What can you do with a mortgaged house damaged by the floods?

Dear home 911,

My family bought a modest house two years ago in Marikina on a 10-year bank loan. During typhoon Ondoy, floodwaters reached up to the second floor of the house, damaging everything inside. The wooden floors and walls have warped and all appliances and furniture have been destroyed. Luckily, we all survived without physical harm. The problem is that with the extent of repairs to be done to make the house livable again, we just can’t afford to pay the mortgage. And nobody wants to buy a house that was damaged by Ondoy, even if you sell it way below the market value — and what value is the house and lot now anyway? It is more practical for us to rent an apartment. While we can still meet the basic necessities, we feel desperate about the mounting bills. It’s easier for us to just let the bank repossess the property. Can we just stop paying and abandon the house? What are the consequences?

Maya

Dear maya,

When I was watching and reading about the aftermath of Ondoy, my heart broke for the loss of lives and for all the hardworking families whose homes were destroyed. There haven’t been many reports about the middle class whose homes were destroyed and I can only imagine the hardship they are going through at seeing all those years of hard work literally being swept away by the floodwaters. Where do they go now? These families will not line up at the relief centers because they still have jobs to go back to, but how do they deal with the loss of decades of hard work, saving a little money here and there, denying themselves vacations or purchases — to eventually buy their own home? And then Ondoy happened. Now they have to face the realities: mortgage payments on a house that is now worth a fraction of what they are paying for. It sounds like a nightmare.

The first thing you have to do, if you haven’t done so, is to meet with your bank manager. Ask about a moratorium. Banks are in the business of making money, but what happened to the country in these past three weeks has so shaken everybody that perhaps they might have payment schemes for Ondoy victims.

I asked my banker friend who works in the loans department of a top bank in the country and this is her answer: 

“If the house was damaged by Ondoy, the mortgage with the bank remains and the obligation of the borrower remains just the same. If the borrower opts not to settle, interest, penalties and charges will accrue, lalaki pa lalo ang utang. The bank will exert its effort to collect and if it is futile it will exercise foreclosure procedures. Once the bank has repossessed the property, the former owner will have a default credit record, the loan will still remain outstanding as far as the borrower is concerned but in the books of the bank it will be considered a bad debt. It may be best to sell the property and use the proceeds to pay off the loan.”

Obviously, with a bad credit record, you will not be able to take out a loan from a bank again. While this may seem like a small thing now, think of the future, when you might need to take out a loan for whatever reason and you can’t because of your record.

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Can’t Afford Car Payments Anymore

Dear tanya,

My car was completely submerged during typhoon Ondoy. Apart from damage brought about by the floods, it also got dents on all sides because it floated on the street. I bought this car last year through a bank loan. The repair estimates have reached P300,000. My apartment was submerged, too, and I have lost everything — appliances, furniture and clothing. I cannot afford to have the car repaired and continue with the loan payment. If the bank repossesses the car, what happens?

Carlo

Dear carlo,

The first time I saw the video of cars floating at the UERM parking lot, I thought this must be a joke. How can SUVs just float away like they were matchboxes? Or like they were made of Styrofoam? It was so surreal.

One of my relatives lives in Sta. Mesa and all four family cars were submerged, too, and like you they’re still paying for them. I have heard of car owners trying to sell their vehicles for a song, but there are no takers because people are afraid that even if the car has been repaired, it really wouldn’t be in its former condition.

My banker friend says, “The same procedure with the housing loan but a shorter process. It is still best for the borrower to settle his obligation with the bank. If not, a negative record will be created in the borrower’s name and the bank may file charges against the borrower for not paying his obligation.”

As for your appliances, Odette of Samsung sent these tips: For refrigerators, clean with a cloth and let it stand for two to three days before turning it on. If the timer/control was submerged in the flood you need to have it serviced (call 580-5777 if it’s a Samsung). For other brown goods like washing machines and TVs, take them to a service center.

For those who have lost loved ones and properties, it’s hard to pick up the pieces when years of toiling were seemingly washed away in an instant. But you can. People are wired that way. On the long list of lessons learned from Ondoy, we shouldn’t forget this one: We are built to withstand blows and start all over again.