Property Insight | Foreclosure, Auction & Bankruptcy15 APR 2021
PETALING JAYA: Experts are calling for Bank Negara Malaysia (BNM) and banks to set up a department to look into why borrowers are defaulting on their payments.

The recent case of M. Moganah, who had her home in Seri Kembangan, Selangor auctioned by a bank, highlights the need for such a department, they said.

The 38-year-old tailor had been living with her husband and two children in the flat for 17 years. She found herself in the predicament when her bank purportedly raised the interest rate on her loan without notifying her.

The bank is said to have blamed it on her failure to update her contact details and home address, a claim which Moganah has refuted. Malaysian Chapter of the International Real Estate Federation former president Yeow Thit Sang said members of the B40 group are often in situations such as Moganah, not by choice but as victims of circumstances.

He said factors such as poor education and lack of opportunities, on top of the Covid-19 situation, have led to a drop in their earnings. “The poor chap who signs on the dotted line with a bank is always at the losing end when it comes to default in payment of a loan.”

Yeow said in Moganah’s situation, the bank should have been more understanding and sympathetic by negotiating with her on how to settle the arrears. “People who lose their houses to banks will often never have a second chance to own another place to call home.”

He suggested that banks explore all possibilities to help borrowers overcome their financial troubles as long as they had not defaulted before.

Yeow said BNM and commercial banks must establish a department to look into such cases.

“The current practice is that if you default on your payments over a number of months, the directive is to foreclose to recover the bank’s money first.”

A chartered accountant, who wished to be known only as Maniam, said such cases are far too common but banks and BNM are not proactive enough in resolving them.

“In my experience in dealing with Bank Negara 20 years ago, it was much more responsive and proactive in dealing with such situations. Currently, there seems to be no sense of urgency or priority from it.”

He said it would be improbable that Moganah was properly notified because prior to a foreclosure of a home, an officer would be sent to examine the house and inform the borrower.

Lawyer V. Kokila Vaani said both banks and borrowers must take some responsibility in such cases.

“To avoid this unfortunate incident from recurring, an enhancement of the notification requirement is needed on the bank’s side. On the other hand, the borrower must also make sure to constantly update their banks on their contact details,” she said.