|
Grupo
Casa Canáda was a major mortgage lender in Costa
Rica, syndicating mortgages with investors and
its own funds. In the 1990s it was possible to
foreclose a mortgage in about eight months,
however today, due to a legal system that barely
functions, it is taking about five years. The
lender has few rights, the borrower many. The
last mortgage loan made by Casa Canada was on
October 24, 2006.
Investing in
mortgages in Costa Rica not a good idea.
Because mortgages in default are very difficult and
time consuming to collect, financial institutes have
huge amounts of money tied up in court, which
restricts their lending ability. Those mortgages
that are made have comparatively high interest
rates, due to the risk of not being able to collect
in a timely manner. The impossible court system
makes the country a borrower’s paradise and a
lender’s nightmare.
Legal steps
to Foreclose a Mortgage
1. Hire a
lawyer to begin the foreclosure process. The lawyer
will usually send a final letter advising the
borrower than the loan is headed for legal action.
Legal fees run 12.5 % of the amount of the mortgage
- 6.25% up to the point of the auction, then the
other 6.25% is added. A further 4% in registry and
legal fees are required once title to the property
is granted.
2. The legal
action begins. The court will set an auction date,
usually within a year or so. The minimum bid at the
first auction is the amount of the original mortgage
loan, however no one in their right mind would bid
at an auction. Bidders are required to deposit 30%
of the sale price, and then pay the balance in 3
days. It can take years for the auction to be
confirmed, not only because court decisions are
slow, but because of interminable appeals by the
borrower, which go to a higher court no matter how
ridiculous they may be, taking forever to resolve.
A bidder’s funds can be tied up in court for many
years - the court does not refund the money unless
the auction is annulled.
3. Once the
auction is confirmed the lawyer applies to receive
title, which involves another long wait. When title
is granted the property will be registered in the
central registry in the name of the lender or
lender’s company after the payment of fees.
4. When
title is received, the former mortgage holder is
still not permitted to enter the property - the next
court procedure is the get possession. During this
period the borrower will sometimes strip anything of
value if there is a building on the property. Casa
Canada has cases where nothing was left but concrete
block walls, but it is more common to lose the
electrical panels, wiring, electrical and plumbing
fixtures, gutters, doors and other easily removed
items. At times we have lost all or part of the
roof, particularly when made of metal sheeting.
5. Once
possession is granted, a parade arrives at the
property. This usually consists of the lender’s
lawyer, the judge and the police. If no one is
home, possession will be rescheduled, or if there is
an objection from the borrower at the property, such
as a possible discrepancy in the lot plan, the
possession will be annulled even though the case may
already be five years old and the information not
previously presented to the court.
Once all
possession hurdles have been overcome, what is left
of the building and the property is now available to
the lender to sell.
Casa Canada
Group currently finances its own real estate sales,
and its own development projects, however different
legal instruments are used, not mortgages.
If you are interested in property financing, call
CASA CANADA GROUP for a consultation, and for
information regarding the law and property
financing. There is no charge for this service,
which could save an investor a lot of money and
frustration.
|
|