Many things can cause you to fall into a situation where your mortgage may be in jeopardy; job loss, marital issues, business failure or sickness can cause significant income losses. Any of these could translate to missed mortgage payments which will eventually a mortgagee sale.

But banks engage the mortgagee sale process only when they are convinced that you cannot pay arrears within a reasonable time. Mortgagee sales don’t just automatically happen. You should urgently get help to reduce the impact or save your home from going to a mortgagee sale.

Here’s why you should do it urgently.

Lenders Hate them

Believe it or not, lenders don’t like dealing with mortgagee sales. For starters, it sends a ‘negative vibe’ to existing clients. Plus, it costs substantial resources. This is one of the reasons why banks follow the responsible lending code. In this code lenders:

• Check that the facility is suitable for you.
• Assess whether you can afford it.
• Provide essential information and disclosures to help you make wise decisions (such as interest rates and amortization schedules)

Lenders also insist that clients should make an initial down payment of between 10% and 20% of the home’s sale value.

If you are facing a mortgagee sale, it is likely that by now, you are not dealing with the lenders directly. You are probably dealing with an appointed agent who wouldn’t have a history of the ‘good times’ or sympathize with you. Moreover, the agent is paid based on their efficiency. If you are in a hot property market like Auckland, chances are you’re dealing with an agent who already has bargain property buyers lined up.

Additional Costs

Dealing with strangers is one downside that you want to avoid. But it’s not as bad as dealing with strange costs.

When the lender contracts an agent to execute the debt recovery process, the costs are lumped up with the home loan. You’ll also be facing additional penalties, fees, and interests that accrue daily.

So, the longer you stay without reaching out for help, the more the debt grows.

Low Sale Prices

If you are banking on cashing in on the sale to clear your debt and restore some normalcy to your credit score, think again.

Mortgagee sales are infamous for attracting bargain property hunters who can manipulate the system and force low prices during the sale process. Although the bank should exercise reasonable care to get the best price for a property, it’s not a must that the bank gets the market price. The Banking Ombudsman Scheme stipulates that the bank only has to obtain a registered valuation of the property, appoint a marketing agent and properly consider offers made.

Incessant Pain

Since you are at the ‘mercy’ of the best price obtained at the mortgagee sale, and the sale price may be low, there’s a risk of your debt persisting beyond the mortgagee sale. For instance, Gary O. Burgess, had an NZ$23,000 outstanding debt even after he lost his property to a mortgagee sale.

When debt hangs on, even after a mortgagee sale, it’s not just another injury to your ego, it could result in insolvency and permanent damage to your creditworthiness.

Mortgagee sales don’t happen overnight. The process is elaborate and may take several months.

But the process of saving your home from going to a mortgagee sale may take weeks. You should urgently reach out to a trusted mortgage advisor and get options. You should also seek legal help from an experienced professional, like a lawyer.