PHOTO BY CARLINGTON WILMOT
Valerie Levy Susan Gordon, Staff Reporter
"A LITTLE LESS than 10 per cent of properties sold on the real estate market go for auction because of defaults in mortgage payments," says realtor Valerie Levy .
Analysts say this figure is indicative of the fact that many home owners need to spend more time understanding how the mortgage process works, specifically as it relates to payments.
Timeliness and consistency are the two key elements of mortgage payments for a home owner. In today's mortgage world, once you have slipped in your payment, your home begins to slide from under you.
Based on a survey done with the various mortgage companies by Sunday Business it appears that most loan institutions give the mortgagor a maximum of two months to be in arrears. If you are in your third month of arrears, "Watch out!" It means the lender is processing your property documents for the purpose of selling your property to recover its funds.
'HIGH DANGER'
The National Housing Trust (NHT) which provided 6,260 mortgages during the financial year 2004-2005 says three months of non-payments and you are in "high danger."
The NHT gives mortgagors a maximum of two months to forfeit on mortgage payments. A mortgage officer at NHT said after the two months' lapse, a notice letter is sent out and then the account moves to the debt collection unit.
At the Victoria Mutual Building Society, "After three months, it goes on sale," said senior vice-president of operations and chief credit officer, Frank Harrison.
NOTICE
"After you miss the first payment, you are served a notice; after you miss the second month you are liable or considered to be in default," said Mr. Harrison
He told Sunday Business that when the borrower is in default, the company puts up the property to be auctioned but this is where it is found necessary. The mortgagor is usually given at least a month's notice after the second month of non-payment.
If the auctioneer made no progress then the property is advertised and placed on the private treaty listing for sale.
Jamaica National Building Society allows the mortgagor one month's delinquency. After there is a default in payment, a demand notice is issued for the client to pay his or her arrears within seven days of the issuance of the notice. Then a statutory notice is issued giving the individual 30 days to pay off the loan.
Both NHT and the building societies say mortgagors always get the chance to come in and speak with an officer in cases where they have difficulties paying. They also pointed out that they try to maintain communication with the borrowers before taking drastic action.
BORROWING
Mrs. Levy pointed put that most persons still try to retain their homes by borrowing from friends and relatives to pay off the mortgage arrears.
Though a two-month period may seem short and unfair to some mortgagors, Mr. Harrison explains why loans institutions shorten the mortgage default period to two months.
"One good reason is that mortgage payment usually represents a large portion of one's income so, for the average person, you cannot afford to slip or else it will be very difficult to catch up," He said unless you have some savings, then it becomes burdensome to pay up your mortgage.
"Slipping payments for two months is twice as hard. One would have to start chasing the arrears as it slips," he added, stating that timely payment of a mortgage was a discipline that must be maintained.
He explained that all financial
institutions have to monitor every loan and review their classifications because they operate under strict regulations encoded by laws both local and international.
International laws prescribe the circumstances and the criteria for classifying loans from good standing to those treated as loss said Mr. Harrison. He said these have implications on the quality of the loans portfolio and the credit rating of the institution.
"You have to maintain good quality loan port folio if not, the value of your assets gets discounted and brings into question if you are strong enough to take deposits," he explained.
