Dfcu has of late come under spotlight over its move to claim mortgages that were formally owned by the now defunct Crane Bank.
The Nile Post sought out State Minister for lands Sam Mayanja who gave insights into the matter.
How did this issue of these mortgages find its way to your desk?
Of course, I'm the Minister of state for lands. One of my core mandate is to do foresight on matters
specifically on land. And once I receive a complaint from the public, I help by intervening. The velocity of my intervention depend on the dynamics of the issues brought for my attention.
In this particular case, the complaint was about the existence of mortgages in the name of Crane Bank. I had to intervene because the complaint related to a Supreme Court decision which declared that Crane bank ceased to exist when the receivership ended. I accordingly instructed the Commissioner Land Registration to clean the Registry Record by removing the mortgages that were in the names of Crane Bank Limited which Bank long ceased to exist. A non- existent entity cannot hold mortgages.
How is it possible that DFCU bought Crane Bank but didn't transfer mortgages ...?
I must say at once, that this is something which surprised me as a lawyer and also surprised my office at the ministry. I know when one buys a business, one takes the assets of that business. For a Bank, among the assets bought are mortgages which the purchaser of the business must transfer to his name.
I have seen that in this matter, whereas there is a purchase agreement for the loans from Crane Bank by
Dfcu Bank, there are no transfer of securities (mortgages)!
Don't you think that Dfcu will be financially affected if these mortgages are cancelled...
I think the question is not that Dfcu will be financially affected. I think the question is whether there is
currently a legal avenue for Dfcu to register the mortgages into its names given the current legal scheme of things. The legal regime currently obtaining is that if one buys a mortgage as an asset, that mortgage must be transferred to the purchaser. If that legal path is ignored there are consequences. Any risk which must be suffered in this transaction was a voluntary action taken by the people who were involved in this transaction. But as a Ministry, we have the duty to clean the Land Registry. The Ministry cannot allow a continuation on the Land Register, mortgages that are in the names of non- existing defunct Banks. Maybe Dfcu could redeem the situation if it can represent mortgage transfers, pay the registration fees, pay the stamp duty and get them registered. The legal dilemma in this scheme of things is as to who shall sign the transfer of the mortgages to Dfcu Bank.
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Additionally, won't the banking sector, as a whole, be grossly affected if these mortgages are canceled on the account that Crane Bank is now defunct....
The banking sector is highly regulated. It operates within laws like Financial Institutions Act, and the Mortgage's Act. When banks comply with the law they are actually doing business. The banking business has grown because the government has put in place the Financial Institutions Act, and that's why you see business growing. If banks register mortgages in accordance with the law, then there will be no need for cancellation of mortgages and Banks will make money. This is how banks must carry out their businesses. It is the legal position that the mortgages currently in the names of the defunct Crane Bank Limited are currently in legal terms not property of Dfcu and no longer that of Crane Bank. These mortgages are legally not a property of anyone. They currently stand as illegal entry to which no one can lay claim. Mortgages are maintained on the register and enforced by legal persons, natural or juridical, in whose names the mortgages are registered.
