Banks and VAMC’ bad debt sale problematic due to too many creditors

23-Oct-2018 Intellasia | InfoMoney | 6:00 AM Print This Post

There are many reasons that many projects related to bad debts were enforced by banks and the Asset Management Company (VAMC) but still cannot be settled due to prolonged disputes.

Bad debts settlement stuck due to unclear obligations

Recently, many customers buy houses in a project in Ha Dong, Hanoi, claimed with the press that this project was suddenly enforced by bank and the bank refused to perform the guarantee obligations for home buyers, although the guarantee contracts were signed.

With pressure from the public, the bank committed to guarantee the benefits of home buyers and ask them to coordinate calmly in order to resolve the issue most reasonably.

However, according to lawyers, in this case, the home buyers are facing great risks. While the bank will also face difficulty to settle the debt since the bank itself was wrong when signed the guarantee contracts, though refused to perform the guarantee obligations.

Lawyer Ha Huy Phong, managing director of Inteco Law Firm, said that according to the Law on Real Estate Business 2014 and Circular No. 07/2015/TT-NHNN, guarantee commitment in selling, leasing houses formed in the future must be effective up to at least 30 days after the houses are handed over. Thus, the bank’s claim that the guarantees were expired is wrong, since the houses have not been handed over. If the commitment shows that the guarantees’ effectiveness ends before houses are handed over, then this commitment is invalid because it violates the above-said Circular.

The problem is still being handled, but this story shows that, after the issuance of Resolution 42/2017/QH14, banks’ debt enforcement is easier, but the handling of enforced assets is not that easy.

It is reported that up to 70 percent of the bad debts managed by VAMC and banks are related to real estate. In which, there are a number of assets under disputes related to guarantees of collateralisation, resulting in long delays and even being stuck.

A typical example is the Saigon One Tower, which was enforced by VAMC for settlement of bad debts of more than seven trillion dong, but after one year of enforcement, this asset has not been put for sale yet. In addition to the difficult in evaluation, another reason is that about 100 home buyers are at risk of losing their money when the building is put for sale. If not handled thoroughly, the litigation process will prolong.

Previously, many other banks such as Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Sai Gon Joint Stock Commercial Bank (SCB), Vietnam Bank for Agriculture and Rural Development (Agribank), etc. also got stuck with a lot of bad debts’ collateral assets. The reason is that the assets have been pledged by the investors to banks for loans, but the investors had sold houses to hundreds of buyers. There are a lot of projects that the investors sold housesto home buyers but still pledged to banks in HCM City such as: The Residential Apartment 584Lilama SHB Plaza, The Rubyland, Thai Binh Plaza, residential area 584 Tan Kien, etc.

The list of collateralised mortgage projects being enforced is likely to increase further as Resolution No. 42/2017/QH14 is being implemented drastically. In the whole country, there are hundreds of projects being pledged to banks by investors. Particularly in Hanoi, according to the City Land Registration Office, by 23rd August, there are 92 projects pledged to banks and credit institutions by investors.

It’s difficult for banks to recover debts if handle carelessly

After the effective date of Resolution No. 42/2017/QH14, a series of real estate projects of billions dong were enforced by banks and VAMC. However, the process of handling large debts is almost stuck due to both the fraudulence of investors and the carelessness of banks when providing guarantees or evaluating collaterals.

According to attorney Truong Thanh Duc, Chair of BASICO Lawyers Council, almost 100 percent of investors pledge their projects for bank loans, which is allowed by law. However, when the project owners want to sell the pledged projects to home buyers, they must either release the mortgages or obtain the consent from buyers. It is wrong for the project owners to sell the apartments which have been pledged to banks. However, in this story, the banks also bear parts of the responsibility for not managing the mortgage properly.

With respect to guarantees, the majority of lawyers and banking experts said that the current guarantee contracts of banks are very lack of transparency. In many projects, investors only referred to letters of guarantee from banks, without presenting the contracts, causing home buyer to bear a lot of risks when the any problem occurs.

However, financial and banking expert also confirm that, in the cases of home buyers having contracts and documents to prove that they have paid money to buy houses, they are protected by law. Resolution 42/2017/QH14 also stipulates that if banks re-assign a project to a new investor, the transferee must inherit the rights and obligations of the precedent project investor.

According to Dr Le Xuan Nghia, an economic expert, nowadays, in most real estate projects, the equity of the investor is very small, but capital is mainly borrowed from banks and mobilised from home buyers, thus, with these real estate projects, homebuyers play both an owner and a lender. As a result, banks should consider homeowners co-owners of the debts. Accordingly, if banks have to refund to home buyers to keep the whole assets, ore provide houses to the buyers who have made the full payment.

Dr Nghia also adds that the handling of bad debts under Resolution 42/2017/QH14 still has a lot of problems, so there should be a law on this issue to handle the problem thoroughly.

The Inspection Agency of SBV has acknowledged that the mechanism of accessing information on the status of collateralised assets does not meet the requirements of credit institutions. Therefore, credit institutions face many difficulties in determining which security assets are in disputes and which security assets are subject to the application of the emergency approach. This has led to difficulties in applying suitable measures to handle under Resolution 42/2017/QH14.


Category: Finance, Vietnam

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