When Boat Loans Go Bad, Marine Repo Men Move In

It's the perfect hour for a leisurely cruise: late afternoon on a sunny Friday at a ritzy yacht club in Sarasota, Fla. But for the five men entering the marina, the next few minutes will be an adrenaline rush. Two of them approach the dock on foot carrying a tool bag, pretending to be mechanics. Three partners advance by sea in a 22-foot towboat. Their target: a 46-foot sport-fishing yacht worth $300,000. "She's a beauty," says Rudy Lamel, who's leading this team of "recovery agents" who've spent weeks searching for this vessel.

The boat's owners have fallen behind on their payments, so the lender has called National Liquidators, the nation's largest boat-repossession firm, to seize this floating collateral. It can be dicey work. "Everyone owns a gun around here," Lamel says nervously as the towboat pulls alongside the target. At 4:29 p.m. his team boards the target. "Hurry—cut the lines if you have to," Lamel shouts as the team's captain jimmies the cabin door. Every second counts when you're doing a "snatch-and-grab"—especially when there's a long list of boats waiting to be recovered.

Florida trails only Nevada when it comes to home-foreclosure filings, and car repossessions are running high, too. While troubled borrowers typically work hard to retain a house or a car, boats are the ultimate discretionary purchase; boat payments are the first to slide in tough times. So this coastal paradise has also become a hotspot for marine repossessions. At National Liquidators, marine-repossession orders jumped from 2,136 in 2007 to 3,372 in 2008—and during one week in February when a NEWSWEEK reporter rode shotgun with a boat repo team, the company snatched 68 boats nationwide. Company president Bob Toney says his inventory of vessels has quadrupled since 2006, leading him to lease four additional boatyards for storage. Every day, new repo orders arrive by e-mail.

The rise in boat repos isn't driven by exactly the same forces driving home foreclosures, but there are similarities. Unlike mortgage brokers, yacht dealers rarely offered no-money-down loans; even at the height of the boat-sales boom, in 2005, most marine lenders still required a 20 percent down payment. But lenders did begin approving boat buyers with lower credit scores, and many of these buyers have defaulted as the economy has weakened. Another problem: boats tend to depreciate sharply, while payments often stretch for 20 years. "It quickly becomes upside down—the boat devalues faster than you can pay off the loan," says Jim Renfrow, sales VP for Fairlane Yachts.

Some debt-burdened boat owners willingly turn over the keys. Even some of the "involuntaries" aren't that difficult: snatching a dinghy on a trailer is no more difficult than repossessing a car. But most targets are in the water, where special rules apply. "If the boat is away from the dock and moving, it's ours," says Larry Miller, 72, a veteran repo captain. But if the owner intercedes before the boat is underway, they have to leave it be. The best teams can get a boat powered up in 60 seconds.

There's no owner in sight one afternoon as Miller peers over the fence at a Spanish villa–style home in Miami. Moored behind the mansion is a 48-foot Sea Ray worth $775,000. Miller, working alongside his son Parris, 45, barks for several minutes, trying to discern if there's a dog on the property. There's not, so they unhinge the gate and board the boat with no problem. Not every snatch-and-grab goes this easily: National has had its repo captains chased by knife-wielding owners and knocked overboard, and some of the boats are in such poor repair they've nearly sunk en route to National's storage yard.

Back at the Sarasota marina, where Rudy Lamel's team is trying to snatch the 46-footer, the process starts off well. Captain Steve Salem quickly breaks into the cabin and is on his back, looking up into the ignition panel. "Clips!" he yells, ordering the alligator clips needed to hot-wire the engine. As the towboat starts tugging the yacht away from the dock, there's a loud buzzing sound and the target boat's twin engines come alive. But there's also the smell of smoke as sluggish fuel injectors try to fire. The boat also has a pressure leak, making it impossible for Salem to steer. That's not uncommon; cash-strapped boaters often skimp on maintenance.

Within 60 seconds, Salem has crawled beneath another panel, where he uses a monkey wrench to restore the boat's steering. Meanwhile, a scared-looking dock manager comes running toward the boat, so Lamel hops off the towboat to show him the paperwork authorizing the seizure. Minutes after the snatch, the towboat and target are motoring out of the harbor at six knots, while Lamel ignites a Winston Light. His team has already documented the personal belongings on-board: a bottle of riesling, some beer and a Samsung TV. It will take three days and $1,000 in fuel to get this boat back to their Ft. Lauderdale marina, where it will be cleaned and stored before it's auctioned off. For its trouble, National Liquidators will collect a few thousand dollars plus 10 percent of the boat's sale price; repo-team members each earn about $200 a day. And over the weekend, this team will be back at another marina, seeking to add to their inventory.