WILD COOT: Housing market condition
It behoves every man or woman who has a house mortgage to get out the copy of the mortgage document and reread it. We would be surprised to see what powers we have given to the mortgagee.
The reality of today’s property market is that for varying reasons, the value of land and houses in Barbados has declined and, in some cases, significantly. If we do not maintain our mortgage payment, banks are constrained to take certain actions. The banker looks at his security to see if at least he can recover the principal. Usually each missed payment brings the loan closer to the possible value of the security. When the market is depressed, the problem becomes more acute. The banker’s first duty is to his depositors whose money he has lent to us. The thought of where the mortgagor will sleep or eat has nothing whatsoever to do with the decision.
For example, if a customer has a mortgage and gets into difficulties at the point where the mortgage loan has been reduced to say $400 000 and no payments are forthcoming, after three monthly payments have been missed the banker ceases to take the interest accumulating into profit. He reassesses the market value of the security and if the market is only offering $400 000 for the property, he will sell under his powers of sale. We could call on the archangel Gabriel for help, it would not matter. Even if our grandmother is living in the house!! ‘Tough tittie’!
It makes a big difference if the mortgagor is prepared to negotiate with the banker. Let us say that instead of paying $3 000 per month, we can only pay $1 500, then the banker will consider extending the life of the loan. Let us say that a windfall of X money will come into the hands of the mortgagor in the next six months, the banker has patience and will wait. Let us say we are about to die and the banker knows that he can sell the property for $1 000 000, the banker will wait and keep an eye on the death notices.
If the mortgagor can find a buyer at nearer his valuation of the property, then let him hurry up and do so.
Calling on the bank to show mercy, sympathy or forbearance is a no-no. Let us say that the banker is sympathetic and lets the matter drift. He would be designated a wimp and be looking for a job. Fortunately, a committee oversees most loans and the bank manager may only be the face of the committee.
The real problem is the perilous or parlous state of the economy. John Doe cannot pay his mortgage because he has lost his job. Mary Doe’s business has had to close because people are not patronising it. We are fighting for survival on the international scene and contrary to the vibes given out by our Central Bank, the banks are facing uphill problems. The Wild Coot has been bringing one such issue to public attention in the last few weeks. Our Government is about to commit banks to do the onerous work of the United States Internal Revenue Department. Banks have to undertake a huge responsibility with concomitant risk exposure. Look at the huge fines of billion of dollars recently imposed on banks. Can any one bank here in Barbados afford such risks? Whoever is advising the Government is not considering the bank exposure.
But Wild Coot, if we do not agree to FATCA, then Uncle Sam will deny our banks the use of correspondent banking services with their US banks. Oh! Well, some battles are worth fighting when it comes to justice. We boast of the finest legal brains. Next year we will celebrate 50 years of Independence. Soon we will celebrate 300 years of democracy, long before the US. Can we not join our voices in protest instead of folding like mice? Let us take this case to the United Nations or the World Trade Organisation. The Caribbean has always looked to Barbados to take the lead. Fathers, mothers, grandfathers, grandmothers have garnered knowledge here and abroad and have returned and influenced their offspring to return here to safeguard our pride and industry. Are those in Parliament going to ‘disguise fair nature with hard-favoured rage:/ Fathers that like so many Alexanders (Adams, Barrows, Arthurs) have in these parts from morn till even fought;/ Be copy now to men of grosser blood’.
My next article will deal with reciprocity. Should Barbadians in America earning or having business with turnover of $50 000 or more pay tax to the Barbados Revenue Authority? Is one American being worth more than one Barbadian being? If you say that your currency is a world currency, should you penalise people for using it worldwide?
Harry Russell is a banker. Email [email protected]