It’s too difficult to recover properties from mortgage defaulters – GREDA

Real estate developers have called for the removal of bottlenecks, via a review of the Borrowers and Lenders Act, that make it difficult for mortgage providers to recover properties when their customers default in payment.

Foreclosure is the legal process by which a lender takes control of a property, evicts the homeowner and sells the home after a homeowner is unable to make full principal and interest payments on his or her mortgage, as stipulated in the mortgage contract. But industry players say processes involved in doing this are too cumbersome and need to give way.

Patrick Ebo Bonful, the new President of the Ghana Real Estate Developers Association (GREDA), said the association wants to work with the government, including its legislative and judicial arms, as well as mortgage financiers to remove these bottlenecks.

“The frustration our mortgage finance institutions go through to recover properties from defaulting customers must be given a second look. For example, in Europe and America, it is not difficult for the mortgage finance institution to recover properties from defaulting customers and so for the same reason they are more than willing to provide mortgage finance to qualified applicants.

This, in turn, makes it possible for real estate developers to sell more houses and thereby make more profit and pay more corporate taxes. As well, it also means more people will be employed.  Additionally, this will also bring solution to the medium to long term financing constraints,” he said at the association’s 30th anniversary dinner dance and awards night in Accra.

The Borrowers and Lenders Act, 2008, Act 773, is the legal framework that for credit and sets standards of disclosure of information by borrowers and lenders.

Lenders have the power to foreclose properties but loopholes in the law and the processes that lenders have to go through allow defaulters to stall the process through injunctions, the association contends.

The Central Bank has said it is currently engaging industry players for a repeal of the act, which also acts as a check on certain credit practices which may be injurious to the banking sector.

Mr. Bonful noted that land litigation is also a real and constant threat to the survival of the industry. He called for a deliberate collective effort to address the problem. “We need to work with all stakeholders to develop a mechanism that will put the ghost of this unnerving problem to bed once and for all.”

He advised that government should take land from the allodial owners in lieu of cash in order to enable them to register all their interest in the lands they own and by so doing government will get to own litigation-free lands across the country which real estate developers and other interested stakeholders can easily access.

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