What is debt recovery and foreclosure in Kenya?
Debt recovery and foreclosure in Kenya, is a legal process by which a lender takes possession of a property used as security for a loan incase of default. It applies to mortgages on real estate properties, other secured loans and also valuable assets.
How foreclosure works
When a borrower defaults on their mortgage payments, the lender initiates debt recovery and foreclosure proceedings. Foreclosure procedures and requirements vary depending on the terms outlined in the loan agreement. visit www.rg.co.ke for more information about debt foreclosure.
Stages of foreclosure
1. Default: This occurs when the borrower fails to make timely payments as agreed and after being offered a specified grace period .
2. Notice of Default: The lender sends a notice of default to the borrower. It informs them of their failure to pay the borrowed loan and giving them grace period to correct the situation.
3. Foreclosure proceedings :For instance, the lender initiates legal proceedings to acquire the property if the borrower fails to correct the situation. This involves a court order to seize the collateral.
4. Auction or Sale: The property is auctioned off to the highest bidder, through a public auction or a private sale once the court grants the foreclosure judgment. Proceeds from the sale of the property are used to repay the outstanding debt and any associated costs.
5. Eviction: Incase the lender sells the property, the former borrower has to vacate the premises. The ownership transfers to the buyer or lender directly in case a buyer is not available.
Therefore, debt recovery and foreclosure in Kenya has serious consequence leading to significant financial and legal implications to the borrower. It includes loss of the property used as collateral, negative impact on the borrower’s credit history and future borrowing potential.
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