Dubai records zero mortgage defaults - official

Posted by: Alka Thursday, 11 June 2009 12:12 PM[UAE] - UAE

This could well be true. A bank would need to approach the courts informing of the default, who, after giving the defaulter 60 days notice, could auction the property, proceeds of which would be given to the bank. Reason for banks to avoid this route is that a property that stands in its Balance Sheet for, say 10 mn, with 90% finance, therefore 9 mn loan, may only be sold for perhaps 6 mn now. This would mean a 3 mn loss recorded. Alternately, if the bank can hold on to the property for longer, till the property prices recover, it minimises its losses, and perhaps recovers closer to the mortgage amount.

Posted by: SR Thursday, 11 June 2009 8:48 AM[UAE]

I think so james, that is why it is called "negative equity"; equity is comittment by the owner!! I have no idea about mortgages here but to my knowledge in most other countries mortgages contain an equity clause as well; i.e. you got to maintain the original equity e.g. if you buy for 1M with 20% equity and if the property value comes down you got to immediately pay the difference to maintain your equity %.

Posted by: mr muscle Thursday, 11 June 2009 8:33 AM[UAE] - UAE

...but there is no doubt about the huge wave of developer defaults coming this way. If you thought you had trouble paying for one apartment, what if the developer doesn't finish the building.....your contract is worthless, you have almost no recourse against a local developer. Even a class action would take years to settle (if you can find a local lawyer to take it on), by which time there will be nothing left. It's time there was protection for investors here, especially the expats who make the place what it is.

Posted by: james Wednesday, 10 June 2009 8:38 PM[UAE]

What happens when the property is sold due to default on mortage but the due amount is not recovered? E.g., property bought for 2m with 1.8m loan and 200k cash. Buyer defaults. Bank reposesses and sells at auction for 1m. The buyer has lost him 200k, but the bank has not recovered 800k. Would the buyer still owe 800k to the bank?

Posted by: Nuts Monday, 16 February 2009 4:51 PM[UAE]

The statement is that no defaults have been recorded. This could be a system problem (no field or option to record defaults). The person responsible for recording defaults may have been inadequately trained or on leave. Alternately, the defaults may be reported to another unit and recording performed by another unit and there is a breakdown of transparent communication to advise the recording unit to record the default. The statement can definitely be true