New mortgage laws tie down spouses

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All mortgage charges will ensure that spouses assent to the borrowing. Photo/Alexander Porter C

All mortgage charges will ensure that spouses assent to the borrowing. Photo/Alexander Porter C 


Posted  Thursday, August 2   2012 at  16:46

A marriage certificate is now a critical document for anyone applying for a mortgage loan thanks to new land laws that require the involvement of spouses in property acquisition.


So dire are the consequence of missing this documentation that a mortgage charge is deemed to be incomplete and would be actually declared null and void by a court of law in the event that a husband or wife feels overlooked in the initial negotiation with the lender.

And for the prospective home buyers still in the singles’ club, a sworn declaration of their status would be required as new legislation - intended to protect the interests of the borrowers’ spouse, takes effect.

The demand that the spouse is involved in the acquisition of property financed by a lender, as envisaged in the Lands Act, is aimed at ensuring that the immediate family is aware of any loans sought to either acquire matrimonial property or where the property has been given as security for a loan.

For the longest time, lenders did not require borrowers to disclose their marital status, a provision that opened an avenue for either spouse to access to loans to acquire property independently.

In the dark

A much bigger concern for borrowers who had kept their spouses in the dark over such loans, is that the new laws will apply to existing and new mortgages, meaning less obscurity about financial dealings in the family setting.

So far, mortgage lenders have said that thousands of home loan borrowers will be required to re-draft their loan agreements to comply with the regulations which make a spouse’s consent critical in accessing credit.

“All mortgage charges will be re-drafted to ensure that spouses assent to the borrowing,” said Frank Ireri, the managing director at mortgage lender Housing Finance.

“Borrowers will have to file their marital status while applying for home loans,” he added, citing that the new laws may render mortgage charges where such paperwork is not filed null and void.

Though information of the social profiles of home buyers remains scanty, developers have noted a growing trend where women are increasingly participating in property acquisition; a trend linked to a growing number of female professionals across different careers and in business.

In the event of default while one of the interested parties, including a spouse, did not consent to mortgage arrangement or where there’s a charge on matrimonial property, the lenders would be heavily exposed to losses of the unpaid amounts.

Mr Ireri explained that the laws were aimed at protecting the borrowers, where lenders have had a free hand in dealing with the mortgaged property with little regard to the interests of the borrowers and the immediate dependants.

“Financiers and banks have to fully explain the implications and costs of the borrowing,” he said in My 15 minute chat with a bank CEO- an interactive session between bank clients and banking executives ran by the Kenya Bankers Association.

It is the reality of losses presented by the new regulation that will prompt the lender to draw up new mortgage charges on all home loans, which the Central Bank of Kenya estimates at about 16,200 as at December last year.

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