Banks will not foreclose on mortgages as delinquencies rise, pledges banker

With tens of thousands of Bahamians still unemployed and unable to maintain monthly financial obligations, President of the Clearing Banks Association Kenrick Brathwaite said banks will exercise extreme forbearance, vowing that most delinquent mortgages will not be foreclosed.

During the month of November, mortgage delinquencies expanded by $37.4 million (8.5 percent).

Brathwaite said while he expects that number to climb, banks have pledged not to take Bahamians out of their homes.

“We are going to be very tolerant again. We were very tolerant with the unsecured loans, so you can multiply that by ten and that’s how we will be concerning persons with mortgages. It’s not going to be an easy thing for us to say okay guys, you’re out of your house, we’re going to foreclose. That’s going to be a last resort for us. Most banks will not take that step, not in the first six months, not in the first year,” he told Guardian Business yesterday.

“You’re going to find that all of those that have a chance to be repaid will remain on the books. We will give them some kind of forbearance on whether we restructure those mortgages. Many of them, if not all of them are going to stay on the books in some kind of way.”

Bloomberg Business reported yesterday that the United States was on the cusp of a housing and mortgage crisis, citing concerns of a “wave of evictions” looming as rental assistance and mortgage forbearance programs, as well as eviction moratoriums soon end.

Brathwaite said while both the US and Bahamian mortgage market are going through the same pandemic, that’s where the similarities end.

“First of all, when the US had its mortgage or housing market crash in 2008, we did not feel that same impact. The reason is that our mortgage market has always had strength. We’ve always had a real strange phenomenon in The Bahamas where a lot of persons do not qualify for mortgages. If you look at the listings for all of the various banks out there, whether it be foreclosed or delinquent mortgages, you would find that there is no secondary market for mortgage foreclosure. That’s a challenge for us,” he said.

“Out of COVID-19 we want to be careful that we don’t put everybody in the same package, because the greatest impact for unemployment would be in the tourism industry. So you would find that government, banking, those persons who really are the ones making up a big portion of the mortgage market, their salary is still intact.

“So we’re not going to have that kind of mortgage impact that persons would think. Bahamian banks have always been extremely tolerant to mortgage holders. We allow them to run a long, long time before we even move to foreclose. Secondly, the Homeowners Protection Bill has a lot of protections in it that makes it even more difficult to foreclose on Bahamian mortgage holders.”

And although credit quality indicators have deteriorated for banks, heading into 2021 Brathwaite said he expects the sector to remain strong.

“Two challenges we’re going to have, which will be no challenge really. One is capital. Most banks’ capital adequacy ratios are well in line with Central Bank guidelines; and two, our liquidity will be strong enough to withhold anything. Delinquency is going to go up, non-performing loans are going to go up because of the hotel sector. But you’re going to find that the banks are going to remain very strong during this period,” he said.

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