Tagged: eAuction
ATM :: Five rights loan defaulters should know they have
By Preeti Kulkarni | 18 Apr, 2016 | Times of India
If you have defaulted on a loan, the rules do not give the lenders a complete walkover. Here’s what you should bear in mind if you find yourself in such a situation.
1.Right to ample notice
A default does not strip you of your rights. Banks have to follow process and give you time to repay dues before repossessing your assets to realise the arrears. Typically, banks initiate such proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (Sarfaesi) Act. If the borrower’s account is classified as a non-performing asset, where repayment is overdue by 90 days, the lender has to first issue a 60-day notice.
“If the borrower fails to repay within the notice period, the bank can go ahead with sale of assets. However, in order to sell, the bank has to serve another 30-day public notice mentioning the details of the sale,” says banking and management consultant VN Kulkarni.
2.Right to ensure fair value
The lender starts the process of auctioning your property to recover dues if you fail to clear what you owe or respond during the 60-day notice period. However, before doing so, they will have to issue another notice specifying the fair value of the secured asset as assessed by the banks’ valuers, along with details like reserve price, date and time of auction.
“The borrower can object if the property is undervalued. He can justify his objection by conveying any better offer that he may have so that the bank can make a decision,” says Kulkarni. In other words, you can look for prospective buyers on your own and introduce them to the lender if you think that the property can yield a better price.
3.Realise balance proceeds
Do not write off your asset mentally the moment it is repossessed. Keep track of the auction process. Lenders are required to refund any balance after recovering the dues, which s a real possibility given that property prices can shoot up beyond the owed amount After recovering the dues and expenses of conducting the auction, the bank has to re und the remaining amount to the borrower as the money belongs to him,” says Kulkarni
4.Right to be heard
During the notice period, you can make your representation to the authorised officer and put forth your objections to the repossession notice. “The officer has to reply within seven days, giving valid reasons if he rejects the representation and objections raised by the borrower,” says Kulkarni.
5.Right to humane treatment
Following adverse reports about the conduct of recovery agents, RBI had pulled up banks over the issue. Banks too decided to voluntarily commit to certain best practices as par of their code of commitment to customers.
For one, agents can contact borrowers a place chosen by the latter. In case they have not specified a place, the agents can visit either the borrower’s residence or place of work. They are required to respect the privacy of borrowers, and ensure civil behavior. They can only call between 7 am and 7 pm. Agents cannot resort to harassment or intimidation, nor can they humiliate the borrowers or their family members.
Source : http://goo.gl/H0O5X2
ATM :: De-jargoned: Foreclosure of a property
Ashwini Kumar Sharma | Last Modified: Wed, Jan 06 2016. 01 51 AM IST | Live Mint
According to the Sarfaesi Act, when a borrower fails to repay her loan, the lender can take control of those assets allocated as security for a loan, without any intervention of a court of law
In 2015, many public sector banks conducted e-auctions of foreclosed properties valuing over Rs.5,000 crore to recover outstanding dues against these properties. State Bank of India, Dena Bank, Canara Bank and Indian Bank, were some of the banks that conducted the e-auctions. The types of properties auctioned included residential houses, commercial spaces, plots and even industrial buildings. Let us take a look why lenders go for foreclosure and what they do with foreclosed properties.
WHAT IS FORECLOSURE?
When you buy a house with a home loan, you are supposed to pay back the loan with interest within a fixed tenure through equated monthly instalments (EMIs). However, if you default on paying the EMIs, the lender can foreclose the property against which you have availed the loan. The first time you default on your EMI, the bank will charge a nominal late fee. But if you delay the subsequent instalment as well, the bank will send you an intimation reminding you about the outstanding payments. If you fail to pay three consecutive EMIs, the lender will send you a demand notice asking you to pay the due EMIs along with the late fee at the earliest. A demand notice is typically sent to the borrower as well as the guarantor of the loan. It calls upon them to pay their dues in full within 60 days from the date of notice.
If even after repeated follow-ups and lapsation of notice period you fail to pay, the lender will declare the loan as a non-performing asset (NPA), or a bad loan. After that, it takes custody of the property under the provision of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002.
WHAT HAPPENS TO FORECLOSED PROPERTIES?
According to the Sarfaesi Act, when a borrower fails to repay her loan, the lender can take control of those assets allocated as security for a loan, without any intervention of a court of law. This helps banks adopt measures for recovery or reconstruction, and reduce their NPAs. Once the lender acquires the property, it either sells or leases it out, or assigns the right over the property to another entity to manage. After sale of the property, the lending institution keeps the outstanding dues, and the remaining money, if any, is given to the defaulting borrower.
SHOULD YOU BUY FORECLOSED PROPERTIES IN AN AUCTION?
The reserve price of these properties are usually kept 10-15% lower than the market value, so that buyers find it attractive enough to participate in the auction. However, before participating in the bid, do your own due diligence of the property on offer. For instance, find out the reason why the borrower defaulted on her loan. Check if the reason for default was due to financial constraints or issues related to the property. Do keep in mind that these properties are sold on an “as is where is” and “as is what is” basis, so consider the cost of repairs and renovation while determining the fair value. Also, make sure you have the required funds available with you to make the payments. To participate in the bid process, you have to pay 10% of the reserve price. Successful bidders need to pay 25% of the auctioned price within 24 hours, and the entire amount within 15-30 days.
Source : http://goo.gl/gk8Ste