‘Buyers regret’ class action suit rejectedBanks breathed easier after a local court rejected a group of homeowners’ contention that they’re not liable to repay mortgages on newly purchased houses because their house prices fell.
And those borrowers will now have to pay all the back payments they stopped paying in the process of the suit.
Homeowners have began suing banks and developers ever since the prices of newly built apartments fell up to 40 percent compared to three to four years ago, when they first signed the contract to purchase them.
The case completed yesterday involved a group of buyers of units in a new apartment development in Gimpo, Gyeonggi.
The Seoul Central District Court rejected all the requests of the homeowners including a refund of their deposits and a cancellation of their contracts with developers.
The court said in a verdict that it’s “difficult to see homeowners’ contracts with developers cancelled and the plaintiffs’ responsibility to repay loans will not be lifted.”
This is the third time that local courts ruled in favor of banks and developers in similar cases.
In April, a group of owners of units in a new apartment development in Namyang, Gyeonggi, lost their legal case against a bank. In November 2011, a group of owners of units in a newly built development in Yongin, Gyeonggi, lost a similar suit.
“I’ve seen some precedents where groups of homeowners won court cases for terminating their contracts with developers, but I never saw a single case where they won the court’s permission to exempt their liability to repay mortgages on newly purchased houses,” said an employee at a local bank. “Although they know that chances are slim, homeowners bring these matters to a court to put some pressure on developers. Developers have certified homeowners’ loans they take out from banks so that homeowners can purchase new apartments. This could lead to some pressure on the builders to give apartment price cuts to buyers.”
He said buyers also go to court to buy time and avoid their credit ratings hitting rock bottom until the end of a court case.
Financial regulators advised buyers to think twice before suing banks and builders.
Although they could avoid becoming credit delinquents during their trial, they will be bombarded with overdue loans and interest rates after the trial.
“When they fail to pay overdue loans and interest rates for more than three months, they could become a credit delinquent,” said an official at the Financial Supervisory Service. “We have advised banks to spread the word to plaintiffs. Those in the middle of a trial should at least repay interest of loans to avoid a catastrophe.”
According to industry insiders, a substantial number of buyers are believed to have filed similar suits given that 122,860 new apartments are due to be completed in five new towns, including Pangyo, Dongtan, Gimpo, Gwanggyo and Paju, by 2015.
By Kim Mi-ju [email@example.com]
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