How Liable Is The Mortgage Guarantor?

[Lazy Sod]

Let's say a house is purchased in the Thai wife's name, with a mortgage from a bank guaranteed by the foreign husband (as I found the banks here normally insist upon). The marriage fails, the wife's family move in, the foreign husband moves out, the wife refuses to sell the house, the mortgage payments stop (as they were coming from the husband).

What does the bank do next? Do they try to re-possess the property before going after the guarantor? What if the guarantor simply refuses to pay anything?

In the West I think the bank would simply re-possess the property, sell it, and then give the proceeds to the wife (as she is the owner). But a few years ago a lawyer here told me no, they go after the guarantor for a long long time before they consider trying to re-possess. Anybody know? How liable is the guarantor in these circumstances? What powers do the banks have to force the guarantor to continue the mortgage payments?

Edited June 18, 2006 by Lazy Sod

[thaigene2]

Let's say a house is purchased in the Thai wife's name, with a mortgage from a bank guaranteed by the foreign husband (as I found the banks here normally insist upon). The marriage fails, the wife's family move in, the foreign husband moves out, the wife refuses to sell the house, the mortgage payments stop (as they were coming from the husband).

What does the bank do next? Do they try to re-possess the property before going after the guarantor? What if the guarantor simply refuses to pay anything?

In the West I think the bank would simply re-possess the property, sell it, and then give the proceeds to the wife (as she is the owner). But a few years ago a lawyer here told me no, they go after the guarantor for a long long time before they consider trying to re-possess. Anybody know? How liable is the guarantor in these circumstances? What powers do the banks have to force the guarantor to continue the mortgage payments?

It's been my experience that most banks and finance companies won't accept a foreginer as the guarantor. In the few times that I've enquired (SCB, Kasikorn for a mortgage and a few car dealers when thinking about getting a new car), I was told that the guarantor must be Thai. In two places (a bank and a car dealer) I was told it was a BOT regulation.

But I have farang friends who have managed to guarantee mortgages in their wife's name. However these Thai women had work experience in offices etc.

When you think about it, why would a bank be willing to offer a mortgage to some foreigner who could literally fly away at any time leaving a Thai wife who may have only a grade 6 education, no job, and no prospects of getting one that would cover the 20 or 30,000 baht a month required?

[Dragonman]

Let's say a house is purchased in the Thai wife's name, with a mortgage from a bank guaranteed by the foreign husband (as I found the banks here normally insist upon). The marriage fails, the wife's family move in, the foreign husband moves out, the wife refuses to sell the house, the mortgage payments stop (as they were coming from the husband).

What does the bank do next? Do they try to re-possess the property before going after the guarantor? What if the guarantor simply refuses to pay anything?

In the West I think the bank would simply re-possess the property, sell it, and then give the proceeds to the wife (as she is the owner). But a few years ago a lawyer here told me no, they go after the guarantor for a long long time before they consider trying to re-possess. Anybody know? How liable is the guarantor in these circumstances? What powers do the banks have to force the guarantor to continue the mortgage payments?

The lawyer was correct. Banks tend not to like to re-possess properties in Thailand unless they have to. Lots of empty bank owned properties around my area. Thais do not like buying previously lived in properties. My wife says it's because of the ghosts.

Even if you weren't a guarantor the bank would likely take action, as all loans taken out within the marriage, even if taken out without your knowlege, are "marital responsibility". You could of course defend by saying you signed at the Land Office to say the funds were your wife's and nothing to do with you. Unlikely to win! As guarantor there would be little defence, other than if your ex wife had pots of money. If you left the Country they would probably re-possess.

My wife was offered a mortgage by Bangkok Bank with me as guarantor. She does not work! There was no mention of any BoT regulations.

[thaigene2]

My wife was offered a mortgage by Bangkok Bank with me as guarantor. She does not work! There was no mention of any BoT regulations.

Yes, I thought it was unlikely..but that's what I was told on more than one occasion. It's probably a face-saver to get the farang out of the office! However, if anyone has seen this supposed-regulation perhaps you could post it (that foreigners allegedy can't be guarantor's of a Thai mortgage/loan).

[Lazy Sod]

I'm almost certain it is not a BOT regulation as I was offered two mortgages in the name of my wife to buy a house in her name with me as the guarantor. She didn't even have to show up at the bank.

[Lazy Sod]

Does anybody know what happens in reality though? This must happen every day for cars, motorcycles, houses, etc.. as from what I see Thai's are always guaranteeing loans for one another with little fear. I asked a couple of Thai friends and they said the bank simply take back the property if they can.

Forget the guarantor's obligations for a minute, how about the banks terms to the main lender (the wife), surely they have a re-possession clause which the husband can refer to if they go after him?

What if you said to the bank, "it's the wife's house, we've split up and I'm not gonna pay the mortgage for her, re-possess it". Considering that the remaining amount of the loan is typically less than 70% of the value of the house then there's positive equity and no real debt (banks will normally only lend upto 70% for a foreign guaranteed loan).

Nadia, any opinions from a legal perspective?

[Dragonman]

Does anybody know what happens in reality though? This must happen every day for cars, motorcycles, houses, etc.. as from what I see Thai's are always guaranteeing loans for one another with little fear. I asked a couple of Thai friends and they said the bank simply take back the property if they can.

Forget the guarantor's obligations for a minute, how about the banks terms to the main lender (the wife), surely they have a re-possession clause which the husband can refer to if they go after him?

What if you said to the bank, "it's the wife's house, we've split up and I'm not gonna pay the mortgage for her, re-possess it". Considering that the remaining amount of the loan is typically less than 70% of the value of the house then there's positive equity and no real debt (banks will normally only lend upto 70% for a foreign guaranteed loan).

Nadia, any opinions from a legal perspective?

Cars and motorcycles are not the same! Easy to re-possess and easy to sell. As I have said houses are not! Re-possession clause is after all guarantor clauses have been attempted. You cannot say "re-possess the house". This is decided on by the bank. Court proceedings, and if you are working, "attachment orders" are first. This is reality, as my brother in law has just received an attachment order for debt. The house being worth more than the loan means nothing. They have to sell it first. Not easy! Property Law has been my speciality for nearly 30 years and thus all my posts are from "a legal perspective".

[thaigene2]

Court proceedings, and if you are working, "attachment orders" are first. This is reality, as my brother in law has just received an attachment order for debt. The house being worth more than the loan means nothing. They have to sell it first. Not easy! Property Law has been my speciality for nearly 30 years and thus all my posts are from "a legal perspective".

Dragonman

Was your brother-in-law the principal borrower or the guarantor?

[Dragonman]

Court proceedings, and if you are working, "attachment orders" are first. This is reality, as my brother in law has just received an attachment order for debt. The house being worth more than the loan means nothing. They have to sell it first. Not easy! Property Law has been my speciality for nearly 30 years and thus all my posts are from "a legal perspective".

Dragonman

Was your brother-in-law the principal borrower or the guarantor?

Principal borrower, but in law they have similar status. Guarantors are not popular nowadays in most countries where "Common Law" prevails, and there are numerous State and Federal Laws in US, as well as case law decisions in UK. The actual wording of the "Guaranty" is everything. You can of course decide to amend any Guaranty to suit your requirements. For example "all means must be used to obtain payment of debt from the first signatory, including the forced sale of assets". Bank will probably not accept it, but it's worth a try.

[GuestHouse]

NEVER EVER EVER NEVER EVER NOT IN A MILLION YEARS EVER - Gaurantee someone else's loans.

Edited June 19, 2006 by GuestHouse

[rishi]

I think that banks in all countries use the same template for cashing in on bad depts. By definition the guarantor will be the first on the list of priority --- they wouldn't have accepted him as a guarantor in the first place, if they didn't believe he would be able to to pay.

It's probably a bit harder to make the bank accept a foreign guarantor (due to the fact he is more likely to be able to vanish), but the Thai banks will accept him, if they feel convinced he can/will pay up in case.

My wife recently got a mortgage with me as a guarantor ... but not until I'd produced bank-statements from my homecountry showing that we didn't really need the mortgage plus that I had foreign income that could handle the monthly payments ... (they didn't accept me solely on the basis that my "homemade" company paid me a salary high enough to meet the standard requirement that monthly payments mustn't exceed 40% of monthly income).

[Dragonman]

I think that banks in all countries use the same template for cashing in on bad depts. By definition the guarantor will be the first on the list of priority --- they wouldn't have accepted him as a guarantor in the first place, if they didn't believe he would be able to to pay.

It's probably a bit harder to make the bank accept a foreign guarantor (due to the fact he is more likely to be able to vanish), but the Thai banks will accept him, if they feel convinced he can/will pay up in case.

My wife recently got a mortgage with me as a guarantor ... but not until I'd produced bank-statements from my homecountry showing that we didn't really need the mortgage plus that I had foreign income that could handle the monthly payments ... (they didn't accept me solely on the basis that my "homemade" company paid me a salary high enough to meet the standard requirement that monthly payments mustn't exceed 40% of monthly income).

Same with me. When the Bank Manager saw I had a Company Pension from UK, only asked for 3 months Bank Statements. Felt it was more likely I'd stay in Thailand, than go back to UK. Also as said previously, would only give 70% mortgage.