People take out mortgage loans to realize the dream of owning a home and pay monthly installments (EMI) for many years. However, if income decreases or financial difficulties arise for any reason, making it hard to pay the mortgage, the question arises about the bank's next steps. A natural question arises: is the house lost after missing one or two payments?
If the monthly payment is not made by the due date, this amount is considered overdue by the bank. According to the Reserve Bank of India (RBI) rules, if a term loan payment remains unpaid for more than 90 days, the account may be classified as a Non-Performing Asset (NPA).
Before this, the bank may contact the client to request payment, and fees may be charged according to current regulations. Penalties for non-fulfillment of obligations must be justified and should not accrue additional interest.
Late EMI payments negatively affect credit history. According to TransUnion CIBIL, missed payments or default on EMI can lead to a deterioration of the CIBIL credit score. This, in turn, can affect a person's ability to take out new loans or obtain loans in the future. Therefore, instead of ignoring EMIs when financial difficulties arise, it is much more important to contact the bank promptly.
If a term loan payment or interest remains unpaid for more than 90 days, the account can become an NPA. After that, the bank has the right to initiate legal proceedings to recover the debt. Since, in the case of a mortgage loan, the house is usually mortgaged with the bank, the bank has the right to act against the secured asset under certain circumstances.
No, the fact that the account has become NPA does not mean the bank can sell the house the next day. The process is regulated by various stages in accordance with the SARFAESI Act. According to Section 13(2) of the SARFAESI Act, in the event of an NPA, the lending bank can issue a written notice to the borrower requiring repayment of the debt within 60 days. If payment is not received within this period, the bank may take further action under the law.
Thus, before selling the house, the borrower is given the opportunity to repay the debt. If the debt is not settled after receiving the 60-day notice, the bank may proceed with the seizure and sale of the mortgaged property in accordance with the legislation. The proceeds from the sale of the property are then used to cover the principal debt and related expenses.
It is important to note that the sale does not mean the bank can sell the house at its discretion for any price; the sale is also carried out within a established legal procedure.
If, after the sale of the property, the bank covers its debts and associated selling costs, and there is a surplus amount, the law provides for the possibility of paying this excess amount. On the other hand, if the proceeds are insufficient to fully cover the bank's obligations, the question of recovering the remaining debt may arise, and the situation will depend on the loan agreement and applicable legislation.
The bank or its collection agents may contact the debtor to recover the debt, but the RBI has prohibited threats or harassment during the recovery process. Regulations require agents to behave correctly and sensitively with clients. The bank or its representatives do not have the right to use methods such as verbal or physical threats, public humiliation, or undue interference in the family's private life.
Most importantly, do not delay contacting the bank. If you feel that you will have difficulty making EMIs in the coming months, you should inform the bank of your situation and inquire about available options. In some cases, it may be possible to discuss changes to the loan terms, extension of the payment period, or other solutions with the bank. However, such an option is not guaranteed for every client; it depends on the bank's policy, the status of the loan, and the client's circumstances.
If you are in a position to make payments, it is crucial to normalize overdue EMIs as soon as possible to maintain credit history and prevent further action.