Father Sez

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Housebuyers in Malaysia are bound hand and foot when they take a mortgage

Monday March 2nd, 2009 by fathersez

A lot is being written in the US blogs about people walking a way from their upside down mortgages. The latest that I read on this was Flexo’s “Should you walk away from your house and mortgage?”  

I know nothing about the legal obligations of the borrower under a US mortgage, but it seems that all that is affected is our credit rating. Maybe demolished completely even, but that seems to be it.  

The Malaysian situation is so much different. A borrower basically signs his / her financial life away. The borrower is made to pay one way or the other, whether, 

-         He passes away. Then his estate is liable for the debt. Usually the banks get a mortgage policy at the time of issuance of the loan. So the loan is paid off.  

-         If the mortgage is for a house under construction and the developer goes belly up, the borrower pays even though there is no completed house for him. This has been a serious problem in the past. There has been a lot of talk on the developers having to build and sell. I am not sure if this has been put into effect. 

-         He loses his job and is unable to pay. Too bad. He just has to find the means or will be dragged through the bankruptcy courts. 

Now, we have always looked at the US as a developed nation and something that we should emulate. Wonder if the Malaysian Banks (including American banks in Malaysia like Citibank) will ever change their standard housing loan documents to match what seem to be US standards?  

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2 Comments for “Housebuyers in Malaysia are bound hand and foot when they take a mortgage”

by mtsen
On March 2, 2009
At 11:26 am

interesting question, but anyone has any proposal ? what should it be, how is the right way to do it ?

On March 2, 2009
At 1:22 pm

I think the Malaysian way is still better. People should be held responsible for the debts they take on. I read somewhere that in the Middle East they have a “debtors’ prison” where they put people in until they pay their debts.

Seems a little harsh, but some borrrowers just use legal tricks to play around the system.

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