The “First Home” program, through which 92,000 state-guaranteed mortgage loans have been granted, brought banks income of EUR3.6 billion over the past four years, with half the amount being the risk taken on by the state, according to data from the SME Loan Guarantee Fund, the institution that manages the guarantees provided by the Romanian government.
State-guaranteed mortgage loans have been the only way in which banks – 90% controlled by foreigners – have financed the economy during the crisis period. The trend has in fact been to cut exposure after the cheap financing from outside Romania, available during the economic boom, was cut off abruptly.
“It’s true that in the absence of state guarantees banks remain reticent to finance the economy. They have almost used up their guarantees, but do not grant much else,” comments financial analyst Aurelian Dochia.
The volume of loans granted for the acquisition of homes climbed from EUR5 billion in December 2008 to EUR8.6 billion at the end of April 2013, with the rise being equivalent to the volume of “First home” loans.
So state-guaranteed loans have come to account for one third of the total number of loans for the acquisition of homes in banks’ portfolios.
Contacted on Sunday by ZF, Aurel Saramet, president of the guarantee fund, declined to comment on the “First home” program. Saramet is investigated alongside several bankers and businesspeople in a case for alleged credit frauds.
Although the program has been a breath of fresh air for banks, they are still reticent when it comes to financing the economy and tend to see risks everywhere. Loans for companies and for individuals fell 7% in April year-on-year, with the overall volume of financing slipping below 220 billion lei (EUR51 billion), according to central bank data.
“Banks had financed the economy aggressively and were blamed for losing control, but now they see risks differently and are more cautious. The ones hurt the most by the lack of financing are small and medium-sized enterprises, however banks’ behavior is understandable because SMEs have the longest delays on loan payments,” Dochia also says.
Banks currently have around EUR160 million left for state-guaranteed mortgage loans, with the “First home” program to end once guarantees are exhausted, unless the government approves a new guarantee cap. Funds were last added to the program in January – EUR200 million.
Considering an average loan of EUR40,000, banks have funds left for around 4,000 loans. Since the beginning of the year, 11,000 “First home” loans have been sold, worth a total of EUR410 million.
Considering an average rate of 100 applications approved per day, banks could run out of guarantees by the end of June.
Demand for “First home” loans has lately fluctuated from one month to another as standard loans now have similar interest rates and the procedure is easier than for state-guaranteed loans.
The program’s only advantage at present is its low downpayment, of just 5%, as opposed to 15% on standard loans in lei and 25% on loans in euro.
Euro-denominated “First home” loans are sold at an interest rate margin of 4% above three-month Euribor and loans in lei at 2.5% above three-month Robor. Over 95% of the loans granted are in euro.
Amid a volume of loans of EUR3.6 billion, banks collect annual installments of around EUR250 million from the 92,000 clients who have taken out “First home” loans.
The state has so far made payments for tens of defaulting loans. In case of default the state pays half the value of the loan to the bank, while the rest of the money is recouped through a foreclosure sale. The amounts paid so far by the state are in the range of hundreds of thousands of euros.
(English version by Daniela Stoican)