Tue | Aug 3, 2021

Foreclosures loom as loan forgiveness ends

Published:Friday | December 18, 2020 | 12:15 AMSteven Jackson - Senior Business Reporter

As moratoriums on mortgage payments come to an end, real estate experts see rising risk for homeowners losing their homes to foreclosures by lenders.

That’s because of the job losses under the pandemic and the slow recovery of the decimated tourism and hospitality market, which has traditionally been a top employer but has experienced a 65 per cent rout in economic activity.

Deborah Cumming, founding realtor at Century 21 Heave-Ho Properties, says properties in the lower-income brackets, including some National Housing Trust, NHT, properties, as well as luxury apartments, especially those in the short-term rental market, will see a fallout.

“We will see more properties going up for private treaty,” Cumming told the Financial Gleaner. “We are not seeing many deals right now, but we will see deals emerge next year in certain sectors – in NHT homes and US rentals. Also, hotel workers are at risk,” she added.

The Multiple Listing Service, or MLS, platform utilised by the realtor community lists 218 properties as being up for sale under private treaty and nine properties under foreclosure. Private treaty is typically the next step taken by the top provider of low-income housing in Jamaica, National Housing Trust, to offload confiscated properties that previously failed to secure sale at public auction.

NHT currently has no properties listed for public auction but has 65 properties up for sale by private treaty. The state-owned agency does not do foreclosures, a process under which a bank or other lender transfers the title from a debtor to themselves in a takeover of property, usually after the client has defaulted on loan payments.

Cumming said that despite the expected rise in public auctions – and by inference, property confiscations – the real estate market has proven resilient, surprisingly so, potentially because there was a shortage of housing before the pandemic.

“With COVID-19, we expected the market to collapse with job cuts and salary reductions, but the opposite has happened,” she said. “We still have a housing shortage and money continues to just move around.”

Still, for some in the market, news of a COVID-19 vaccine has changed some of the calculations regarding the fate awaiting homeowners whose finances remain vulnerable due to job losses or salary cuts, and failed or failing businesses.

Optimistic sign

News of a COVID-19 vaccine for realtor Andrew Issa is an optimistic sign of an eventual return to normality next year, and an important factor in stemming foreclosures, public auctions and private treaties.

“I doubt we will see any uptick in foreclosures,” said Issa, the managing partner at Coldwell Banker Jamaica. But he also noted that any delay in the vaccine could create some “jitters in the market”.

Magne Evering is not as optimistic. A COVID-19 vaccine will save lives but not much else, he said.

“The vaccine will not create jobs,” said Evering, who holds the position of Qualifying Director at CD Alexander, a popular auction house for repossessed homes and other assets.

“We can anticipate a spike in foreclosures because the lending institutions can only keep those moratoriums for so long,” said Evering. “Those laid off and those with cuts in salaries are going to have issues next year.”

Evering and others think that people will lose their homes as a natural consequence of losing their jobs earlier in the year with the onset of the pandemic. Banks, credit unions and the National Housing Trust offered delays in mortgage payments between three to six months. That timeline generally reaches its end point this month.

Traditionally, each year, institutions reach out to auction houses leading up to July as persons slack off on mortgage payments in order to finance other activity, including vacations, said the CD Alexander executive. For 2020, that timeline would have fallen within the loan repayment-reprieve period offered by lenders.

“This year, we haven’t seen a spike so far,” Evering said.

In the case of the NHT, which manages a portfolio of around 117,000 mortgagors in total, some 6,500 of them applied for the moratorium, costing the housing agency an estimated $400 million.