After receiving the mortgage loan from the bank, not every borrower can manage to use such loan for the right purpose as stated. Some have bad investments and lose their solvency. In which incurred bad debts urge the bank to foreclose on the mortgaged properties for sale. However, this process must be in accordance with the laws.
Firstly, identify which bank is entitled to foreclose on the mortgaged properties.
When a mortgage is overdue but the borrower still does not fulfil or rightly fulfil his/her obligation, the lender is entitled to take possession and sell the secured properties. In other words, the foreclosure occurs when the bank fulfilled its obligation but the borrower has yet to repay the loan and interest.
In which, under the Civil Law 2015 and Decree No. 42/2017/QH14 on experiment for credit institutions to recover bad debts, enacted by the National Assembly. Banks must comply with procedure to foreclose on mortgaged properties as follows:
Step 1: Give the borrower a written notice before a reasonable time (commonly around 15 days for real estates and 30 days for movable properties).
Step 2: The borrower gives the secured properties to the bank. If he/she refuses or is not able to do so, the bank has the right to request a competent court to enforce this transfer.
Step 3: Reassess the property value, since value of movable properties may depreciate over time while that of the properties may appreciate.
Step 4: Auction the secured properties.
In this step, the bank must hold an auction of the property at the headquarter of a property auction organizer where the properties are located or other places according to the agreement between owners of auctioned properties and property auction organizer, except the laws regulate otherwise.
Step 5: proceed with procedures to transfer property ownership to the new owner, pay fees and the borrower’s debt, any remaining amount will be returned to the borrower.
Accordingly, the mortgagees do not have total discretion in foreclosure on secured properties, instead, they must comply with the procedures prescribed by laws. So that lawful rights and interests of the mortgagees and the debtors would be balanced. In the foreclosure, the bank must comply with the laws, the borrowers must know the procedure available for them to intervene whenever being aware of the bank wrongfully foreclosing. Therefore, both parties should consult lawyers.
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