Sunday, February 22, 2009  |  by  Maxine Million

Strategies to Keep Your Investment

Building societies booked $14.5 billion in new mortgages as at September 2008. Compared to 2007, Bank of Jamaica statistics show that this is a 44 per cent jump from the number of new mortgages booked year over year.

No question about it – in late 2006 when building society interest rates hit the all-time lows of 12.99 per cent on the heels of the announced low rate of six per cent by the National Housing Trust (NHT) for contributors who earned $20,000 or more per week, Jamaicans when on a property shopping and money borrowing spree.

And, lest we forget, many of us had other, high-yielding sources of income to help us afford new houses. Additionally, in order to access the high-yielding sources of income, many of us borrowed against property we owned.
Of course, now that the party is over, property owners are waking up to the triple whammy of rising mortgage interest rates, the disappearance of high-yielding income and the spectre of job losses.
The rising cost of your mortgage
The situation is very sobering. Hugh Reid, Senior vice-president & chief operating officer, in a February letter to Victoria Mutual Building Society mortgagors stated: “The recent interest rate increases by the Bank of Jamaica has forced the Society to increase interest rates on ..new mortgages and increased interest rates on existing mortgages will likely follow.”
Robert Wright, manager of First Caribbean International Building Society sent out a similar letter to mortgagors in January.
Government to the rescue
In an attempt to mitigate the pain facing homeowners, Prime Minister Bruce Golding in December announced that, “As of January 1, we will be increasing the period after which non-performing loans are booked from 90 days to 180 days. This will remain in place until the current economic crisis is behind us.”
This moratorium applied to the building societies and the NHT.
Wake-up Call
As nice as the new measure sounds, recognise that if you are behind in your mortgage for 90 days, all that will happen is that it will be another 90 days before the lender can begin the foreclosure process. So the imperative is to devise a strategy to hold on to your house.
Strategy Session
-    Cut your budget
Go through your budget and strip it down to the bone. Get rid of the non-essentials that drain your cash. You may have to give up certain niceties such as cable television, internet, cellphone credit (yes, go back to just using your land line).
- Sell something
Do you have an extra car? What about furniture? Do you have a stock portfolio? It is better to take a lower price on these assets, have the cash, and pay your obligations than lose the property.
-    Juggle your bills
If your back is against the wall, you may have to choose to let some bills go unpaid. For most of us, the higher priorities are mortgage or rent, utilities, food and health/life insurance. The fact is, that you must live somewhere, you must use light and water, you must eat and if something were to happen to you, your family should be protected.
Now that you have stripped the mortgage down to the bare essentials, the next step is to review your mortgage payment options. Do not be ashamed. Now is the time to act before you wake up and see your property listed for auction in the newspapers.
-    Pay something
You have cut your budget to the bone and you still cannot make the monthly mortgage payment in full. Don’t give up hope and just sit back. Pay as much as you can. This shows that you are making an effort and this will help you to negotiate terms with your lender.
-    Reinstatement.
If you are in arrears for one or two months and you now have the cash to clear off the debt, call or write to find out if your mortgage banker will reinstate you as a current mortgagor. This removes you from the list of potential foreclosures.
-    Options available to NHT mortgagors
Based on the mandate from the prime minister, the Housing Trust offers several ways that mortgagors under pressure can get relief.
-    Suspension of mortgage payments
-    Reduction in monthly payments
-    Rescheduling of mortgage payments
In his February letter to homeowners, Reid notes: “It is therefore important that at the earliest sign of difficulty.that you visit or contact our Mortgage Department at our Duke Street location so we can work together to make payment arrangements on your account.” This shows that bankers are very flexible and are willing to work with you.
It costs the banker far more to foreclose than to work with you.
At the end of the day, the mortgage lenders are not real estate companies. They do not want to hold on to your asset and have a bad debt on their books. Remember that they too are under financial pressure.
If you cannot pay your mortgage and they have to foreclose, it costs them. They have to pay several professionals such as valuators and auctioneers to sell the property. And if the market continues to be soft, it can take up to a year or more for the property to sell – and they might not get the full asking price. It is much cheaper to work with you.
So, you do have options and you have the power to hold on to your house.