Clock ticks for input on mortgage law reform

| 10/04/2019 | 27 Comments

Cayman News Service(CNS): People wishing to provide input to government about its proposals to create specific legislation to deal with home loans have until the end of April to make their submissions. The Law Reform Commission is examining whether or not the laws in this area need to be reformed as a result of public concerns about foreclosures and the levels of hardship claimed by those who have had homes seized by the banks.

The commission circulated a discussion paper last December entitled, The Enforcement of Mortgage-type Security Over Real Estate: Is Reform of The Law Necessary?

The paper is a first step towards a new regime for home loans. It was prepared in response to a request by the attorney general for the commission to look into the need to reform the law on mortgage-type securities over land and, in particular, residential properties.

While there has been a drop in the number of foreclosures recently, a number of weaknesses in the legal regime have already been identified. The discussion paper points out that banks claim to follow a code of conduct when taking homes from people who have defaulted on their loan but it is “entirely voluntary, and non-compliance with the code gives rise to no legal recourse”, the reformers have noted.

The paper also looks at the respective bargaining powers of lender and borrower in home loan arrangements, as borrowers faced with the enforced sale of their home are hardly likely to have the financial means to enforce their legal rights or employ experts to renegotiate their loan.

The persistent complaints that banks act only in their own self-interest in these situations has led many people to believe that when the lender moves in to take a home secured against it, not only do they often do it after a very short period of default, they then undervalue the properties, ignoring the equity people have in the homes.

The perception is that banks take the easy route of selling properties based on the price of an outstanding loan rather than the homes value. They rarely opt to help struggling lenders repackage loans or even give them time to sell the property for the real value before they foreclose.

The commission also said it will consider whether there should be legislation that deals specifically with security over residential property, unlike the existing legislation which makes no distinction between security registered over residential properties and that registered over properties used for other purposes.

The discussion paper can be viewed here or a hard copy can be collected from the commission’s office.

Submissions should be sent to the Director of the Law Reform Commission via email to jose.griffith@gov.ky or in writing,

or by hand to:
4th Floor Government Administration Building, Portfolio of Legal Affairs
133 Elgin Avenue, George Town, Grand Cayman

or by mail to:
Director of the Law Reform Commission
P.O. Box 136
Grand Cayman KY1-9000

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Category: Banking, Business

Comments (27)

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  1. Anonymous says:

    I think that the loan officers need to do their home work better the same way that Insurance Agents should do. For example if one applies for a mortgage for an large expensive home then they should be directed to buy a smaller home that is more affordable. Thing is these days everyone is trying to out do the other and they never live to pay off their loans. Since we are on this subject there are so many folks from many years back whose properties, homes and vehicles that have been paid for are still assigned to the banks. Many people are finding this out and they have to wait forever to get them released also at a cost. This is terribly wrong and needs to be looked into by our Government. The ok to release this is from somewhere overseas like the Bahamas etc. What if there is a death and the families comes along to find this would the Banks accept payments from them? This is totally wrong and dangerous. The responsibility should definitely be on the Banks to notify the various institutes such as the Land Registry and Licensing Department. There are folks whose loans were paid off from the Old Barclays days and is still assigned. We seem to be in a backward situation. Luckily the majority of us has not completed our loans. But to those of us who has we better check with our Banks.

  2. Anonymous says:

    The problem doesn’t lie within the law, it’s people’s understanding of the terms of the mortgage that they sign up to. At the end of the day, an individual won’t sign up to something they can’t afford. I understand that circumstances change and people lose jobs making it difficult to make payments. An individual understanding their mortgage, will help prevent spreading themselves too thin. If someone is living paycheck to paycheck with a mortgage, perhaps they should have purchased a property lower in value then they won’t be foreclosed on.

  3. Anonymous says:

    The public of these islands have voiced concerns to their elected officials, who have then brought the issues up the due process ladder. This is your opportunity to speak your mind, provide evidence when necessary and ensure the system gets changed for the better.

    Note that “I never want to get foreclosed on, even if I don’t pay my mortgage” feedback likely won’t go very far.

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    • Anonymous says:

      Help me here please, didn’t Kennethbryan bring this motion to the house some time ago ? Im sure he did .

  4. Anonymous says:

    It’s not uncommon for some of the foreclosed properties to not even hit the market before they are ‘acquired’ by parties in the chain whether it be in the bank, lawyers or the realtors. Everyone wants a bargain.

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  5. Anonymous says:

    Maybe better to find out why properties get into foreclosure.

    It amazes me that it is still possible in this country, that you can get sick, get fired, and end up on the street.

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  6. I've sent concrete information to the anti-corruption commission! says:

    I’ve sent concrete information to the anti-corruption commission to support the fact that the credit manager of a certain local bank awarded the sale of several properties in foreclosure to his own son, who is a real estate agent at one of the island’s largest real estate firms. The ACC has clear and indisputable evidence of this conflict of interest. To date, I’ve received no response and I’ve not seen any sign of investigation! How can the guy who decides that a home should be foreclosed on, then be allowed to engage his own son to sell the property? Is the credit manager of the bank foreclosing prematurely, so that his son can sell the property and they split the profits? Why is the ACC not investigating this clear breach of fiduciary duty???

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    • Say it like it is says:

      4.38pm If what you say is true then no doubt you will get a response in due course.You need to be careful with your unsubstantiated allegation regarding premature sale as the bank no doubt will respond through their lawyers.

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      • I’ve sent concrete information to the anti-corruption commission! says:

        @ Say it Like it Is – “unsubstantiated allegations”??? Did you miss the “concrete information” and “clear and indisputable” parts of my comment?? What the heck are you talking about? Say something useful, or say nothing.

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        • Say it like it is says:

          11.35pm You suggested the credit manager may be foreclosing prematurely so that his son could sell and split the profits with his father.That was certainly “concrete” and potentially libellous.That’s what I’m talking about.

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          • I’ve sent concrete information to the anti-corruption commission! says:

            There are several documented instances of collusion between these two parties. The ACC only need look at A) who recommends that property be foreclosed, and B) which real estate agent is immediately engaged to list and sell the property. The commission for the sale goes to the agent. There is clear line between the agent and the credit manager. Standard practice is for financial industry professionals to avoid such obvious conflicts of interest in order to avoid the slightest appearance impropriety.

            If the credit manager gives his own son a single foreclosure listing, that is at the very least a conflict of interest and could indeed be considered a breach of fiduciary responsibility as well. If the manager gives his son SEVERAL foreclosure listings, well that is a clear indication of potential misconduct and at the very least warrants the scrutiny of the ACC.

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    • Anonymous says:

      I’ve seen realtors mop up foreclosures, either directly or indirectly, before they’ve had adequate marketing periods. But hey, they’re an all powerful cartel so what can you do.

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    • Anony says:

      4.38 before a bank can sell a delinquent mortgaged property,notice under s.64 and s72 have to be given ton the borrower and the notice period should elapse. If the mortgage delinquency is not updated or the debt restructured, then the bank can force the sale of the property for the value of the property once the property has been advertised on the MLS or by public auction. However the bank can not keep any profits from the sale, only the amount of their mortgage. You may not have as much information as you think you have, be careful.

  7. Michel Lemay says:

    Make certain to send your input before the deadline.All the info how to do it is in the article. That’s how you should voice your opinion. I did !

  8. Anonymous says:

    yawn….banks have never been proved to have acted unlawfully in any property re-posseion in cayman ever.

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  9. Anonymous says:

    Don’t the foreigners love these foreclosures….. They benefit directly.

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  10. Anonymous says:

    remind me again how the banks grant mortgages for 30 years to people on 1 year work permits? oh, so that developers and realtors can all sleep well….

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    • Anonymous says:

      Because people can still own and not live here. Or, OR… let me just guess, work permits get renewed.

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  11. Cess Pita says:

    This is a bit like Caymanians who obtain university degrees claiming they cannot secure a job and that expatriates are employed instead who have no qualifications.There is one documented example of how accommodating the banks can be following every avenue of assistance with the borrower before foreclosure. Let us see documented examples from borrowers on how the banks have exploited and taken advantage of them to back up their claims.

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  12. Anonymous says:

    For conflict of interest reasons, shouldn’t individuals at the bank involved with enforcing the foreclosure then not be allowed to purchase the foreclosed home?

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  13. Anonymous says:

    In Cayman it is not unusual for market value (to move the property in 3 or 4 months) to be less than the mortgage amount on a new residence.

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  14. Anonymous says:

    In many other places the lender has to advertise the property at full market value for a period of time and then has to get court permission to sell for less.

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