Foreclosures could spike by year’s-end as loan moratoriums expire
Puerto Rico property owners could face higher foreclosure levels after moratoriums on loan payments provided by local banks after Hurricane María expire in coming months, executives at FirstBank predicted Thursday.
Citing data provided by the Office of the Financial Institutions Commissioner, FirstBank representatives noted that during the quarter prior to the storm’s catastrophic hit last September, foreclosures were at 12.3 percent for the industry as a whole, spiking to 16.9 percent during the third quarter of 2017, and peaking at 31.5 percent during the fourth quarter of last year. The figure dropped to 23.5 percent during the first quarter of this year.
For FirstBank — Puerto Rico’s second-largest mortgage lender — the trend was pretty similar: 6.7 percent during the second quarter of 2017, 7.2 percent during the third quarter, 20.3 percent during the last quarter, and back down to 15.7 percent for the first trimester of this year.
“Delinquencies have dropped since January because people have begun paying their loans, and they’re paying better than before the moratorium,” said Javier Hernández-Scimeca, first vice president of mortgage management at FirstBank.
However, he admitted that the bank is having a specific issue to modify loans for lenders who are backed by the Federal Housing Administration, which has held off on offering the alternative of scooping the payments that have accumulated during the moratorium — in some cases, as many as 10 months — and throwing them to the end of the loan.
Instead, the government insurer is requiring that homeowners start over in paying off their loan. That is a particularly difficult option for FHA-insured Puerto Rico homeowners to accept, as an undefined number — in the thousands — have paid 10, 15, and even 20 years of their 30-year loans, Hernández-Scimeca said.
“It’s one of the biggest problems we have. We can’t push the outstanding payments toward the end of the loan. However, I believe FHA will be coming up with a package for its customers soon,” he said.
Last week, local banking executives met with FHA officials who were on the island participating in the Puerto Rico Mortgage Bankers Association conference, relaying their concerns. Hernández-Scimeca believes they listened and will reveal a different alternative for affected customers.
Hurricane María not only provoked income losses for thousands of homeowners, but physical losses to their properties as well, Hernández-Scimeca said.
“Puerto Rican homeowners who were affected had an average of $7,000 in losses. In the Virgin Islands the average insurance claim was about $80,000, with the biggest losses registered in Tortola,” he said.
Puerto Rico’s mortgage banking sector had a $13.5 billion active loan portfolio as of March 2018. That number is slightly up from the $13 billion on record for September 2017, when Hurricane María crossed the island.