Mortgagee Sales now account for 4% of all house sales. This is a disturbing statistics. It is horrifying to think that 1 in 25 houses selling on the market today are mortgagee sales. For statistics
Regional towns across New Zealand are feeling the squeeze as mortgagee sales hit another historic high in September, according to the latest figures from Terralink International.
The data released today showed 343 registered mortgagee sales – up on the previous record number of 321 in July this year.
September 2009’s figures are up 130 per cent from the 149 mortgagee sales recorded in September 2008.
In September 2007, prior to the recession, there were 16 mortgagee sales.
Terralink Managing Director Mike Donald said the new record figures followed an uncharacteristic dip in mortgagee sales the month before.
“The continuing increase in mortgagee sales came as no surprise because all indicators showed the worst was not over for property owners. I don’t think we’ll see a true decline until sometime next year,” he said.
Regional towns and cities showed the greatest increases in mortgagee sales, Mr Donald added.
The number of mortgagee sales in Manawatu has doubled in a month from 11 to 22, Hawke’s Bay has gone from 15 to 24 and there were 32 mortgagee sales in the Waikato region in September, up from 18 the month before.
Northland, Otago and the Bay of Plenty also saw significant increases.
“The recession isn’t just hurting people in the big cities, small town New Zealand is clearly hurting too,” Mr Donald said.
Christchurch was the hardest hit main city, up from 19 mortgagee sales in August, to 29 in September.
As I see it now there is no logical reason as to why house prices in New Zealand haven’t yet crashed in a dramatic way like the rest of the world. Not only is farming bad but tourism is terrible. Mortgagee sales and mortgagee auctions have risen 100% in Northland from May 2008 to May 2009, In Auckland during the same period, they rose 211% and in Wellington 1000%
This begs me to ask why are people getting themselves into the hassle of mortgagee sales but unfortunately its just about people not taking the right measures to avoid it. But I still receive emails from people asking why do people get themselves into this situation and others asking what actually happens in a mortgagee sale. So here is a quick excert from a New Zealand Website that details what a mortgagee sale is…
So what happens at a mortgagee sale?
A mortgagee sale is the final stage of the mortgagee process, at which the property which is the subject of the mortgagee action is sold at public auction to the highest bidder. The sale is conducted by a court-appointed referee. The referee commences the sale by reading aloud the Terms of Sale; the Terms of Sale is the document that acts as the contract of sale between the referee and the high bidder, and sets forth the rights, responsibilities and obligations of both the referee and the high bidder. Once the referee has read the Terms of Sale, the referee begins to accept bids for the property. The foreclosing mortgage holder (the “Mortgagee”) usually has an “upset price” which is the minimum amount it will accept in satisfaction of the mortgage debt. If the highest amount bid is less than the upset price, the Mortgagee will usually be the high bidder and take title to the property. If, however, the highest amount bid exceeds the upset price, the property will generally be sold to the highest bidder.
How does this happen?
If you fail to make the payments due under a mortgage on your home, the lender (the “mortgagee”) has the right to recoup the loan amount through exercising the powers contained in the mortgage contract. Usually this is done through the power to sell the property.
The mortgagee must, however, fulfil certain strict legal requirements, including serving you (the “mortgagor”) with the proper notice. If these requirements aren’t met then you may be able to apply to the court for a remedy.
Mortgagee must serve you with notice before taking action
Before taking action the mortgagee must serve you with a notice under section 92 of the PROPERTY LAW ACT 1952. This notice must adequately inform you of:
- the nature and extent of the default complained of (that is, the amount by which you are in default)
- the date by which you must remedy the default
- the rights that the mortgagee is entitled to exercise if you don’t remedy the default by the specified date
The date specified must be at least four weeks from the date on which the notice is given. But if the mortgage contract specifies a period for this that is longer than four weeks, the date specified in the notice cannot be earlier than the end of that longer period.
If you receive a notice from your mortgagee that does not comply with the legal requirements, you may be able to apply to the court for an injunction to prevent the sale going ahead. Further, if the mortgagee exercises the power of sale before the date specified in the notice, you may also be able to apply to the court for a remedy.
The mortgagee’s duty to obtain the best price
The mortgagee has a statutory duty to take reasonable care to obtain the best price reasonably obtainable as at the time of sale. If the mortgagee breaches this duty, you can apply to the court for a remedy.
To satisfy the duty the mortgagee must adequately market the property, which may involve advertising outside the local area, giving notice of the property’s advantages (including the potential for any development), and setting a realistic reserve price based on the property’s valuation.
Three ways of exercising the power of sale
The mortgagee can exercise the power of sale in one of three ways:
- sale through the High Court Registrar
- sale through public auction
- a private sale
Sale through the Registrar
If the mortgagee chooses to exercise its power of sale through the High Court Registrar, it must apply to the Registrar and notify the Registrar of the name and address of the mortgagor and of any other mortgagee. The Registrar must be satisfied that the mortgagee is entitled to exercise its power of sale.
A mortgagee is entitled to buy the mortgaged property only if the sale is conducted through the Registrar.
Your right to redeem the property
There is a small degree of protection afforded to you, the mortgagor, through the “redemption price” – this is the price at which you may redeem the land to be sold. At any time before the Registrar’s sale you may pay the redemption price or the amount due and owing under the mortgage; the mortgagee must then release the mortgage.
The redemption price is set by the mortgagee, and must be specified in the mortgagee’s application to the Registrar to conduct the sale. Any advertisement for the mortgagee sale must state that the redemption price is available at the Registrar’s office and can be obtained before the auction.
The best thing to do is talk to your lender and your solicitor early to avoid heartache.