Banks lost 40% of the value of mortgages

Local banks lost some 30-40 percent of the value of mortgages they established for housing or consumer loans, due to the deadlock on the real estate market, which led to a fall of prices.

Lenders risk not recovering all their receivables in case of foreclosure. To avoid such losses, bankers are looking for ways to postpone foreclosure and would rather reschedule loans, while the number of those who can no longer pay back borrowed funds has risen by some 40 percent compared to the previous years.

For the moment, Leumi bank, one of the smaller lenders on the market, has 67 properties in foreclosure proceedings, while Volksbank, the institution with the highest exposure on the real estate segment (95 percent), is foreclosing some 10-20 properties.

According to sources on the banking market, Romania's largest banks, Banca Comerciala Romana (BCR) and BRD-Groupe Societe Generale, have the largest number of ongoing foreclosures.Although most banks were requesting additional collateral when granting a loan, up to 150 percent of the loan value, they still risk recovering only part of the receivable value, because foreclosed properties are sold at the second tender only, with the price dropping to 75 percent of the value set by evaluators for the first bidding, according to the General Manager of Coface Romania factoring, loan insurance and risk management company, Cristian Ionescu.

However, Bancpost lender President, Mihai Bogza, said that the extra collateral requested in previous years proves to have been 'wise.' "When we granted mortgages, we only calculated part of the mortgage value.

"On the other hand, "we are aware of the crisis, and have begun being lenient with our clients," he added. Furthermore, foreclosure in Romania is a difficult procedure, due to the bureaucracy.

Business Standard