mortgage're in danger

Mortgage credit crunch doesn't loom up to Russia like it was in the USA, because of the mortgage market immaturity in our country. But russian banks have to make more rigorous the mortgage conditions, because of the liquidity problems on the foreign markets, that's why the development of our mortgage market slows down.

Mortgage credit crunch in the USA affected russian mortgage system indirectly, specifically, pull the financing from the Occident became more difficult and expensive. But nowadays this crunch soars up on a new level - at 11th of July the Fannie Mae and Freddie Mac shares which get a half of the USA mortgage market ($ 6 billion), broke on 31% and 33% duly. Later the shares of IndyMac mortgage american bank (the 7th in size) broke on 99%. At once the USA federal government declared that take this bank under control. According to expert opinion these events affect the russian mortgage market only in prices of occidental resources for russian banks.

Furthermore the russian mortgage market  shouldn't be assimilated with american not in market size and not in the share of real property business. In our days the highest forecast is that from 30-50% off all the deals with real estate are done with mortgages, the lowest is only 10-15. According to the data from the  "BEST-realty" company, for the last year the quantity of mortgage dealing increased on 4%, in Moscow - on 2 %. In the "MIAN - realty agency" the number of mortgage dealings on the buying ready housing amount 45%, but on buying building - 15%.

Precautionary measures took by banks will help to restrain the influence of american crisis on russian market.
Lending institutions changed their strategies from the very beginning walking by rule - more quality than quantity.
Recent tends on mortgage market are quite joyless for borrowers. Banks have been increasing initial deposit, interest rates, narrowing the quantity of potential borrowers.
Only borrowers with considerable incomes can make use of credit. For instance, while buying a one-roomed flat in Moscow outskirts at the cost of $240 000 and 20% initial deposit at 25-years mortgage the monthly payment will total $1880. It means that borrower's income should be about $4000.

The average mortgage rate is 12-13% in rubbles and 10-11% in dollars. One of the most widespread conditions is the following: 20-30% initial deposit for loan period of 25-30 years. According to experts' forecasts, improvment of the mortgage market will occur only by the middle of 2009. Before it loan rates will rise only. So a part of clients, who could buy an accommodation using a mortgage only, even won't be able to take advantage of it. Borrowers who had available funds for accommodation purchase are becoming bank clients now, becouse of the prices rose.

It's all to be a coterie. While resource costs get up, corporate mortgage rates are rising too for building and developer companies, that leads to cost rising of original buildings. Original costs in turn indirectly increases secondory costs, so an amount of people who can purchase an accomodation without mortgage use is getting low. It makes up a possibility of client circle extension, but in connection with cost rising, an amount of people could use a mortgage significantly decreases - replies Igor Antonov, director of product development department, OTP Bank. "Because of the severe banks requirements to prove the income, from the side of "business" category customers, such as employers and keepers but also the customers who can't prove their income, solvent demand is still largely dissatisfied" - Vladimir Mildzikhov (the director of mortgage direction "MIAN - realty agency") replies.

Inability to use the already approved mortgage because of the intense housing prise increase is one of the main problems in buying a flat using mortgage. However the realty price increase can also affect  the banking sector. Considering the general economic situation the housing prise increase even can break down the mortgage development, and also decrease the movements of mortgage loan granting. "Unfortunately, it’s really difficult to make a prediction nowadays. Everything will depend on the general inflation level and the level of national prosperity. If the rates of income growth are to collate to the rates of prise increase the mortgage market will be developing dynamically. We can expect the lowering number of demands - people just will not able to pay for the loan" - Helena Voronina (the deputy director of the nmrtgage centre Bank Absolute) talks.

Even now the soucars mark the lowering mortgage loan granting. It's because of as stiffening conditions of banks funds raising, so the changing of borrower characteristics. " The decreasing of loan granting rates  concerned with possibility lack to refund the loans. It's about the banks, which  cooperated with the foreign investors all alone. There's no long-term money how also no relative cheep money, and it's not clear how long such situation will exist on the world funds markets.  Conditions are changed dramatically to banks working on Housing mortgage agency program” - the bank "Fundservice" mortgage management director, Alexandr Igumnov considers.


Though the absence of direct crisis influence on a russian market, it's overgoing the second best times. The high level of inflation and housing prise increase don't let borrowers to make their savings even to  mortgage primary contribution. "There are 4 main mortgage problems: the realty prises uncertainty, the growing level of past-due debt  (according to official statistics it's amount about 10%), keen decreasing of solvent demand totaly by the country and absence any chances to refund the mortgage case of the majority players at nearest year", - the director of sale department and development the Russian mortgage bank, Alexey Dorosh considers.

One of the main problem of loan expensive is absence long-term money and cheep money exectly inside in the country. "There's no long-term money in our country,  the financial institutions, which accumulate it, they don't participate in distribution of these money not as on the West, not so in Europe and the USA. Actually there is a big unused money reserve, but a lack of permissions doesn't let to put it in requisition. Unfortunately, whole mortgage market funds either by goverment in a  face of housing mortgage loan  and goverment banks or by foreign banks, or by russian banks but then again using west money. Probably, the real rates decrease can  take one or two years. We should develope the fund market farther, but also achieve great success in fight with inflation", - the chief of regional mortgage department of National reserve bank Naum Libkind thinks.

The experts estimate influence of new stage american crisis on the russian market in different ways. In spite of the compeleted situation as for the banks so for the borrowers, we shouldn't wait the russian mortgage crisis  in nearest time. Primarily, because of undevelopment market. "At this date talk about russian mortgage crisis till early. The penetration level of mortgage loan in the russian fund market is greatly low beside with west counties, especially with the USA, where mortgage crisis bursted. Besides, the russian mortgage loan conditions are more strict than it was in the USA at last years (variable rates, zero payments, the absence of necessary to prove the incomes etc.), and in a view of the USA negative experience but also limited capacity to attract the fund, the situation  hardly will change in nearest time from the point of view the loan and the request to grow the share on this market. In the same time, we can expect the  rates of increase on this market, the reason of this will be the absence of ability from banks to securitize the loans purposely to grow the case farther, so then the capital markets are still closed for majority financial institution", - stock market analysis department director of investment bank "KIT Finance" Maria Kalvarskays talks.

Vice-chairman of department "Absolute bank" Oleg Skvortsov also doesn't predict the russian mortgage crisis:"The mortgage market in our country is too young nowadays and it's size takes about 2,5 % of GDP. That why the russian economic doesn't change in this sector. So we shouldn't expect the american way of crisis development. Though Russian Federation suffers the west crisis influence, it is minimal. The first stage of crisis didn't touch our country and we hope the second will go outside. Nowadays in Russia the mortgage movements are slow down, what we can 	observe as in limited access to resources so in traditional summer bust. Begining from September the market will grow."

However some experts even now estimate current situation as crisis beginning, but not for the banks but for the borrowers. "The crisis has begun for borrowers, because of the rates increasing in this year. But for the banks it's supposed to begin for next 1,5 - 2,5 years, when money supply and the default predicted level (nowadays it's amount 12%) which will 	affect in the felt mass of non repayments. The market increasing in 2006 gave to banks the feeling of "cherry pie" (easy money), now this period is over. Now we have to work hardly for getting the results. On the back of, it will lead to bank's reduction and active loan sales to shareholders. If the goverment will not think proper to activate some other methods for realization mortgage nation quetions the economic default on the country level will happen in 5 years. In particular, the question is in rent housing as a probable solve problem", - the genel chief and the 	part-owner of a company group "Multibroker" Natalia Kirpichenko gives pessimistic preditiction.

"We may say, the mortgage crisis has been happening in Russia. However, luckily, it passes more easily then in the USA and other Europe countries. We have no any backgrounds to slump in realty prices as it was in the West. The russian borrowers pay enough correct, the facts of realization mortgaged flats have identity character. So the size of mortgage deals is not really important (it's just about 10% of general size), for to influence
on the realty market. The mortgage crisis in Russia affected in general only on the loan conditions, which were offered by banks to present potential borrowers. Complexities in getting the mortgage and present realty price level made the housing unreachable for many people, who could have a house at the begining of last year", - the vice director of mortgage department Vyatcheslav Panteleev  talks.

In spide of the negative crisis influence, it has the positive sides. The risk decreasing in mortgage lending and stiffening the requirements to borrowers may also help to the banks not to allow the repeating the situation on the american market. The safe bank policy will lower the percent of troubled loans, but the realty prices have to steady because of the demand low.  Just the same we shouldn't expect the redical improvement in banks conditions of lending or loan rates decreasing", - the director of credit department SDM bank Sergej Kozlov are sure. 


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Original (Russian): Ипотека под ударом (http://www.kommersant.ru/doc.aspx?DocsID=913355)
Translation: © Klementina, killerpool, Virgoss.

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