Mortgage lenders have taken a firm stand against the new mortgage bill that is currently before parliament, demanding for additional amendments to allow them facilitate the development of the budding mortgage industry.

Despite earlier amendments to the bill, banks prime mortgage lenders in Rwanda want parliament to amend clause 2 of article 14 which indicates that in case of default, the mortgagee can lease the mortgage in agreement with the mortgagor (the creditor who received the mortgage).

"It is a big problem. It does not make sense,” Steve Caley, the Chair of the National Banker’s Association told Business Times during an interview last week.

The industry representatives are also uncomfortable with clause 3 and 4 that give "excessive” protection to the mortgagor. The clauses say that in case of default, the mortgagee should possess or sell the mortgage in agreement with the mortgagor.

"I regret that if this clause stays there will be no borrowers to protect. This is really important and the banks are very strong in their view that it has to be removed,” Caley asserted.

He said, this is likely to force banks to come up with internal documents that will waive the rights of the mortgagors under article 14.

However, the challenge for the banks would be whether such documents are acknowledged by the courts of law.
"It would be better if the normal rules of the game apply as generally enforced in other jurisdictions,” Caley observed, noting that the normal procedure for default is that the bank repossess the property for sale, without consulting the defaulter.

He also underscored that unless amendments are done soon, the bill is likely to halt the progress in the mortgage industry.

"For the last eight to nine months very few loans were approved in the banking system because of the problems of this law.”

According to Caley, this also negatively affects business of real estate developers who construct these houses.  
"Property developers are not owners, they want to develop, sell and move on with the money they make to build the next houses.”

Only four out of eight commercial banks embrace mortgage financing alongside Rwanda Housing Bank.
BCR is also concerned about the clause indicated in pending mortgage bill.

"It is one of the clauses that should be removed, luckily our mortgage portfolio is basically one year old,” said Sanjeev Anand, the Managing Director of BCR.

The Central Bank Governor, François Kanimba, supported the bankers, saying the mortgage bill is wanting.
While some amendments to the bill have been approved by parliament, the Governor noted that banks are still uncomfortable.

"It does not make sense from the banking pointing of view. I do not understand why the mortgagee should give consent to the bank to sell the collateral,” Kanimba said.
 "I fully agree with the banks. This has to be reviewed,” he said.  

Following a general outcry of stakeholders of the mortgage industry including bankers and real estate developers, Parliament approved some amendments to the bill in October this year.

Amendments were made to the article that had earlier stipulated that a mortgagee shall raise 70 percent of the mortgage value while the bank shall finance up to 30 percent.

With the amendment, guarantee banks or mortgage financiers were allowed to determine the appropriate percentage the mortgagee shall raise on the mortgage.

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