Lacking hard data or the sight of fishing boats clogging up coastal bank parking lots, it’s difficult to confirm persistent and growing rumors that repossessions are soaring and as many as 100 lobstermen could lose their boats through loan defaults this year.
The number of commercial fishing vessel repossessions in Maine — and nationwide — is not available. Government agencies don’t collect or track the data and lending institutions are not required to share the information with the public.
Nonetheless, interviews with bankers and other lenders from Kittery to Lubec, as well as the U.S. Marshals Service, which is involved in some boat seizures, revealed no increases in annual fishing vessel foreclosures.
Still, Maine Lobstermen’s Association president Dave Cousens said he knows “three or four guys that have had boats repossessed in the mid-coast” and he’s concerned about fishermen who are swamped in debt and struggling to make boat mortgage payments.
“Our costs have skyrocketed and the catch has plummeted,” explains Cousens. “If you don’t have boat payments, should things go down, you still have money to live. If you have boat payments and the catch is down, especially in this economy, you’re not able to pay your bills.”
Some new and non-traditional loans available to fishermen can lessen financial strains, as well as one little-known legal option that can stop repossession.
But as fishing season begins, commercial lenders see few, if any, distress signals despite a 40 percent drop in landings since they peaked in 2003.
Working Waterfront surveyed 13 small-to-large-sized lending institutions that, among others, finance the lobster fishery to varying degrees.
Machias Savings Bank president Edward Hennesy echoed lender statements when asked if fishing boat repossessions or loan delinquencies had increased in the last three years: “We haven’t noticed a big difference. If there’s going to be a difference, it might be this year but we’ve seen nothing to be alarmed about — yet…. We’re hoping for a good season.”
Lobster boats cost $10,000 to $450,000. A standard 10-year loan for $150,000 at 7.5 percent, for example, translates into $26,600 per year.
Add boat and gear maintenance plus soaring insurance, bait and fuel costs to pursue fewer lobsters whose dock prices have virtually flat-lined and, without a jump in landings or decreased fishing effort (which has remained high despite catch losses) and the image of boats being auctioned off doesn’t seem so remote.
“There’s no question that boats have gotten bigger and more expensive and that [fishermen] are overcapitalized,” observes maritime attorney Nicholas Walsh of Portland. “Some guys have $4,000 to $5,000 a month boat payments and some own two boats.”
Walsh’s practice hasn’t seen a spike in fishing vessel liens, but he notes that bankruptcies among fishermen may be growing.
Bankruptcy filings in Maine nearly doubled in 2007. While unknown numbers of fishermen were among the 2,300 people who filed, only two utilized Chapter 12, according to Peter Fessenden, a U.S. District Court trustee.
Chapter 12 not only halts vessel repossession but allows commercial fishermen to restructure debt, including home and boat mortgages, at current value.
Repossession of assets financed by banks or other lenders occurs every year for many reasons including bankruptcy, ill health and illegal drug use.
Yet despite troubles in the fishery, 99 to 100 percent of boat mortgages and fishing-related loans are paid on time, and delinquency rates in the last three years have not changed among lenders surveyed for this story.
Most banks said they had zero repossessions in the last three years; two mid-sized banks reported one to two per year; and one large-sized bank noted one in 2008.
These 13 lenders combined averaged two to four fishing boat foreclosures per year.
The U.S. Marshals Service in Portland cited no increases of annual fishing boat seizures. Purchasing agent Tina Moore estimates that federal marshals serve warrants on about five commercial fishing vessels of all types each year.
Working Waterfront also contacted boatyards, boat brokers, and auctioneers in Maine and New England to determine if they held vessels that had been seized by banks or other creditors who were not interviewed for this story.
None of them were holding repossessed commercial fishing boats and none had been contacted by a Maine lender to sell a fishing boat.
Lenders don’t want repossessed assets, including fishing boats.
“We can’t make money off a boat, but the lobsterman can,” points out Joseph Murphy, president of Bar Harbor Bank & Trust. “It’s unlikely that we’ll receive the full value of it — there’s almost always a loss of that. So it’s in everyone’s interest to work together.”
Commercial lenders repeatedly emphasized that as soon as a borrower sees trouble ahead, she or he should contact the banker.
Familiar with fishing’s up-and-down cycles, lenders can modify loans, including payment deferrals, and issue interest-only or other loans to bridge fishermen into the next season, explained Kenneth Steele, senior loan officer at Damariscotta Bank & Trust.
Lenders said they work with some fishermen every year to keep them afloat but saw no significant growth in interim-financing requests in the last three years.
Reflecting economic and fishery downturns, requests for new boat loans are down but loans to refurbish vessels or replace fishing gear are up, according to Bath Savings Institution’s senior commercial lender Geoff Gattis.
Loan officer Robert Horne at Farm Credit, a cooperative, says he’s “seen a handful of fishermen sell off boats and gear” recently and that Farm Credit, which specializes in loans to fishing, farming, and forest industries, has extended repayment terms for some fishermen in the last two years.
Among non-traditional loan options available to fishermen, the non-profit Coastal Enterprises Inc. not only provides gap funding, but finances boats at below market rates. And the Finance Authority of Maine (FAME) is currently offering direct, below-market rate loans under the state’s Economic Recovery Loan Program.
Meanwhile, FAME and Farm Credit are working together to fund loans to help lobstermen comply with new federal trap-line regulations, effective this October.
“The cost to convert floating line to sinking line could be anywhere from $10,000 to $15,000 for 100 traps,” said Horne.
Lending institutions interviewed for our story (WWF May 2008) on commercial fishing vessel repossessions: Bath Savings Institution, Bar Harbor Bank & Trust, Camden National Bank and Union Trust Company, Damariscotta Bank & Trust Co., Farm Credit, Gorham Savings Bank, Kennebunk Savings Bank, KeyBank, Machias Savings Bank, Northeast Bank, TD Banknorth, The First.