|
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 does not function, 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 is a very bad idea.
As a result, mortgages are very difficult
to get, with comparatively high interest rates.
This is due to the legal process necessary
to foreclose.
These are the legal steps.
- Send the mortgage to a lawyer to
begin the collection 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, when the other 6.25% is added. A further 4% in registry and legal fees are required
once title to the property is granted.
- 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.
A bidder’s funds can be tied up in
court for years - the court does not refund
the money unless the auction is annulled.
- 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 after payment of fees.
- When title is received, the
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 from the
house. We
have 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.
- 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, the possession will
be rescheduled, or if there is an objection
from the borrower such as a possible
discrepancy in the lot plan, the possession
will be annulled even though the case may be
five years old and the information never
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.
An
added reason Casa Canada no longer administers new
mortgages is harassment by SUGEF.
This organization is one of the financial
supervisory authorities in Costa Rica, in charge
of banks, finance companies or other lenders. (For
more details see the “Investment
Administration” section.)
Entities lending investor or depositor
funds for discretionary investments must be
registered with this organization.
Casa Canada was investigated by
SUGEF in 2003, then provided with a letter giving
us a clean bill of health, however in 2008
employees of SUGEF spent most of the year, on and
off, in our offices doing their best to try to
find some way in which we were breaking the law.
In the course of this investigation they
happily trampled on at least three of our rights
under the constitution of Costa Rica, something
for which we may yet seek damages.
They found nothing illegal, but between
them and the problems of collecting bad debts we
decided mortgage administration was not worth the
trouble.
|
|