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Business Duty Officer

Tightening the policy of the Central Bank on the issuance of unsecured loans to obtain a mortgage is a rational vector

Tightening the policy of the Central Bank on the issuance of unsecured loans to obtain a mortgage is a rational vector

Yesterday we wrote about, that it has become more difficult to get a mortgage in Russia with a minimum deposit. This situation for our publication was commented by a member of the General Council of "Business Russia", Head of the Expert Center for Criminal Law Policy and Enforcement of Judicial Acts,ambassador “business officer” Ekaterina Avdeeva:

“Tightening of the policy of the Central Bank (CB) for issuing unsecured loans to obtain a mortgage - the correct and rational vector. The volume of mortgage debt in the country as a whole in 2022 decreased by 6% - to 54,9 billion rubles, and for a year, from April 2021 year to April 2022 y, decreased by 15%, or 9,9 billion rubles. Despite the relative resilience of the mortgage portfolio to the macroeconomic shock from sanctions pressure, borrower defaults are still common and critical.

In case, when it comes to mortgages, the right to inviolability of the only home does not apply, in other words, the person is left without funds and real estate. Means, proceeds from the sale of a mortgage apartment, will be used to pay off the debt to the mortgagee. If there are other creditors, they will receive money only if, when they remain after meeting the requirements of the first.

Foreclosure on a mortgage apartment is more critical, than the opportunity offered today by the Central Bank to the borrower to develop sustainable financial discipline and the practice of saving money during the period of collecting an adequate down payment. Undoubtedly, this somewhat delays the acquisition of such housing, but in the long run reduces the number of defaults.

To date, in the case of overdue debt, there are no restrictions not only on the withdrawal of housing, but also for its subsequent sale at auction. The sale of such real estate begins with a discount in 20%. If the borrower has paid the down payment, for example, in 10%, paid off the mortgage for a short time and was late in payments at an early stage, then there is a big risk, that after the delay, the final demand will be sent, until the lawsuits, housing can rise in price, and get cheaper, so the price may be lower than 20%. More than that, if mortgage housing is not sold at auction at a discount 20%, there is a further decline. In this case, the borrower may be left without housing, and without compensation, and most importantly, he will remain indebted to a significant amount of a credit institution, which is more likely to lead to bankruptcy.

Potentially dangerous strategies worth mentioning separately, when borrowers take consumer loans to make a down payment, and then mortgage obligations. The financial burden and risks are so great in terms of going into arrears, that this pernicious trend must be stopped.

Previously, the calculation of the debt burden indicator (Debt Service-To-Income (DSTI) Ratio) was less harsh, interest allowed in 50% and even higher. Of course, for mortgage loans, the debt burden should be significantly lower, since if a household has less than 50% of income, this becomes an unbearable burden for the family and creates serious risks in case of loss of work even for a few months. According to statistics, debt of the Russian family in 2022 year compared to 2021 has grown since 21,3% to 26,1%. This is not about worsening the situation of borrowers, but about a reasonable approach to entering into a long-term relationship with a credit institution when obtaining a mortgage loan, assessment of all financial risks and their opportunities.

Thus, The strategy of the Central Bank is aimed at reducing the number of rash, premature mortgages, until that moment, when the borrower is really financially ready for this. More than that, the borrower is recommended, in addition to the down payment, have financial reserves for a few more months to pay off the loan.

Great steps have already been taken in terms of protecting the rights of mortgage borrowers. In particular, legally regulates the issue of protecting the rights of borrowers, who take mortgage loans for personal needs, and separately - mortgage borrowers.

At the same time, we consider it necessary to raise the issue of limiting the collection of a seized property for borrowers-individuals. Adjustments to law enforcement practice in the event of a mortgage crisis should be worked out by the state together with the Central Bank. At the same time, it is important to determine the mechanisms for distinguishing between real and fraudulent mortgage schemes.. Sanitation of responsibility by the only mortgage housing should be aimed at protecting conscientious citizens and contain the inevitability of punishment for illegal actions..

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