Recovery of bad debt (getting, sale, transfer of collateralized)

Saturday, 29 November 2014 11:40
Recovery of bad debt (getting, sale, transfer of collateralized)

Satisfaction of the Banks claims at the expense of collateralized property (getting of collateralized property in the ownership of the Bank, sale of collateralized property to the third parties by the Bank, transfer of collateralized property to be managed by the Bank)   

The mentioned procedure is used if there are specific clauses (warning) in collateral agreements. Without any warnings the Bank has a right to satisfy its demands only in virtue of the court’s decision.

Decision on satisfaction of the bank’s claims at the expense of collateralized property is made by Bad Loan Committee with further approval of made decision by the Management Board of the Bank.

Materials for considering this issue are prepared and provided for the Committee by Distressed Assets Recovery Unit.

Term for the mentioned materials to be prepared and considered by Bad Loan Committee will be established separately depending on certain defined situation.

Transfer of collateral in the ownership of the Bank

Depending on type of the collateralized property (mortgage, collateral), an order of actions of Distressed Assets Recovery Unit has a range of peculiarities concerning measure fulfillment which are consisting of the below mentioned.

Transfer of mortgaged property in the ownership of the Bank

The Bank, as the Mortgage holder, can satisfy a claim secured by mortgage by acquisition of ownership right on mortgaged property.

Warnings mentioned in collateral agreement stipulate a transfer of the ownership right to the Bank on mortgaged property on account of fulfillment of principle obligation by the Customer under the Contract. Such warnings and/or appropriate agreement on satisfaction of the mortgage holder’s claims and/or appropriate court decision are a legal virtue for registration of the Bank’s ownership right on real estate property which is a mortgaged property.

The Bank gets the collateralized property in its ownership at value determined at the moment of such acquisition in virtue of assessment of the mortgaged property by an evaluator. In case of acquisition of the ownership right on mortgaged property, the bank is to compensate for the Mortgage provider an exceeding of 90% of mortgaged property value over amount of the Bank’s claims secured by mortgage. Hereby, while making appropriate decision, it is necessary to take into consideration the fact that existing rights of other persons of a higher priority regarding term utilization of real estate acquired in the ownership by the Bank is continued to be valid according to conditions of the agreement due to which such utilization is stipulated.  Rights and requirements of the third parties on mortgaged property acquired in the ownership by the Bank which have lower priority than the requirement of the last one become null and void.

Transfer of collateralized property in the ownership of the Bank

After having acquired the collateralized property legally, the Bank has a right to satisfy its claim regarding obligation secured by collateral by acquiring the ownership right on collateralized property. Hereby, The Bank is to inform the Customer and other Collateral holders of appropriate movable property about its intention to acquire the ownership right on collateralized property according to the mentioned way.  

The Customer/Collateral provider or other Collateral holders in favor of which a registered collateralized property is provided, within 30 (thirty) days after registration of data on repossession of collateralized property in the State Registry of Collateralized Property can object a transfer of collateralized property in the ownership of the Bank.

If other Collateral holder objects a transfer of collateralized property in the ownership of the Bank, the Bank can acquire the right on collateralized property only if it satisfies a demand of Collateral holder who objects it. If the Customer objects, the Bank can acquire the right on collateralized property only in virtue of the court decision.

If the Bank acquires the right on collateralized property, appropriate obligation of the customer under the Contract secured by collateral is considered as completely fulfilled and the Bank is not able to provide other requirements for the Customer subject to the fulfillment of this obligation.

While making decision on acquiring the ownership right on collateralized property by the Bank, all collaterals with higher priority is continued to be valid and collaterals with lower priority become null and void. Further actions relating to collateralized property transferred to the ownership of the Bank as a non fulfilled obligation under the Contract are performed by Distressed Assets Recovery Unit.

Collateralized property transferred to the ownership of the Bank is sold to the third parties only in virtue of appropriate resolution of the Management Board of the Bank.

Satisfaction of the Banks requirements by concluding agreements on alienation of collateral

Sale of mortgaged property by the Bank

If the mentioned action is performed, the Bank is obliged to inform in a written form at least 30 (thirty) days before concluding sale-purchase agreement with the third parties Collateral provider and all persons who have rights and requirements on collateralized property registered in the State Mortgage Registry, about the intention to conclude this agreement.    

If this condition is not fulfilled, the Bank bears responsibility towards such persons for compensation of inflicted losses.

Within 30 (thirty) days after having received such message, a person having registered rights or requirements on mortgaged property, can inform the Bank in a written form of intention to purchase mortgaged property.Having received this message by the Bank, the mentioned person acquires priority right to purchase the Bank’s mortgaged property.

If received several such messages, a right on purchasing mortgaged property will be acquired by a person with higher priority of the registered rights and requirements.

If a person expressed the intention to purchase mortgaged property, evades or due to other reasons doesn’t make steps to conclude a sale-purchase agreement of mortgaged property with the Bank  within 5 (five) working days after the termination of above mentioned 30 days, he loses the right on purchase of mortgaged property. This right is transferred to another persons expressed intention to purchase mortgaged property according to the priority of their rights and requirements.   

If persons having registered rights and requirements on mortgaged property didn’t express intention to purchase it, the Bank has a right to sell mortgaged property at the own discretion to any other person.

Selling price of mortgaged property is established by consent between Mortgage provider and the Bank or in virtue of the property assessment by evaluator (accredited by the Bank) on level not lower than ordinary prices are for this type of property. If this condition is not fulfilled, the Bank bears responsibility towards other persons according to priority and their registered rights and requirements and towards Mortgage provider for compensation of difference between the selling price of mortgaged property and an ordinary price for it.  

 Funds received from sale of mortgaged property are distributed between the Bank and other persons having registered rights and requirements on mortgaged property according to priority and amount of rights and requirements.  Rest of funds is returned to Mortgage provider.

According to the result of selling mortgaged property, the Bank sends to Mortgage provider/Customer a report on distribution of funds received from the sale of mortgaged property.

Agreement on sale-purchase of mortgaged property concluded by the Bank with the third parties is a legal virtue to register the buyer’s ownership right on real estate property that was mortgaged property.     

Sale of collateralized property by the Bank

The Bank has a right to satisfy its claim towards the Customer under the Contract by selling collateralized property to a third party. In this case, in order established by the legislation, the Bank is obliged to inform the debtor and other Collateral holders of the intention to fulfill such right indicating the way selected by it, place and time of sale procedure.

The Bank has a right to sell collateralized property to any person-buyer or on public market.  

Other Collateral holder has a priority right to purchase collateralized property if within 30 (thirty) days after registration of appropriate record in the State Registry of Collateralized Property he informs the Bank in a written form of the intention to purchase collateralized property. If several Collateral holders send messages about intention to purchase collateralized property, the Collateral holder with higher priority will acquire the right on purchasing it.

Price of collateralized property purchased by another Collateral holder is not to be lower than proposed to the Bank by any other third party during the sale procedure.    

If Collateral holder, expressed intention to purchase collateralized property, doesn’t make steps to conclude a sale-purchase agreement of mortgaged property with the Bank  within 5 (five) days after the sale procedure conducted by the Bank,  the right on purchasing collateralized property is transferred to another Collateral holder expressed intention to purchase collateralized property according to the established priority.

Such Collateral holder is also provided 5 (five) days to conclude sale-purchase agreement for appropriate movable property, the violation of which will result in losing right on purchase of collateralized property.

If Collateral holders, in favor of which the registered collateral was provided, didn’t use the right to purchase it, the Bank is to sale collateralized property to a person who will propose the highest price.

Sale-purchase agreement for collateralized property is concluded by the Bank on behalf of the Customer/Collateral provider and is a legal virtue for acquiring the ownership right on appropriate movable property by the buyer of this object.  The buyer of collateralized property acquires a right on appropriate movable property without any securities and public commitments and also without other contractual commitments with lower priority.

Within 10 (ten) days after the selling of collateralized property, the Bank is obliged to provide for the Customer/Collateral provider and all Collateral holders in favor of which the registered collateral of this movable property was provided, a written report on sales results.  

Funds received by the Bank from the sale of collateralized property are distributed according to the following priority:

1) covering costs for organization of collateralized property sale;

2) satisfaction of demands, secured by collateral, of the Collateral holders with higher priority;

3) satisfaction of the own demand secured by collateral;

4) satisfaction of demands, secured by collateral, of the Collateral holders with lower priority;

5) returning the rest of funds to the Customer/Collateral provider.

Sale of collateral is a virtue for cancellation of all existing collaterals of appropriate movable property and other contractual commitments with lower priority.   

Regulatory legal acts can stipulate certain restrictions regarding above mentioned sale procedure of mortgaged property or collateralized property.

Transfer of collateral to the Bank management

Standards of the current legislation stipulate a possibility to fulfill this action only towards mortgaged property.

When the Bank has made a decision on repossession of mortgaged property and in order to receive production, income, securing proper economic utilization of real estate property to be collateralized according to its target assignment, mortgaged property can be transferred in virtue of agreement with mortgage provider or the court decision to the Bank’s management for the period before its selling. 

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