the mortgage debt keeps increasing the principal, interest, arrears and finance charges keep accumulating against the consumer, and then when the bank eventually sells the property, if it’s able to, the property is sold at prices far below the once-market value.

“This leaves the consumer with debts of hundreds of thousands of dollars, with seven percent interest accumulating on the judgment debt. The consumer has no chance of being able to repay.”

Ms Lomas said it appeared there were many across the Island who had been made redundant and were now suffering the same fate: in the wake of an imploded mortgage, an impossible, and growing, bill to pay.

She added: “The Bermuda Monetary Authority could reduce some of this impact on the consumer by prescribing a lower statutory rate of interest, currently seven percent, on the banks’ judgments.”

Noting that “any foreclosure or default is something that financial institutions work hard to avoid”, an HSBC Bermuda spokesman responded: “When the bank needs to act, it will continue to act in strict adherence with its legal rights as a creditor.”

Mortgages are approved only after a list of assessments, the spokesman added.

“These include loan to appraised value and debt to service ratio the ability to pay the mortgage based on current salary or cash flow.”

HSBC said it encouraged clients who found themselves in difficulty to talk to the bank as soon as possible, for an assessment of their circumstances and possible alternatives options.

Meanwhile, months after losing her house, Leyoni Junos continues to fight the bank’s repossession of her Middle Road, Warwick residence.

She said she has filed a writ against HSBC, and hopes to challenge her eviction based on the original judicial order.

Back in court again this week, Ms Junos explained: “The judge’s order did not give me a date to give up possession. In case law in the UK you can’t evict unless that date has passed. That’s my argument that the whole proceedings and the way they did it was unlawful. That’s what the court will hear in time.”

Ms Junos said she hopes to file damages against the bank for removing her possessions from the property and breaking the locks to enter, and spoke optimistically of her case, but admitted that a great deal more court time lies ahead.

In the meantime, her mortgage debt, five years after the bank first took action against her, stands at $213,000.

“I’m still staying with friends, but I go up to the house every day,” she said. “I still have animals there that I’m looking after, and possessions there.”

At her next day in court, she added, “They are going to look at the law as it applies to the date issue. If I am correct, that date should have been set, and the whole thing goes out the window.”

Currently out of work, Ms Junos said she has been carrying the case forward herself, with the assistance of friends.

“I believe there have been a lot of evictions out there that we’re not aware of,” she said.

Are you facing repossession or have lost your home? Send your story to jbell[AT]royalgazette.bm.

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Published Feb 22, 2012 at 8:00 am (Updated Feb 22, 2012 at 8:53 am)

Home buyers saddled with debt as repossessions continue

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