In what cases can a bank take an apartment for mortgage debts
Mortgage is one of the types of long-term lending. No matter how banks try to minimize the risk of non-payment, no one is insured against unforeseen life circumstances, and it is impossible to predict what will happen to the borrower after 5-10 years. Therefore, situations when mortgage debts arise are not uncommon. Read in the article whether a bank can take an apartment for mortgage debts, what way out of this situation does the borrower have and what awaits him as a result of the formation of debt.
Common reasons for the formation of mortgage debt are banal situations - loss of a job, a decrease in income. These circumstances are practically independent of the borrower, and he can rarely take steps to avoid such life situations.
Banks try to reduce the risk of insolvency by requiring the involvement of co-borrowers when applying for a mortgage loan. However, almost always the spouse acts as a co-borrower, and with a sharp decrease in the family budget, this person also cannot ensure the timeliness of payment.
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At first glance, it seems that the monthly mortgage payment is quite feasible. But in fact, along with the loan, the borrower acquires other obligations:
- Payment of utility services;
- property tax;
- annual renewal of the mortgage insurance contract.
Often, it is precisely because of the cost of renewing insurance that the first delay in a mortgage agreement occurs. The only missed payment according to the schedule leads to an increase in debt, because fines, penalties and forfeits are charged on the amount of the resulting debt, stipulated by the terms of the loan.
Another common cause of debt is divorce. Spouses rarely manage to agree on a reasonable division of the loan burden, so a long trial postpones the fulfillment of mortgage obligations indefinitely. This becomes the reason for the emergence of debt and the application of penalties by the bank.
What Happens After a Mortgage Arrears?
The bank does not immediately go to extreme measures. To begin with, the organization will try to figure out why the debt has formed. Employees of the overdue debt department will start calling, writing letters and inviting to the bank to resolve the situation.
As a rule, the bank will offer the borrower to issue a debt restructuring or credit vacation. The first option is to increase the loan term, resulting in a decrease in the amount of the monthly payment. Another option is a temporary exemption from the obligation to pay a mortgage. The loan holiday period usually does not exceed one year, but this time is enough to restore financial stability.
If the debtor does not negotiate with the bank, then the only option left is to return the funds - the withdrawal of the apartment. The bank usually does the following:
- Sending a written notification of the intention to start the procedure for the seizure of real estate pledged. The notice shall be sent to the debtor one month before the expected date of commencement of the court proceedings.
- If the borrower does not take any action (restructuring, repayment of the debt, etc.), the bank may demand early repayment of the mortgage in full.
- If the request is ignored, the bank sues.
- The court makes a decision to evict the debtor and seize the subject of pledge.
As a result of the trial, the housing is seized, and the property is put up for auction. Debt repayment occurs at the expense of funds received from the sale of real estate. If any amount remains after the closing of the mortgage loan, it is returned to the non-payer.
What to do if you have mortgage debt?
There are several options for resolving the issue with the resulting mortgage debt. However, it must be understood that none of them can be considered a panacea. So let's look at each method.
Extension of the term
The debtor has the right to apply to the bank and write an application with a request to extend the mortgage term. This method is suitable for those who did not apply for a loan for the maximum possible period.
It should be taken into account that an increase in the term may serve as a reason for raising the interest rate on the loan or the occurrence of an additional commission. However, the issue of the debt that has arisen will be resolved, since, despite the increasing coefficients, the monthly payment will be lower than the original one.
Assignment
According to Federal Law No. 102 “On Mortgage” and Art. 382-393.3 of the Civil Code of the Russian Federation, the bank has the right to assign the right to claim the loan to third parties. This happens in the order of cession or subrogation (for insurance companies). In this case, nothing will change for the borrower. Most likely, the amount of debt will not be reduced.
In turn, the borrower can also transfer the obligation to repay the loan to a third party. This is done through the sale of collateral. It is important that the buyer is aware that the property is encumbered and subject to collateral. He must give his consent in writing to the fact that he assumes obligations under the mortgage loan in full.
The bank can meet halfway and find a buyer on its own. For a new borrower, this is a profitable purchase, since the interest rate on already mortgaged real estate will be lower than under a newly concluded agreement with the bank.
On-lending
In some cases, it is allowed to issue a new loan to repay an existing one, but banks do not often do this, since there is no guarantee that a newly issued loan will not suffer the same fate.
The interest rate for a consumer loan will be higher than for a mortgage. Such refinancing is possible if the citizen has solvency. In this case, a new payment schedule will be formed for the final repayment of the mortgage.
Sale of collateral
The bank may offer the borrower to sell the mortgaged apartment without a court decision. A peace agreement implies setting a price that will suit both parties.
After the sale of the property, the mortgage must be fully repaid, including payment of fines, penalties and commissions. The rest of the amount is returned to the payer.
However, more often in practice, after the sale of real estate, the borrower remains indebted. The way out of the situation will be preliminary insurance of the object against possible risks associated with the inability to pay the mortgage.
Bankruptcy of the borrower
According to the amendments to the legislation introduced by Federal Law No. 476 of December 29, 2014, citizens who have a debt of more than 500 thousand rubles have the right to apply to the judicial authorities to declare themselves bankrupt. This right can be exercised if it is impossible to pay debts on existing obligations for more than three months.
At the same time, it should be borne in mind that declaring a citizen bankrupt does not relieve him of the need to pay off his mortgage debt. Since the loan is secured by a pledge, that is, an apartment purchased with these funds, the property will be sold at auction. Bankrupt status is maintained for five years.
Transfer of mortgage debt to court
As mentioned above, if the bank's requirements expressed in a written notice are ignored, the credit institution sues the defaulter in court. The statement of claim is submitted to the district judicial authority at the location of the subject of pledge.
The following documents are attached to the claim:
- confirmation of the termination of payment under the mortgage agreement;
- contract of sale of an apartment;
- mortgage agreement;
- documents confirming that the apartment is the subject of collateral.
By a court decision, the apartment will be alienated to the bank. If the owner interferes with the execution of the court decision, then the bailiff service is involved in the case.
If the bank has filed a lawsuit against you, contact a lawyer for advice. In some cases, it is possible to resolve the issue without withdrawing the apartment. You can get legal help on our website.
Will the bank take the apartment?
When a debt for a mortgage arises, the borrower has a well-founded fear that his family will be kicked out into the street, and his apartment will be seized. It should be taken into account that only bailiffs can arrest an apartment by the appropriate court decision. Any threat of collectors or the bank is a way of intimidation.
They can take an apartment because of a mortgage debt even when it is the only real estate suitable for habitation, owned by a defaulter. However, there are some legal restrictions. So, for example, it is impossible to seize a mortgage apartment if the amount of debt is less than 5% of the value of the property, and the delay is less than three months.
If a minor is registered and lives in the apartment, then real estate can be sold only with the written consent of the guardianship and guardianship authorities. The opinion of an employee of this body is always taken into account.
We recommend that you do not hide from the bank and consult with a lawyer. Almost always, the issue can be resolved on mutually beneficial terms. Remember that the bank can legally take the apartment for mortgage debts, but timely measures taken will help to avoid this.
