Due to frustrations with the foreclosure process, Kennedy Funding Financial, a prominent international lender with a sizable footprint in the Caribbean region, has decided to stop lending in the U.S. Virgin Islands for an undetermined amount of time. Considerable bureaucratic red tape has made it increasingly difficult to take action on properties with tenants who have defaulted on their loans, resulting in a situation in which even attempting to protect and preserve those properties becomes next to impossible.
The primary source of trouble with the foreclosure process is a backlog of cases as they make their way through the courts. The Territory requires all foreclosures to proceed through the court system, with property owners forced to file suit to initiate the process.
Kennedy Funding CEO Kevin Wolfer, in announcing his firm’s decision, emphasized that the move is based solely on issues with the foreclosure process, rather than any disillusionment with the Territory itself. In fact, he said that, should the U.S. Virgin Islands reform its foreclosure process, Kennedy Funding would absolutely consider returning to the Territory in the future.
Other U.S.-based lenders, facing the same difficulties in completing foreclosures quickly and efficiently, have taken similar steps to get out of the lending market in the U.S. Virgin Islands. Wolfer emphasized this growing trend in announcing Kennedy Funding’s departure, and called on the Government of the Virgin Islands to act quickly to right the situation, lest the Territory continue to struggle financially and become less attractive in the regional real estate market.
Currently, 32 U.S. states and the District of Columbia already operate mostly or entirely outside of the judicial system when it comes to foreclosures. Because the lender does not have to file a lawsuit to foreclose on a property, it allows the foreclosure process to proceed with court delays.
St. Thomas attorney Tom Bolt, Chair of the U.S. Virgin Islands Uniform Law Commission and counsel for several banks, noted that there is ongoing discussion relative to the impediments to credit on the Territory due to the current law on foreclosure. Legislation to provide for non-judicial foreclosure is pending and hopefully will be introduced in the 31st Legislature. It would preserve the safeguards for owner occupied residential property through the judicial system.
BoltNagi is a widely respected and established business law firm serving clients throughout the U.S. Virgin Islands.