A new law adopted by the State Duma on May 28, 2024, allows mortgage borrowers facing financial difficulties to independently sell their pledged property. This development aims to provide an alternative for borrowers who are unable to repay their loans.
Previously, banks typically handled the sale of pledged properties themselves. However, this process often involved court costs and resulted in lower auction prices. Additionally, creditors were hesitant to allow clients to sell their properties due to concerns about debt repayment guarantees. The new law seeks to balance the interests of both creditors and borrowers with input from the Bank of Russia.
Under the new regulations, a borrower must inform the bank of their intention to sell the mortgaged property independently. The bank will then set a minimum price and sale deadlines. If the sale price exceeds the outstanding debt, the borrower retains any excess funds. Borrowers can proceed with independent sales throughout the mortgage contract's validity period. During this time, creditors cannot foreclose on the property but may assist in its sale.
There are specific circumstances under which creditors can prevent independent sales, such as ongoing foreclosure proceedings or bankruptcy of either party involved in the mortgage contract. Additionally, if a property is already pledged under other contracts, it cannot be sold independently.