Monday , March 20 2023

Look at what the banks did


Banks: Thousands of mortgage borrowers find themselves in an informal hostage situation with banks playing a “dirty” game on their backs. All events on…

Thousands of borrowers, with mortgages on homes or businesses, fall into the category of regulated, serviced loans and banks have sold them to credit management companies. Τ

More loans in this category, in the amount of several billion euros, could be “greened” by drastic restructuring of servicers, but currently there is no progress in this direction, so that borrowers can find a final solution.

Banks have repaid loans in the amount of several tens of billions of euros, but, as the European institutions have repeatedly noted, these arrangements have generally not been successful and many regulated loans are rapidly returning to the red / non-performing category.

As shown in the table (source: Bank of Greece), at the end of 2019, there were a total of regulated loans of 38.5 billion euros, most of which (24.6 billion) were uncollectible, and about 14 billion euros in the service category.

Already at the end of 2020, a large decrease in regulated loans was recorded, by about 10 billion euros, as banks transferred them, through large securitizations in funds. A significant percentage of loans transferred to management companies are regulated, serviced loans.

Credit arrangements

  • Amounts in millions of euros, December 2019, December 2020
  • Regulated loans 38,549 28,236
  • Regulated serviced loans 13,947 11,576
  • Regulated non-performing loans 24,602 16,660

Most loans in this category are not considered finalized from a supervisory point of view, although, mainly through their extension, but also through state war programs (“Bridge”), borrowers manage to repay them consistently.

In order to be considered permanently settled, a way must be found to keep the balance of the loan lower than the value of the house pledged for the loan.

For example, a loan is not considered final, even if the monthly installment is reduced to a level low enough that the borrower can pay it when he has a balance of 100,000 euros, while the value of the property is 80,000 euros.

In this scenario, which faces thousands of borrowers, management companies could offer a final solution, taking advantage of the margin they have from buying loans at very low prices, relative to their face value.

In the example above, the management company could easily reduce the value of the loan to reduce it from € 100,000 to less than € 80,000.

It is possible that the final adjustment of the loan, according to the income of the borrower, will require an additional extension. The end result will be that the loan becomes permanently “green” and, theoretically, that the management company resells it to the bank, at a higher price that will enable it to “lock in” the capital gain in a short time.

However, these loan restructurings remain “frozen”, because banks do not want to buy loans in this category.

If they do, they will have to “keep aside” more funds than they have for serviced loans. Given the constant pressure on banks’ capital adequacy due to poor loan securitizations, banks are reluctant to add more weight to their balance sheets.

For their part, management companies have no reason to rush into final arrangements that will provide a lasting solution to borrowers. As long as loans continue to be serviced, even in a way that could create problems in the future, companies have no incentive to reduce the value of loans because they cannot repay them to banks and “write” capital gains.

Thus, the problem is left to be solved later, when the borrowers will start “pushing” and there will be a risk that the regulated, serviced loans will “turn red” again.

Banks: It distributes mortgages

At the same time, Piraeus Bank is opening a loan tap as mortgage approval begins on very favorable terms. All events on…

Buying a house is now more favorable than rent, given that rents have risen due to short-term leases, as Piraeus Bank executives have pointed out, presenting market trends and the profile of potential buyers.

The bank’s mortgage loan payments in 2021 will amount to around 260 million euros, and 7 out of 10 approved loans have a variable interest rate.

“Banks have huge liquidity and want to give mortgages. Today, Piraeus has 12 billion euros in the ECB with a negative interest rate, and that costs us 60 million euros a year. Therefore, it is preferable to give mortgages and make a profit “, noted Vassilis Koutentakis, Senior General Manager, General Manager of Retail Banking of Piraeus Bank, and added that” we prefer the current market with 800-900 million euros of new payments per year, from 11 billion euros in payments in 2007. “

According to the chief economist of Piraeus Bank, Ilias Lekka, since the Greek economy has entered an ever faster growth path, there is already an increase in demand, and thus an increase in prices throughout the country. At the same time, the keeping of interest rates at low levels by the ECB, the high liquidity of Greek banks and their intention for a strong credit expansion favor lending.

“The big challenge is to convince people that banks not only can, but also want to give loans,” said Mr. Giannis Grammatikos, general manager of retail and distribution networks.

Today, the housing market is focused on people aged 25 to 44, who generally have a stable income (civil servants, the military) and can be financed with at least 20% of real estate purchases and borrow the remaining amount. In case of increase of own participation, the interest rate is lower.

In addition, Piraeus Bank, as Irina Mikropoulou, senior director for retail and distribution, said, offers fully personalized invoicing, and the interest rate is determined according to the borrower’s credit profile, duration and amount of the loan. In fact, buying a home with low energy consumption starts with a 0.15% discount on the interest rate and without the cost of approval.

“In 2021, every other client who took a mortgage loan with a variable interest rate received it with a final interest rate of less than 2.2%,” said E. Mikropoulou

As the leaders of Piraeus pointed out, paying the rent every month, even though it offers housing, does not return anything in terms of investment. In the case of buying a house, either with one’s own funds or obtaining a mortgage, real estate is property that gives imputed income if it is owned by him.

There is also the possibility of earnings in the event of future resale, because although real estate prices have risen significantly in recent years, they come from a sharp decline in the first years of the crisis.

According to the example given by the leaders of Piraeus:

Suppose a house with a commercial value of 100,000 euros is rented for 450 euros per month, or 5,400 euros per year.

In case of purchase for home ownership at current value, the picture is as follows:

  • Value 100,000
  • 6,000 different costs (real estate, notaries, lawyer, transfer tax, mortgage rights, etc.)
  • Total costs 106,000 euros.
  • In addition, there is an annual fee for ENFIA and maintenance costs of € 400.

In case of obtaining a mortgage:

  • in the amount of 80,000 euros with an interest rate of 3% and a duration of 30 years
  • the monthly installment is 340 euros (-24% of the rent) or 4,080 euros per year

The amount of relief that arises if the loan installment is deducted from the rent and the annual distribution of ENFIA is 77 euros or about 1,000 euros.

Banks: Thriller with Greek ATMs: Look what happened

At the same time, the thriller continues with the disappearance of ATMs, and Piraeus Bank drastically reduces them, forcing its customers to travel miles to find the first one available!

Specifically, the bank’s client on Facebook writes:

“Everything is fine, but setting up more ATMs to serve customers is not a culture?” Mileage and fuel for the nearest machine? While abroad there is literally in every retail store, here we have to write itineraries! Culture is not only art, but also the right attitude towards customers of an otherwise serious business. “Finally, install ATMs in every area, because there may be many in urban centers in the province, but with binoculars!”

The bank’s response was as follows:

“Good evening. Thank you for taking the time to send us your written comments and observations, which we have forwarded to our department. We remain at your disposal for anything you need.”

The cause of discomfort? The decision to lock mass stores in several areas, which reduces the availability of ATMs …

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