Tamweel may repossess properties in default

Tamweel, the country's largest home lender by volume, may become the first to sell repossessed properties once the legal process is complete. Legal uncertainties have made mortgage lenders reluctant to hold forced sales or auctions in the past, as the system has never been tested. Instead, lenders have negotiated with distressed mortgage customers to try to recover some capital and avoid costly legal proceedings. No repossessions have been completed by UAE banks, according to Mohammed Sultan Thani, the assistant director general at the Dubai Land Department, which would oversee the sale of any repossessed properties under the 2008 Mortgage Law. "The banks want to resolve things on their own," Mr Thani said. Credit Suisse estimates banks could lose as much as Dh23 billion (US$6.26bn), or almost half of their Dh60bn overall mortgage lending. Other analysts say the exposure is much lower. Raj Madha, an analyst with EFG-Hermes, estimates potential bad mortgage loans at about Dh6bn. Wasim Saifi, the chief executive of Tamweel, said the Islamic lender would "move to the next step of disposal of properties once the legal process of foreclosure is completed". Mr Saifi said Tamweel "had started the process of foreclosure for a few customers". He said a growing number of mortgage customers were behind with payments. Tamweel and Amlak account for more than half of the country's mortgage market, which amounts to outstanding mortgages of about Dh35bn. The remainder, of about Dh25bn, is divided among Emirates NBD, Abu Dhabi Commercial Bank, HSBC and Standard Chartered, and several smaller players. "The number of defaults in the provisionable category, that is 90 days and above, is still relatively manageable," Mr Saifi said. But he added a clearer picture would not be available until the third quarter. Job losses, rising mortgage rates, salary cuts and steep declines in property prices are the main reasons for a growing number of mortgage owners falling behind with payments. Amlak and Tamweel stopped new mortgage lending in November, after trading in their stocks was suspended. They are expected to receive approval to restructure and secure their funding in a few weeks, Sheikh Khaled bin Zayed, the chairman of Tamweel, said yesterday. uharnischfeger@thenational.ae