No storm-related deaths were immediately reported.
Officials had feared that Paloma could slow Cuba's recovery from Gustav and Ike, devastating hurricanes that struck earlier this year, causing about $9.4 billion in damage and destroying nearly a third of the island's crops.
But Vicente de la O of Cuba's national power company said damage to the power grid was far less than that caused by Gustav and Ike in late August and early September.
Paloma roared ashore near Santa Cruz del Sur late Saturday as a Category 4 hurricane but quickly lost strength, according to the U.S. National Hurricane Center in Miami. Forecasters said the Cuban and Bahamian governments discontinued all warnings associated with Paloma by Sunday morning.
At 4 p.m. EST, Paloma's center was 15 miles (25 km) south-southwest of Camaguey, Cuba. Once as strong as 145 mph (230 kph), the storm's winds had weakened to 35 mph (55 kph). Paloma was drifting toward the north at about 1 mph (2 kph).
The hurricane center's forecast said Paloma or its remnants should be near the north coast of Cuba on Monday.
On Sunday, waves more than 10 feet (3 meters) high leveled about 50 modest houses along the coast of Santa Cruz del Sur. Civil Defense authorities said altogether 435 homes in the community were destroyed.
Javier Ramos told The Associated Press he rebuilt his simple wood-frame house in the town after Hurricane Ike, only to watch Paloma flatten it again.
"At least we're alive, but my wife hasn't seen this yet," Ramos said as he scavenged bits of clothing and smashed dishes in his front yard. "I don't know how she's going to react. It's going to be terrible."
Elsewhere in town, Angel Betancourt was skinning a drowned goat.
"The water was up to a meter high and the goat drowned," he said. "What else can we do? We're going to eat it."
Touring Santa Cruz del Sur on Sunday, Vice President Jose Ramon Machado Ventura said the area was among the hardest-hit nationwide.
In the nearby community of Jagua, Herienso Rondon, a 50-year-old retired day laborer, said he was still trying to repair damage from Ike when Paloma tore away his wooden house's roof and pulverized the belongings inside, including a meager bed and mattress.
"I don't have any hope," he said. "After Hurricane Ike (government officials) came to visit me and said they had no way to help and I had to buy the wood for repairs.
"I have no money," said Rondon, who gets a monthly pension of 158 pesos, about $7.50.
Across central and eastern Cuba, more than 500,000 people were evacuated from low-lying areas as Paloma approached. Cuba regularly moves people en masse to higher ground before tropical storms and hurricanes, preventing major loss of life.
Earlier, Paloma downed trees, flooded low-lying areas and damaged roofs in the Cayman Islands. But residents there appeared to weather the hurricane unscathed.
