A right of mortgage does not automatically give the right to foreclose on a property

Financing a home usually requires a money loan from the bank. To obtain this loan, the buyer must provide a mortgage lien on his home. If a homeowner subsequently fails to meet his payment obligations to the bank, the bank is authorized at any time to sell the property publicly. Recently, however, the Amsterdam interim relief judge (LJN CA0869) ruled otherwise.

Mortgagee not always authorized to foreclose

The homeowner in question repeatedly allowed mortgage payments to fall into arrears, and eventually the bank subsequently announced the public sale of the property. Despite the fact that the debtor was in arrears with payments, the court in preliminary relief proceedings prohibited the bank from foreclosing on the collateral. The court found that under the circumstances, the bank was abusing its foreclosure rights.

Bank must 'go to extremes' to avoid auction

The interim relief judge considered that in these times, when the Netherlands is not doing well economically and there are many houses for sale and underwater (i.e. the mortgage debt is higher than the value of the house), more leniency should be expected from a bank than in economically good times.

Today, many debtors will be left with significant residual debt after a foreclosure sale. The bank should first of all investigate whether there are possibilities to make an arrangement to avoid a residual debt. With this ruling, homeowners with mortgage payment problems will have less reason to fear that their home will be auctioned off immediately.

Comment

It remains to be seen whether this exception will also be applied when not the bank, but a company or natural person has obtained a mortgage right for a debt or loan. In some cases, it is advisable to choose other forms of security.