By Harold Ayodo
Owning homes was believed to be a preserve of the wealthy until banks began to offer friendly mortgage facilities. Arguably, competition has reduced interest rates on mortgages and most financial institutions today require applicants to pay between 10 and 20 per cent of the total amount as deposit.
To qualify for mortgage or a loan, banks often demand securities in the form of title deeds or proof of income. With the introduction of a pension-backed mortgage, the dream of owning a home has become real for many people as they can use their retirement benefits to secure a mortgage.
For financial institutions, the increasing demand for mortgages and other loans has pushed profits into the stratosphere, with many banks recording billions in pre-tax profits.
There are numerous success stories of homeowners who have benefited from existing mortgage facilities. Similarly, there are also stories of broken dreams and investments gone awry.
Defaulting on payment is a common dispute. To recover their capital, financial institutions seek legal redress and scenes of families being thrown out of their homes are not strange when auctioneers swing into action to enforce a court order.
Loss of main sources of income that could also lead to bankruptcy is the main reason why borrowers default on loan repayments. Investors whose properties risk auction can move to the High Court to obtain injunctions to stop an impending sale after proving their ability to pay.
Lending institutions, however, have legal rights to recover their money from defaulting borrowers and may opt to sell the property or appoint an official to manage it to raise the money.
While borrowers have the right to secure their property from the bank as long as they can prove ability to redeem the property by repaying the loan, courts can nevertheless issue foreclosure orders, which absolutely debar borrowers from their rights to redeem.
The High Court can also issue orders of the judicial power of sale especially when the mortgaged property is worth more than the loan.
This is an alternative remedy to foreclosure as proceeds of the auction are paid to creditors on priority basis.
Courts can also order the appointment of receivers towards collection of rents, profits and income from the property. The proceeds are used to discharge the mortgage debt, pay receiver fees and interests accrued.
Lending institutions that move to court seeking orders for the sale of property without special reasons are mostly condemned to pay costs of the suit.
—The writer is a lawyer and journalist.