The writer owns an office specializing in banking law and commercial and civil law
An increase in the Bank of Israel’s interest rate is reflected in the mortgage interest rates, and increases the payment volumes. The direct and immediate effect is on the track next to the frame. In her average 25-year mortgage of one million shekels where one third is taken at prime interest, this is an increase of 450 shekels in the monthly repayment since the beginning of the year due to the increase in interest rates.
A mortgage is a loan agreement for all intents and purposes, in order to guarantee its return, a real estate asset is mortgaged, which the lender, the bank, can exercise in the event that he did not receive back the money he borrowed according to the terms of the agreement between the parties.
There is no need to expand, because in the absolute majority of cases, this is an agreement that has enormous economic consequences for the borrower and accordingly, it is very important to make a considered and informed decision, what is the scope of the loan and what are the repayment rates and dates, which the borrower expects to be able to meet.
Unfortunately, sometimes even in the case where the mortgage matched the repayment capacity at the time of taking it out, changes in economic circumstances – such as a decrease in the repayment capacity of the mortgage holders or such as those that happened recently with the new interest rate increase – may lead to difficulties in meeting the loan repayment conditions.
What do you do if a problem is expected in paying the mortgage repayments?
In the event that it is known in advance about a temporary problem in meeting the repayment of her mortgage payments, it is recommended to proactively contact the bank and try to agree on a grace period during which the bank will not collect the current repayment payments or will collect only a part of them (for example, only the interest or principal component) .
What happens when the bank turns to the debtor with a request to realize her mortgage?
When the debtor receives a warning notice from the bank about the initiation of mortgage enforcement procedures, he must perform a number of checks: Is it a cessation of payment due to the death of the spouse; Does the deceased sign valid life insurance documents and in this case demand the payment of the balance of the loan by the insurance. If there is no life insurance, it is necessary to check why insurance was not taken out, as sometimes it may be the negligence of the bank officials, in which case there is a chance of getting an exemption from the repayment of the loan.
Second, due to the amendment to the enforcement law, the bank may take procedures to realize its mortgage only after a six-month delay in its mortgage loan payments, and not immediately starting with the first delay.
Third, the request to realize the mortgage will be submitted only for the amount of the arrears and not for the entire outstanding balance of the mortgage loan.
Another protection that may be available to the borrower is the examination of the balance of the debt claimed by the bank, through an attorney specializing in banking law and experts in preparing bank statements.
Is it possible to reach another arrangement with the bank?
The debtor may negotiate with the bank and pay his debt in installments, in order to avoid taking mortgage foreclosure proceedings against him. In this framework, the debtor may request to pay off his debt in alternative ways and from other sources, so that the property is not foreclosed, or to make other collateral available to the bank. In certain cases , the debtor can pay the bank only the real debt, which according to him is in arrears, based on the opinions of banking experts. Regarding the balance of the amount demanded by the bank, he can file a lawsuit in court to cancel it.
At the level of execution, the obligor is going to have additional options for action: the debtor can notify the head of the Hotzalp, within 20 days from the date of receiving the warning notice from the bank, about the opening of procedures for the realization of his mortgage, of his desire to sell the apartment himself, and the head of the Hotzalp may grant him a stay of 90 days To do this, while providing appropriate collateral for the deposit for the apartment in the Hotzlap file.
In the event that the borrower does not wish to sell the apartment, he has the option to pay off the arrears within 90 days of the appointment of a receiver to realize the mortgage, or to pay off half of the arrears, and with the approval of the head of the Housing Authority to pay off the remaining half within six months.
Can the bank foreclose the apartment if you don’t pay?
In the event that you have not been able to pay the repayments for several months in a row, the bank will act to collect the debt through the realization of its mortgage. That is, an application to the executor’s office, with a request to order the appointment of the bank’s attorney as receiver, who will work to sell the apartment and transfer the proceeds received from its sale for the purpose of covering the debt.
It should be remembered that this is an expensive procedure due to the addition of arrears interest, the fee for opening the Hotzalp case, the receiver’s tax tax, publication in the press, the preparation of an appraiser’s report, etc.), the cost of which will be added to the loan that you must return to the bank. Therefore, it is recommended to contact the head of the Hotzal “f or the property receiver, requesting a fixed period for self-sale of the property, which may help to increase the proceeds from its sale.
What happens to the Arabs who signed, are they in danger?
A debtor who fails to pay his mortgage exposes the guarantors to a claim by the bank. To the extent that the realization of the mortgage did not lead to the disposal of the full amount of the loan, including interest and linkage differences, the bank may file a lawsuit against the guarantors and demand from them the balance of the principal debtor’s debt. Accepting the claim against the guarantors means taking enforcement procedures against them. It should be noted that this is an unusual and unusual event, since as a general rule the bank grants mortgage loans only after it has assessed the amount of the collateral, and even leaves a margin of safety sufficient to repay it.
In cases of economic catastrophe, such as the bursting of a real estate bubble, there may be a situation where even the realization of the collateral placed in favor of the bank will not cover the amount of the loan, and then the bank will have to turn to the guarantors for this purpose. Therefore, the guarantors must seek legal advice before signing a bond and be updated quarterly about The principal debtor’s compliance with the repayment of the mortgage loan.
I have a mortgage and I haven’t been able to pay for 6 months. Can the bank, in addition to eviction from the property and appointing a receiver, file bankruptcy against me?
Usually, the realization of the property eliminates the debt and therefore it seems that there is no point in bankruptcy proceedings on behalf of the bank, and in practice this usually does not happen.
Am I entitled to alternative housing from the bank if the apartment is sold to me?
The Tenant Protection Law states that, in the case of the sale of a residential apartment and its sale by the creditor – the bank, as part of the mortgage foreclosure procedure, the mortgagee will become a protected tenant of the new owner. The Enforcement Law states that before ordering the eviction of an apartment and its sale, it must be ensured that the debtor And for his family members there is a reasonable alternative to a place of residence, or he has the financial possibility to finance another reasonable place of residence, for a period of at least 18 months.
“In order to avoid the consequences of the obligation to provide for reasonable alternative housing, the banks usually include clauses in the mortgage agreements that constitute a waiver by the mortgagee of his right to alternative housing, in the event that the mortgage is realized. Following an amendment to the Enforcement Law that came into force on 05.16.09, it was determined that there is no validity For the section waiving the right to alternative housing (if the mortgage documents were signed after this date) and the bank is obligated to pay an amount that will allow the owner of the apartment who is evicted from his home to rent an apartment suitable for his needs, in the area of his residence, for up to 18 months (the registrar has the authority to determine even a longer period) “.