Lenders of Dewan Housing Finance Corp. Ltd (DHFL) are in the process of filing an application in the Bombay high court (HC) to protect the housing finance company’s borrowers from being classified as defaulters just because DHFL has been declared a defaulter, two people aware of the development said, requesting anonymity.
According to the people cited above, DHFL has been receiving repayments on schedule from its retail borrowers, but has not been able to use the proceeds towards paying the dues to its lenders.
As a result, DHFL’s retail borrowers were at risk of being declared defaulters in spite of making repayments.
The issue is about securitization of home loans, which involves pooling together of individual loans and selling the right to receive future payments from borrowers to a third party, which could include banks and investors.
The housing finance company (HFC) in return receives a consideration much before the actual maturity of the original loan. Then, the HFC continues to collect interest and monthly payment on these loans on behalf of the acquirer of the loans, and remit the amount after retaining its portion.
The Bombay high court has restrained DHFL from making any payment to its secured and unsecured creditors. Earlier, mutual funds, including Edelweiss Asset Management Co. and Reliance AMC, had filed separate pleas before the court seeking to recover their dues after the HFC defaulted on the non-convertible debentures (NCDs),…