Sri Lanka to appoint foreclosure ombudsman, change mortgage laws: PM
ECONOMYNEXT – Sri Lanka’s Prime Minister Mahinda Rajapaksa has ordered that an ombudsman be appointed to review sales of assets given as security for loans from banks, a finance ministry statement said.
The underlying parate execution law (a foreclosure procedure) should also be reviewed, he had said.
“Prime Minister has said an official should be appointed before auctioning property given as security for loans,” a finance ministry statement said following a meeting with regulators and other ministers.
He had said in addition to banks and the borrower, a third party was needed to intervene.
He had instructed officials draw up the necessary legislation to change parate execution laws and appoint an ombudsman.
Quick foreclosure allows banks to recover defaulted loans and pay depositors.
If foreclosure is made difficult banks will also be more cautious in giving loans and access to loans may reduce, analysts say.
Many small individuals who do not have assets and are not considered for loans are able to use lease to buy a vehicle due to quick seizure available to recover the vehicle and repay depositors.
Most Sri Lankan finance companies have fallen not due to leases but due to property investments.
Prime Minister has also asked for a review of housing mortages, as people who give a house they are living will lose it, creating a homeless family, he had said.
The impact on the access of housing loans due to a change in mortgage law, or ratings of banks is not clear.