Vexed Bermoothes

Blustery Opinions From Bermuda

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Mortgage Foreclosure Rates

September 11th, 2012 · No Comments · Economy

While the Premier fantasizes that the Island’s “economic recovery has begun” the statistics indicate that Bermuda is sliding into a deepening trough.

In today’s news, the Bermuda Monetary Authority reports that local banks are reporting sharp increases in non-performing loans.

The banks racked up a loss charge for bad debt totalling $73.9 million in second quarter, which is more than quadruple the amount compared to the previous quarter ($12.8 million) and prior year ($16.6 million).

“The impact of a deteriorating lending book continues to be affected by poor economic fundamentals,” the report stated, adding that during the quarter, net charge-off to total loans rose sharply from 0.6 percent in the first quarter of 2012 to 3.2 percent in the second.

While these spiraling statistics are certainly worrisome for the banks, they are even worse for Bermudians and specifically Bermudian homeowners.  Exactly how many mortgages are in default?  A worst case extrapolation from the BMA bad debt report indicates the number could be in the hundreds.

In the past, Bermuda had a burgeoning real estate market and mortgage defaults were a relatively rare occurrence.  As a result, Bermuda has weak consumer protections for mortgage holders and has never collected systematic information on default rates.  Thus must change:  as in other jurisdictions, there should be a public report on mortgage defaults (including property repossessions).

The banks will fight this, as a clear vision of how much property is in default might lower their ability to sell off repossessed homes for maximum value (i.e., they want to maintain a sellers’ advantage).   However, Bermuda must increase transparency in this sector as real estate is such an important part of many Bermudians’ assets and the current vagueness surrounding real estate values is not healthy for anyone buying or selling a home.

I am tired of politicians and real estate agents telling us that everything is hunky dory, when the man in the street can feel that it isn’t.  Let’s get the facts out there.

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