Banks Should Form a Department to Work With Borrowers Before Foreclosure
Be the first to review
It is a sad reality that more and more Malaysians are falling victim to foreclosure due to unfortunate circumstances and poor education and poor communication from banks. Industry experts are now urging Bank Negara Malaysia (BNM) and banks to form a department especially to work with borrowers on defaulting payments.
The call for this department arose from a case of M. Moganah, who saw a bank auction off her house in Seri Kembangan, Selangor.
The Sun Daily reported that the 38-year-old found herself in a predicament when the interest rate on her loan was purportedly raised by her bank without notifying her.
After 17 years of living at the household, the bank blamed Moganah for not updating her contact details. Without the knowledge of the change in interest rates, her default payments did not amount which led to her losing her family home.
Yeow Thit Sang, former President of the Malaysian Chapter of the International Real Estate Federation, said that this is becoming a more common occurrence, especially amongst the B40 group.
“The poor chap who signs on the dotted line with a bank is always at the losing end when it comes to default in payment of a loan,” he said as quoted by The Sun Daily.
In Moganah’s case, Yeow says the bank should have been more lenient and should have discussed with her how to solve the issue before taking extreme measures.
“People who lose their houses to banks will often never have a second chance to own another place to call home.”
Yeow urged banks to explore all possibilities to help borrowers – who had not defaulted before – overcome their financial troubles.
With this, BNM and commercial banks should establish a department that would look into such cases, he said.
“The current practice is that if you default on your payments over a number of months, the directive is to foreclose to recover the bank’s money first,” said Yeow.
A chartered accountant, who wanted to be identified only as Manjam, said that while such cases are too common, BNM and banks are not proactive enough in resolving such issues.
“In my experience in dealing with Bank Negara 20 years ago, it was much more responsive and proactive in dealing with such situations. Currently, there seems to be no sense of urgency or priority from it,” he said as quoted by The Sun Daily.
He noted that it seems improbable that Moganah was properly notified since before a house is foreclosed, an officer would be sent to inform the borrower and examine the home.
Lawyer V. Kokila Vaani, on the other hand, said both borrowers and banks must take some responsibility in such cases.
“To avoid this unfortunate incident from recurring, an enhancement of the notification requirement is needed on the bank’s side. On the other hand, the borrower must also make sure to constantly update their banks on their contact details,” she said as quoted by The Sun Daily.
This article was repurposed from the original article by PropertyGuru.