Sen. Ríos presents measures to prevent home foreclosures

SAN JUAN – Senate Rules and Calendar Committee Chairman Carmelo Ríos Santiago presented Wednesday what he called a mortgage reform with the filing of three measures that are aimed at allowing people to keep their property.

“Currently in Puerto Rico there are about 25,000 properties about to be foreclosed and this mortgage reform is aimed at favoring consumers. In 2016, a record of homes foreclosed by the banks was reached due to a lack of payment from 5,424 residences, the highest number in history,” he said. “This number will continue to increase. In only five years, 22,329 families have lost their homes, and without a home it is easier to emigrate and lose a sense of belonging in Puerto Rico. That is why we are presenting this package of measures.”

At a press conference Wednesday, the Senate spokesman explained that Senate Bill 395 amends Article 1417 of the Civil Code for the purpose of increasing debtors’ rights.

Senate Rules and Calendar Committee Chairman Carmelo Ríos Santiago filed three measures aimed at helping mortgage-holders. (CB / Limarys Suárez)

Specifically, the amendment directs banks to let homeowners know when their mortgage loan is sold to a third party and the amount it will be sold for so the homeowner has an opportunity to refinance for a lower amount than the original mortgage.

“Banks are selling mortgage loan portfolios for 25 cents to 35 cents on the dollar. If you took out a mortgage for $150,000, when the bank sells it to another institution that loan is sold for about $40,000. What the measure seeks is that the mortgage-holder can invest in his own house and can buy in 70 days the property they already have for a much lower price,” he explained.

Ríos predicted that banks will oppose the measure, but said he is not afraid of being pressured or lobbied. Meanwhile, he said that with this measure, banks will not lose money while the property owner benefits from lower payments.

“We cannot continue to watch banks foreclose homes. Investors are looking at and buying at a discount and I have no problem with that. My problem is we don’t give an opportunity to those who left the bank scared after signing their mortgage, who have paid for 15 years and now the bank decides to sell the loan portfolio of that home at a 70% discount without the owner of the property being aware or having the opportunity to refinance their own residence at a discount,” he added.

The committee chairman also said that if his proposal became law, he would be creating a new market for investors who want to refinance their own residences at a lower price than the original.

“My bet here is that a lot of people are going to go into that business of financing that market in which there is a $150,000 house, the bank wants to sell the loan portfolio for $40,000 and they tell me: I’ll give you the money to refinance for $40,000 but with a higher-than-market rate. In the end, the property owner, if they paid $800 monthly, even with a higher rate, they would pay $400 a month. It’s an excellent mortgage product,” he said.

Senate Bill 396, part of the package Ríos called the mortgage reform, allows municipalities to acquire residences that are declared a public nuisance and then sold to people who wish to renovate and turn them into their main residence.

“This measure seeks that a person who sees a property that has already been declared a public nuisance by the municipality can say I am interested in the lot so that the municipality becomes a facilitating entity and, through expropriation, sells it. This guarantees us the payment of CRIM [Spanish acronym for Municipal Revenue Collections Center], guarantees us that this property will be used and we remove a municipal health hazard,” he said.
Senate Bill 397 amends the local Judiciary Act to create specialized, mortgage-related courts to address the “alarming” increase in foreclosed properties.

Ríos believes having these special courtrooms in San Juan, Mayagüez, Ponce and Fajardo will allow people to keep their homes.

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