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- To return the tithe: the bankrupt will be left part of the money after the sale of mortgage housing
To return the tithe: the bankrupt will be left part of the money after the sale of mortgage housing
The Russian authorities continue to finalize the rules for bankruptcy of citizens with mortgage housing. According to the new amendments to the government bill, part of the proceeds from the sale of the debtor's only mortgage apartment will be retained by him. However, the mechanism of money distribution — 80% to the bank, 10% to other creditors and 10% to the debtor himself — has already caused an active discussion among lawyers, realtors and developers. Experts warn that the protection of debtors remains limited and can generate new legal conflicts. Details can be found in the Izvestia article.
What changes the bill
The revised bill changes the procedure for allocating funds for the sale of mortgage housing in bankruptcy. First, the costs of selling real estate will be covered, then up to 80% of the funds will be received by the mortgaging bank, and another 10% will be sent to creditors of the first and second stages, for example, for obligations related to harm to life and health or payment of wages.
The remaining 10% is supposed to be transferred to the debtor himself. However, the amount is limited: it cannot exceed the amount of the initial payment and mortgage payments already made. In addition, the court will be able to reduce the payment if it considers the debtor's behavior to be unfair or if the remaining funds are sufficient to purchase more modest housing.
Saving 10% of the proceeds from the sale of mortgage housing will increase the financial security of borrowers, as it will encourage lenders to speed up procedures and not accumulate debt exceeding the cut-off level, believes Elena Samokhina, Director of the Banking Development Department of the Association of Banks of Russia. This is important in conditions of high market rates.
At the same time, borrowers have alternative support tools. As the press service of the Ministry of Finance of Russia draws attention, for those who find themselves in a difficult financial situation, there are credit holidays (including mortgage loans). During the period of their validity, the borrower can suspend or reduce payments, retaining the right to housing and avoiding fines and penalties. Special rules are provided for CBO participants and their family members: vacations are provided for the duration of service on mobilization, contract or participation in the CBO, extended by 180 days. In some cases, the period may be extended.
The dominant scenario
The innovation only partially mitigates the consequences of bankruptcy, but it does not make mortgages less risky for families, experts say.
— The proposed amendments to the bankruptcy law are a long—awaited measure that eliminates injustice. Previously, a family with a mortgage could lose their only home and be left on the street without any funds at all, even if the apartment cost more than the remaining debt to the bank. The new rules ensure that people do not stay "at zero," says Denis Morgunov, a member of the committee of the Russian Guild of Mortgage Realtors. — However, for young parents who are just planning a mortgage, it would be premature to call this measure "life-saving".
It only softens the blow a little in the event of a disaster, but it does not cancel it, the Izvestia interlocutor emphasizes.
The problem of losing housing in financial difficulties is generally not new to Russian legislation, bankruptcy experts remind.
— In fact, this is a complete transition to the model that has been formed in Western countries, when housing is a privilege, and this privilege must be paid for by a bank for life through a mortgage loan, — said Vyacheslav Golenev, chairman of the working group of the Federal Chamber of Lawyers of the Russian Federation on bankruptcy issues.
The main risk, in his opinion, is that the bill does not offer anything fundamentally new: the loss of a mortgage apartment due to the loss of a source of income remains the dominant scenario.
The low bar
Experts also pay attention to the economic side of the issue — limiting payments to the amount of payments actually made. In practice, the payment ceiling in this case may turn out to be extremely low, warns Nina Gukasova, director of the program of the FMCF for improving financial literacy of the population of IGSU RANHiGS.
— For a young family at the initial stage of a mortgage, the main amount of payments is interest, and the main debt decreases slowly, — she reminds.
In case of bankruptcy, a few years after the purchase of housing, the family risks returning almost to the starting point, the expert warns.
— Considering that the median initial payment on the family mortgage was about 2.3 million rubles, the family risks losing not only the apartment and everything that was paid in excess of this amount, but also, in fact, returning to the starting point with very modest capital, which in current conditions is clearly insufficient even for the initial payment for a new home.- explains Gukasova.
Real estate market experts remind us that the main threat to mortgage borrowers remains the same — loss of income. This applies to young families and single borrowers equally, says Natalia Kiselyova, legal adviser at the Academic office of Inkom-Real Estate.
"But we need to consider such options so that, in case of their occurrence, we don't get lost and take the necessary actions, including selling the apartment before foreclosing on it by the bank," the Izvestia interlocutor urges.
Conflict of interest
One of the most controversial topics of the new regulation was the fate of former spouses and children from previous marriages. The bill is actually focused on the debtor's current family and almost does not affect the rights of its previous members. According to lawyers, a significant number of new legal disputes may arise in this area.
— The draft law uses the concepts of "a debtor citizen" and "members of his family living together with him." The former spouse and children from another marriage who live separately do not fall under this definition. This creates a huge potential for conflict," Nina Gukasova notes.
According to her, in real life, such a scenario can look very dramatic. As an example, she cites a situation in which a man who took out a mortgage after a divorce will receive 10% of the proceeds in bankruptcy to provide housing only for his new family.
"The first family, where his children from a previous marriage live, will receive nothing," the expert points out.
Lawyers confirm that much will depend on the ownership structure of the housing. The ability of the former spouse and children to claim any payment from the sale of a mortgage apartment depends primarily on the ownership of the property and the fact of cohabitation with the debtor, explains Tatiana Belova, Associate professor of the Department of Business and Corporate Law at O.E. Kutafin University. At the same time, the current regulation may not take into account the interests of previous families.
"As drafted, the bill creates a risk that funds from the sale of the only home will be used to pay off the mortgage and the current spouse, but completely ignore the interests of the previous family," the specialist emphasizes.
Bankruptcy experts also remind that the key role is often played not by the law itself, but by the previously settled property relations of the spouses.
— Firstly, it is not the family that receives the money, but the debtor. Secondly, in which marriage the apartment was purchased with a mortgage is usually decided even during the divorce, because the bank does not allow uncertainty with the collateral object, — says Vyacheslav Golenev. — Therefore, the issue largely depends on how the property relations and obligations between the spouses were previously settled.
According to the combination of factors
From the point of view of the legislator, the new norm should create a balance between the interests of banks and citizens. But experts believe that practical implementation will depend on many factors, from judicial practice to the behavior of borrowers themselves.
"The amendments proposed by the legislators are a good attempt to find a balance between the interests of creditors and the protection of the debtor, but they cannot solve all the problems and minimize possible risks," says Evgenia Sabitova, a member of the Union of Lawyers and Bloggers based at the Moscow Law Institute of the Russian Bar Association.
According to her, for bona fide borrowers, the innovation is still a step forward — the new norm acts as a minimal "safety cushion" and makes it possible to reduce the risk of complete financial failure after bankruptcy. However, the assessment of the debtor's behavior will play an important role.
"The court will be given fairly broad powers to reduce payments, and this may create uncertainty: the same situations in different regions may be interpreted in different ways," the expert draws attention.
However, some experts believe that the new mechanism only formalizes the existing practice.
— This bill does not create any new risks, but in fact puts in order the current legislation on the basis of the resolution of the Constitutional Court of the Russian Federation dated 06/04/2024 No. 28-P, — says Sergey Chuzhakov, Director of Development of the federal company "Floors".
The key point of the innovation, according to him, is to legally determine the fate of the funds remaining after the sale of the mortgage apartment.
— The decision of the Constitutional Court confirmed that the balance of the amount from the sale of the debtor's mortgage apartment remains for him to buy a new home, — the expert notes.
Apartments from auctions
A separate issue is the impact of the innovation on the housing market. Some experts believe that the law may increase the number of apartments being sold at auction, while others are confident that the effect will be limited.
— After the adoption of this bill, direct stimulation of the real estate market should not be expected. Rather, his influence will be ambivalent," says Dmitry Shchegelsky, President of the National Chamber of Real Estate, General Director of the Benois Real Estate Agency.
Theoretically, according to the expert, the law is able to increase the number of transactions: banks will receive a more understandable mechanism for refunding funds, and the objects themselves will reach the auction faster. However, if the number of problem mortgages increases, the opposite effect is possible.
— If there are a lot of such sales, this will create pressure on prices, because objects from auctions are usually sold at a discount and become a new benchmark for the market. As a result, prices for similar apartments may decrease, and the time frame for their sale may increase," the specialist warns.
According to him, with the growth of problem mortgages, it is possible to increase the number of forced sales, which have several features: objects are sold faster and more often at a discount, and the price is formed not by the market, but by the need to repay debt. This can create pressure on the secondary market.
— If the share of such facilities becomes noticeable, this may lead to lower prices for similar apartments and increased competition between sellers, — predicts the expert.
For buyers, the appearance of more objects at auction opens up opportunities to purchase housing cheaper than the market price, but such transactions remain legally complex and often involve risks, the source said.
— In general, the law increases the liquidity of distressed assets, but with an increase in delinquencies and bankruptcies, it is he who is able to increase price declines. This is not an incentive for growth, but a tool for adapting to possible market risks," Shchegelsky is convinced.
However, other market participants consider the impact of the law secondary to macroeconomic factors.
— As for the possibility of stimulating the real estate market, it is hardly possible to see a direct relationship. The proposed changes should be considered only one of the many factors that can influence the market," emphasizes Elena Yelnikova, Associate Professor of the Department of Business and Corporate Law at the Moscow State Law University.
Prices are more affected by the key interest rate, inflation and government policy in the field of mortgage lending, she said.
— In conditions of continued demand for liquid residential real estate, it is hardly possible to expect lower prices, — sums up the interlocutor of Izvestia.
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