Mizrahi Tefahot (Tefahot) mortgage enforcement, Kiryat Gat 2009: after 3 months of arrears

This article is based on a report by Netta Rot on the Walla news site, published on 21 September 2009. According to the report, the judgment was given "recently"; the date of the judgment and the case number were not stated, so they are marked here as "not stated in the sources". We have not reviewed the full text of the judgment, and all facts below are as reported in the article. The article refers to the bank as "Bank Tefahot" (Tefahot Mortgage Bank), which is today part of Mizrahi Tefahot Bank.

Background: a mortgage, short arrears and the sale of the apartment

According to the article, in 1999 the plaintiff and his then wife took a mortgage from the bank to buy an apartment. They later ran into financial difficulties, fell behind on payments and decided to sell the apartment. A sale agreement was signed in April 2001.

According to the report, the bank opened enforcement proceedings three days after the sale agreement was signed, after arrears of only three months. The plaintiff sued in the Kiryat Gat Magistrate's Court for the damage he says the enforcement proceedings caused him.

What each side argued

The plaintiff argued, according to the article, that the bank acted negligently and in bad faith: it went straight to the most extreme step, and the couple were given only three days to repay the loan.

The bank argued that the proceedings were proper and that it had not received notice of the sale from the plaintiff, which is why it proceeded with enforcement.

What the court decided

According to the report, Judge Tali Haimovitz held that the bank acted negligently and in bad faith toward the plaintiff. She noted that the bank gave no explanation for rushing to take an extreme step first, when the arrears were only three months. As quoted in the article: "No explanation was given as to why, this time, the bank hurried to take specifically the extreme step as a first step."

The judge further held, according to the article, that once the bank learned the apartment had been sold, it should have withdrawn its demand for immediate repayment of the whole loan and charged default interest only on the months in arrears, not on the entire loan. The bank did neither. According to the report, the judge held that this conduct "constitutes a breach of the special duties of care and loyalty imposed on a bank toward a customer".

The outcome, according to the article: the bank was ordered to pay the plaintiff about NIS 33,000 for interest differentials and overcharges, the costs of the enforcement proceedings and emotional distress, plus NIS 8,000 in legal costs, about NIS 41,000 in total.

What it means for customers

The judgment does not hold that a bank may not act to collect a mortgage in arrears. According to the report, the criticism focused on the bank going straight to the extreme step after short arrears, and on its continuing to demand the whole loan and charge default interest on all of it even after it knew the apartment had been sold.

Borrowers who receive a demand for immediate repayment can check whether the bank is charging default interest on the whole balance or only on the amounts in arrears, and keep a record of every notice they give the bank, for example about the sale of the property. Keep in mind: this is a Magistrate's Court judgment, which does not create a binding precedent, and every case turns on its own facts. We do not know whether an appeal was filed.

Frequently asked questions about court rulings against Mizrahi Tefahot Bank

Source grade: Report only, no text of the decision. The text of the decision was not found in open access. The details rest on a report and are attributed in the article to the source that gave them.

The date of the judgment and the case number were not stated in the report (published 21 September 2009). We have not reviewed the full text of the judgment. We do not know whether an appeal was filed.

Sources

1. https://www.walla.co.il/news/israel/1577107

How to cite

Customer's claim v. Bank Tefahot (now Mizrahi Tefahot) - case number not stated in the sources, Kiryat Gat Magistrate's Court. Source: Net HaMishpat (Israeli courts database), case Customer's claim v. Bank Tefahot (now Mizrahi Tefahot) - case number not stated in the sources.