Translated material
The road to the lender
The state is ready to support insolvent mortgage borrowers
From the beginning of next year, Russians who have lost their jobs should receive a deferment from paying interest on mortgage loans. This is the opinion of Prime Minister Vladimir Putin, who yesterday called on the government to settle all the necessary formalities as soon as possible. The Agency for Housing Mortgage Lending (AHML) will help unemployed citizens. According to its head, Alexander Semenyaki, a special program for restructuring mortgage loans will be developed for such Russians. Citizens wishing to take advantage of government assistance will also have to prove that they have no ability to pay the loans. Moreover, the government's assistance will not be free of charge - after the borrower finds a job again, he will have to pay for state support.The intention to provide a mortgage deferment for unemployed citizens, as well as to lift the three-year moratorium on the use of maternity capital, was voiced last week by Vladimir Putin, speaking with Russians via a “direct line”. On Friday, his promise was confirmed at a special anti-crisis meeting in the government (it was announced that AHML would allocate 200 billion rubles from the budget to support both the population and banks that issue mortgage loans). And yesterday, at a full government meeting, the necessary amendments to the law on maternity capital were approved, and Mr. Putin demanded that his colleagues “quickly complete all formalities” related to supporting citizens with mortgages.
“Citizens who purchased housing on credit, but lost their jobs due to well-known economic events or who lost a significant part of their earnings due to a reduction in the volume of activities of their enterprise, already in 2009 should be actually exempt from paying interest on mortgage loans or payments principal if the payment deadline has come,” Mr. Putin said. At the same time, he emphasized the urgency of the task, giving instructions “to develop a system of state guarantees through the Agency for Housing Mortgage Lending, so that these citizens could be actually exempted from paying interest on loans as early as 2009.”
As you know, due to the financial crisis, the income of many Russians may decrease significantly, and borrowers will not be able to pay for their mortgage. As Reuters reports, citing Ivan Oskolkov, director of the Department of the Ministry of Economic Development, defaults on mortgage loans in Russia have occurred in up to 10% of borrowers. According to his forecasts, the total amount of defaults on mortgage loans in the worst case could reach 400 billion rubles. According to AHML estimates, mortgage loans worth about 1 trillion rubles have now been issued in Russia, including 40% issued by banks operating in accordance with the agency’s standards.
Yesterday, the head of AHML, Alexander Semenyaka, speaking at the all-Russian conference “Mortgage in Russia: Expanding Opportunities,” explained the conditions under which citizens can count on state support. The borrower will be offered a standard solution for restructuring payments due in 2009. This does not mean that the citizen will be completely exempt from mortgage payments. The borrower will continue to repay the loan, but in small amounts based on decreased income. “It is important that the borrower continues to pay, even if only a symbolic amount... so that he does not forget the way to the lender,” Mr. Semenyaka said. AHML, in turn, will pay the bank the remaining portion of the loan. It has not yet been determined whether the bank will be compensated only for the body of the loan or also for the interest on it.
To obtain the right to debt restructuring, you must provide documents from the employment center, a copy of your passport, and an extract from the Unified State Register of Real Estate (USRN). If it follows from the documents that a person owns more than one apartment (hence, he can rent out one of them and receive income), such a borrower can no longer qualify for a deferred payment.
In the event that a citizen has not lost his job, but his income has decreased significantly, he must provide a personal income tax-2 certificate confirming the reduction in wages. By putting forward such demands, the authorities make it clear that assistance will be provided only to those citizens who really need it, and any attempts to profit from the state will be suppressed. “We don’t have the task of giving away money, we invest it while controlling our risks,” says Mr. Semenyaka. According to him, if the borrower did not pay the loan before the crisis, then, having lost his job now, he is unlikely to be able to count on restructuring his debt. As soon as a citizen can get a job, the moratorium ends.
“In essence, we provide a soft loan,” says Alexander Semenyaka. As AHML explained, after the borrower’s solvency is restored, his monthly mortgage payment will be slightly higher than before the deferment. This is the price for government assistance. “It is obvious that the payment increase will not be too significant, so as not to undermine solvency in the future,” AHML notes. The agency expects that by the end of this year the basic principles of supporting borrowers will be formed. Then, apparently, it will become clear about the use of maternity capital. According to AHML, the average monthly mortgage loan payment is about 15 thousand rubles. Taking into account that the amount of “maternity capital” is 250 thousand rubles, we can assume that these funds may be enough to repay the loan for almost a year and a half. But in order for money to be managed in this way, amendments to the legislation are necessary - the government yesterday approved the corresponding bill, and, apparently, it will be submitted to the State Duma for consideration without delay.
In addition to citizens, AHML will also help banks issuing mortgage loans. 200 billion rubles received from the state. The agency will primarily be used to buy out mortgages from banks that operate according to AHML standards. As for other credit institutions, they can issue mortgage securities, the debut issues of which will be purchased by the agency (the minimum issue volume is from 3 billion rubles). Thus, banks will receive the necessary funds to continue lending to the population. According to AHML estimates, such securities may be issued in the first quarter of 2009. According to Mr. Semenyaka, 50 banks have a pool of mortgage loans from RUB 6 billion. and ten banks have experience issuing mortgage bonds. “We expect them to quickly get to work,” says the head of the agency.
AHML will issue its guarantees for subsequent issues of mortgage-backed securities (the volume of guarantees is 500 billion rubles). It is assumed that the securities will be purchased by Vnesheconombank and the Pension Fund of the Russian Federation. This will happen if amendments to the legislation are adopted that will expand the investment declarations of the Pension Fund and development institutions in terms of investing in mortgage-backed securities. As for those banks whose volume of loans is too small to carry out securitization, it is possible that AHML may directly purchase pools of loans.
The agency estimates the potential volume of banks' mortgage securities at at least 100 billion rubles. If the requirements of the law regulating the issuance of mortgage securities are relaxed, this volume will double. Currently, a mortgage can be securitized only if the borrower’s down payment is at least 30%; under the Affordable Housing program, citizens could contribute less. According to Mr. Semenyaki, there are different options for changing the legislation, in particular, the size of the down payment for loans that can be securitized will be reduced from 30 to 20%.
Since decisions need to be made as soon as possible, the main decisions on all the main parameters of support for both borrowers and banks must be made before the end of this year.