You can successfully fight foreclosure on your property

Sembule Group was the first company owned by Ugandans to manufacture steel products, including wire mesh and nails. It became household name when it extended to financial services by starting the Sembule Investment Bank, an insurance firm - Pan World Insurance and a television and radio assembling plant.

In the late 90s, it also ventured into manufacturing energy saving bulbs.The company’s troubles started in 1997 when it acquired a loan from PTA Bank to expand its banking experience but the bank [Sembule Investment Bank] was run down by poor management, according to Bank of Uganda, and was eventually placed under liquidation.

In 2014, it lost its Shs27b factory in Nalukolongo to businessman Frank Nekusa who bought it at Shs5b and paid off other outstanding debts. Since then, a number of other prominent businesses have had their day in court fighting against foreclosures from lending institutions and individual money lenders.

A foreclosure is when property is taken over by a bank or any other money lending institution for failure to keep up with mortgage payments.

Judith Ninsiima, a lawyer, notes that when a house goes into foreclosure, it is the start of a long, detailed process where a financial institution seeks to take title of the property back from the owner.

“Many people panic when they receive writs mistakenly thinking that they have already lost their property. That is not true. It only means that a process has been started because the owner has failed to make their mortgage payments on a timely basis,” she reveals.

Dealing with foreclosure
Ninsiima, reveals there are many ways of dealing with a foreclosure, but to start with, if a homeowner is served with the summons and complaint in a foreclosure, the first thing they should do is hire an attorney that does foreclosure defense work.

The lawyer can then guide you on which option to take.

“Remedy and procedure for the relief of foreclosure is provided for under the Mortgage Act 2009 which repealed the Mortgage Act cap 229. Either the property owner can willingly hand over ownership to the lending institution which then has a right to sell the property to recover its money,” she explains.

For a mortgagee to exercise the remedy of foreclosure, the provisions of sections 19, 20 and 26 of the Mortgage Act 2009 have to be strictly followed.

Section 91(1) provides that where money secured by a mortgage is made payable on demand, a demand in writing shall create a default I payment. 19(2) is to the effect that where the mortgagor is in default of any obligation to pay the principal sum on demand or any interest or other relief payment or part of it under the mortgage, the mortgagee my serve to the mortgagor notice in writing and require the mortgagor to rectify the default within 45 working days.

If after the expiration of the time stipulated in the notice the mortgagor has still failed to pay the monies due, section 26 empowers the mortgagee to foreclose and sale the mortgaged property. This foreclosure is a statutory power of sale based on compliance with the prescribed procedure.

The act has safeguards in place that empower a mortgagee to sell without prior intervention of court. These safeguards include:
Effective service of the notice clearly stipulating the time frame within which to pay onto the mortgagor.

If after the notice period, the mortgagor has still not paid, a notice of intension to sell has to be issued to the mortgagor but most importantly, it has to be served onto the spouse or surety of the mortgagor. This is to give an opportunity to apply for relief from court if there is just cause to halt foreclosure.

The sale by a mortgagee has to be by public auction unless sale by private treaty is agreed to by the mortgagor.

A sale by order of court may be conducted in the manner directed by the court in accordance with regulations eight and nine of the Mortgage Regulations 2012 respectively.

Ninsiima notes that all these procedural requirements are to ensure that the mortgagor has been given an opportunity to exercise his right or equity of redemption before the option to redeem is extinguished.

Avoiding foreclosure
The clear cut way of avoiding foreclosure is to be up-to-date with one’s payment schedule as provided by the mortgagee advises Molly Akite relationship officer at Housing Finance Bank.

This notwithstanding, we cannot turn a blind eye on the unexpected occurrences that may affect one’s ability to meet his payment obligations under a mortgage.

Once a borrower realises that he may not be in position to meet his payments on time, below are the steps to be taken in order to manage the foreclosure process.

Explain to the bank
Approach your bankers and explain your predicament. Banks too have a human face and their core objective is not only to make profit but also to recover their money at the least cost without destroying their relationship with the borrower. They normally become high handed when push comes to shove and the borrower is adamant.

“With the help of your relationship manager, one can request that the loan be rescheduled and monthly instalments reduced, this will be considered depending on the borrower’s cash flow and projections,” says Akite.

Ask for more time
Where a borrower/ mortgagor has no hope of raising money to repay the debt, approach your bankers, explain your scenario and request for the suspension of interest and agree on how the property can be liquidated to offset the loan obligation.

More often than not, borrowers keep away from their bankers upon hitting a financial hiccup. Such not only leaves the interest running at a penalty rate but also forces the banks to incur heavy expenses in the foreclosure process which expenses are transferred onto the borrower.

In the long run, the penal interest rate and the expenses of foreclosure end up eating up the money the borrower could have retained an amicable sale agreed upon between him and his bankers.

Most people complain about how their properties were sold off by financial institutions through foreclosure at giveaway prices.

Courts overtime have penalised any financial institution that has sold mortgaged property at lower than its market value. They have also gone ahead to advise that the mortgagor should be given an opportunity to look for a buyer if he/ she feels they can get a better offer for the property.

Therefore, where a borrower has hit a dead end, it is advisable to engage his bankers and reach an understanding allowing him to sell the mortgaged property as long as the proceeds are directed at offsetting the mortgage first.

Ninsiima reveals that some borrowers often rush to court to halt the foreclosure process yet this can easily be done amicably by engaging one’s bankers.

At the end of the day, no court will tell you not to pay your loan obligations. Litigation may only delay the inevitable but will not waive your loan. It is advisable to only engage into litigation where the financial institution has flouted the foreclosure procedure, sold at a price below market value and adamantly charging exorbitant penal interest rate.

“If a homeowner fails to make the required mortgage payments, the lender may foreclose on the property. Depending on the terms and agreements made within the original mortgage contract, the lender may initiate either a statutory or a judicial foreclosure,” says Ninsiima.

Forms of foreclosure
Statutory Foreclosure
A statutory foreclosure to force the sale of the property can be performed without bringing a court action. The lender must follow strict state regulations as to the proper notices and opportunities for the homeowner to provide payments before the sale of the property. This procedure is a relatively fast process.

Judicial procedure
If a judicial foreclosure action is required to force the sale, the lender must file a complaint with the court system and go through the litigation process. In several state jurisdictions, the homeowner is allowed the right to stay in possession of the home until the foreclosure process is finalized or a sale of the home occurs.

Foreclosure and the tenant

In the battle between landlords and lenders, it might seem as though tenants have no leverage. This may not be the case.

Whether the property is owned by the old owner, the new owner, or a foreclosing bank, everyone will be much happier if they get a monthly check.

Occupancy has great value for landlords and banks. What they don’t want is an empty property. If the property is empty, it may be subject to vandalism or weather damage.

In some situations, if the property is not occupied for a given time, insurance can lapse. The owner can then be stuck with a vacant property and no insurance. Property owners in such areas might be especially willing to work with tenants and avoid serious penalties for violations.

In the end, tenants and property owners will probably do best getting together and comparing interests. As a renter, you likely have some leverage, so don’t be afraid to tell property owners what you want. If you need help speak with local attorneys and housing office officials. With any luck, everybody will see the benefit of just working things out. (real-estate-law.freeadvice.com)

Lender compromise
Since some lenders prefer to avoid the cost of foreclosure, they are sometimes willing to work out an agreement with the homeowner. The lender may accept “interest only” payments or partial payments for a time to assist the homeowner. There are detailed regulations which must be followed regarding the foreclosure procedures. It is recommended that if you are facing a foreclosure proceeding, a consult with an attorney who can interpret these regulations would be in your best interest. (real-estate-law.freeadvice.com)