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  1. #1
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    Default Home loan questions

    I currently have a home loan in the DR with a cooperativa at 17% interest and am looking to refinance to get my house payment lower.

    Question # 1: in the unlikely event of default on a home loan, does Dominican law allow the creditors to take the house without any recompensation to the homeowner for their equity?

    Question #2: I can pay off the loan (around 25k) and get 9.2% with my credit card(unsecured personal loan), in the unlikely event of default, is their any likliehood that the American bank will be able to get a judgement against me and take my home here in the DR.

    Thanks for the help. I don't plan on actually defaulting, but given the state of the economy I am planning for worst case. FYI, the best refinancing in the DR I can get in the DR will still be at 14% and I will have to pay US3000+ more than the credit card to get the loan(taxes and fees).

  2. #2
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    I have some answers only to part 2.

    Credit card debt is UNsecured loan (unlike mortgage and auto loan) so the bank cannot confiscate your home for non-payment.

    Another thing. Even if they decide to bring the case against you to the court, first they need to give you the summons (or notification) IN PERSON.

    They can never do this as long as you are in Dominican Republic and all further proceedings stop automatically.

    So, go ahead, have fun!!!

    Quote Originally Posted by Chip View Post
    I currently have a home loan in the DR with a cooperativa at 17% interest and am looking to refinance to get my house payment lower.

    Question # 1: in the unlikely event of default on a home loan, does Dominican law allow the creditors to take the house without any recompensation to the homeowner for their equity?

    Question #2: I can pay off the loan (around 25k) and get 9.2% with my credit card(unsecured personal loan), in the unlikely event of default, is their any likliehood that the American bank will be able to get a judgement against me and take my home here in the DR.

    Thanks for the help. I don't plan on actually defaulting, but given the state of the economy I am planning for worst case. FYI, the best refinancing in the DR I can get in the DR will still be at 14% and I will have to pay US3000+ more than the credit card to get the loan(taxes and fees).

  3. #3
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    Quote Originally Posted by Chip View Post
    Question # 1: in the unlikely event of default on a home loan, does Dominican law allow the creditors to take the house without any recompensation to the homeowner for their equity?
    Absolutely, unless you have some special contract that says otherwise.

  4. #4
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    Default Concerning Question #2

    Quote Originally Posted by Chip View Post
    I currently have a home loan in the DR with a cooperativa at 17% interest and am looking to refinance to get my house payment lower.

    Question # 1: in the unlikely event of default on a home loan, does Dominican law allow the creditors to take the house without any recompensation to the homeowner for their equity?

    Question #2: I can pay off the loan (around 25k) and get 9.2% with my credit card(unsecured personal loan), in the unlikely event of default, is their any likliehood that the American bank will be able to get a judgement against me and take my home here in the DR.

    Thanks for the help. I don't plan on actually defaulting, but given the state of the economy I am planning for worst case. FYI, the best refinancing in the DR I can get in the DR will still be at 14% and I will have to pay US3000+ more than the credit card to get the loan(taxes and fees).


    Assuming it is a U.S. credit card in your name only, the card company could and would proceed to get a judgment in the event of a default by you. Contrary to advice already given, you do not need to be served in person in all jurisdictions that I am familiar with. "Last and usual" address (address identified on your c.c. account) is sufficient for service to be accomplished. Once rendered, a judgment can be applied to any assets you may have (including D.R. real estate).

    The likelihood of that happening has increased markedly in the last few years. As more people and assets have gone global, so too have the searches and seizures of those assets. That having been said, in your particular case, the creditor would have to weigh the costs vs. the benefits. That is, proceeding in the D.R. judicial system and expending the time and money necessary to recover on a 25,000 +/- default.

    To answer your originally intended question, a couple of questons remain. Is your current home loan priced in dollars or pesos? Is it fixed or variable? What is the length of the loan?

    If you are currently paying in dollars, then the credit card option appears to save you a great deal of money and would be the logical choice. However, if the loan is in pesos and at a fixed interest you need to weigh the likelihood of the peso returning to prior levels (or higher) not seen since the end of the Mejia presidency. In that scenario, a fixed peso loan might be a better choice.



    Respectfully,
    Playacaribe2

  5. #5
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    Quote Originally Posted by playacaribe2 View Post
    However, if the loan is in pesos and at a fixed interest you need to weigh the likelihood of the peso returning to prior levels (or higher) not seen since the end of the Mejia presidency. In that scenario, a fixed peso loan might be a better choice.
    The home loan is in pesos and I am currently paying around RD40k a month, and for this reason would like to lower it to around US1000 or less, not to mention the 17% interest rate.

    Do you realy think the peso is going to devalue more in the next months/years?

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    Default I wish I knew for sure...

    Quote Originally Posted by Chip View Post
    The home loan is in pesos and I am currently paying around RD40k a month, and for this reason would like to lower it to around US1000 or less, not to mention the 17% interest rate.

    Do you realy think the peso is going to devalue more in the next months/years?

    how fast the peso will devalue. This may be subject to debate, but my best case is overall "real" inflation in the D.R. is currently running at low double digits and thus in March 2009 the peso will probably be at 41-42 per dollar.

    With that in mind, and assuming you believe that scenario, you need to extrapolate the numbers over the life of your loan to determine if keeping the loan and letting inflation work for you is your best benefit, or whether going the credit card route would be better.

    At a first look the credit card route seems like the logical choice, but depending on your loan length and type (fixed/variable) do not overlook the power of inflation.


    Respectfully,
    Playacaribe2

  7. #7
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    Default Correction!

    The correct future peso rate for my post above should be 37-38 per dollar.


    Respectfully,
    Playacaribe2

  8. #8
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    Quote Originally Posted by playacaribe2 View Post
    how fast the peso will devalue. This may be subject to debate, but my best case is overall "real" inflation in the D.R. is currently running at low double digits and thus in March 2009 the peso will probably be at 41-42 per dollar.

    With that in mind, and assuming you believe that scenario, you need to extrapolate the numbers over the life of your loan to determine if keeping the loan and letting inflation work for you is your best benefit, or whether going the credit card route would be better.

    At a first look the credit card route seems like the logical choice, but depending on your loan length and type (fixed/variable) do not overlook the power of inflation.


    Respectfully,
    Playacaribe2
    I apologize, I just remembered something important, my loan interest rate is not fixed, it will fluctuate with the dollar. Therefore, there is no advantage to have it remain in pesos.

    FYI, this is standard practice here in the DR - in fact, I talked with Banco Leon, BHD, BVP, Banreservas, BP, Scotiabank, Banco San Cruz, Coop Cibao, etc. etc. etc. and they all said the same - the rates were "fixed" as long as the exchange rate doesn't fluctuate a "whole lot". I remember telling one loan officer than they really shouldn't advertize them as "fixed", whereupon he says "that is how it's done here", go figure.

    Nonetheless, thanks for the help, and remember, there is no such thing as a fixed rate homeloan to be had(at least in cibao).

  9. #9
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    Quote Originally Posted by playacaribe2 View Post
    The likelihood of that happening has increased markedly in the last few years. As more people and assets have gone global, so too have the searches and seizures of those assets. That having been said, in your particular case, the creditor would have to weigh the costs vs. the benefits. That is, proceeding in the D.R. judicial system and expending the time and money necessary to recover on a 25,000 +/- default.
    My brother is an atorney, and he said pretty much the same thing, I was wondering if anybody had any real examples of this happening. Also, I am asking this question not becasue I expect to default, but just planning for the worst case scenario given that I work in the construction industry and things are quite slow now. It would be nice to know how difficult time and money wise the DR judicial process is to get a judgement.

    In the event something happens and the banks realize it could be a problem getting a judgement, I could always do a chapter 17 and barter to have my payments reduced by giving me a longer term and/or lower interest rate.

    thanks

  10. #10
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    Quote Originally Posted by Rocky View Post
    Absolutely, unless you have some special contract that says otherwise.
    Wow, that is bad - all the equity lost. The loan I have is with the Coop San Jose and I have no idea what the small print says, but knowing the "Dominican way" as far as business goes, I figured it would all be to the banks advantage - this is another reason I really want to pay off this loan sooner rather than later.

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