Hungarians Battle to Keep Homes in Face of Strong Swiss Franc
Hungarians Battle to Keep Homes in Face of Strong Franc
Dieter Nagl/Bloomberg
“We should have shouted louder, much louder,” central bank President Andras Simor told reporters in Budapest for a book on the Hungarian financial crisis. “We still haven’t found a way to stop people from buying flat-screen TVs from foreign-currency credit.”
“We should have shouted louder, much louder,” central bank President Andras Simor told reporters in Budapest for a book on the Hungarian financial crisis. “We still haven’t found a way to stop people from buying flat-screen TVs from foreign-currency credit.” Photographer: Dieter Nagl/Bloomberg
Melinda Nagy, a Hungarian special education teacher who knows little about financial markets, has started to lose sleep over exchange rates.
Nagy’s payments on her Swiss-franc denominated mortgage almost doubled after the Hungarian forint dropped 35 percent since 2008 against the Alpine nation’s currency, forcing her to clean houses and work at a chicken ranch to avoid foreclosure.
“I’d rather burn my house down than give it back to the bank,” said Nagy, 43, who lives in the eastern Hungarian city of Hatvan. “What’s the difference if I go to jail or become homeless?”
The amount of franc-denominated mortgages in Hungary surged to 2.2 trillion forint ($10.2 billion) in May from 133.8 billion forint at the start of 2005, according to central bank data. Non-performing loans at local lenders such as OTP Bank Nyrt, Erste Group Bank AG and Foldhitel es Jelzalogbank Nyrt may rise to as much as 10 percent of total loans by the end of the year, said Tamas Erdei, president of the Budapest-based Banking Association.
About 5.4 trillion forint, or two-thirds of overall household credit, is denominated in foreign currencies. Of that, 82 percent are in Swiss francs.
“We should have shouted louder, much louder,” central bank President Andras Simor told reporters at a July 21 gathering in Budapest for a book on the Hungarian financial crisis. “We still haven’t found a way to stop people from buying flat-screen TVs from foreign-currency credit.”
Chicken Work
Nagy said she adds to her already busy week as a special education teacher by loading chickens onto trucks for 12 hours for the equivalent of $10 and doing domestic chores. The monthly payment on her 10 million-forint mortgage has increased to 130,000 forint from 70,000 forint.
“I can’t sleep, I can’t concentrate on work,” she said.
Household debt repayments have increased across Hungary as the franc rose to a record 219 per forint on July 1. The forint slid almost 4 percent in June after Lajos Kosa, a senior politician in the ruling Fidesz party, said Hungary has a “slim chance” to avoid a Greece-like crisis.
The Association of Distressed Borrowers in Budapest gets about 15,000 calls a month, 10 times the amount a few years ago, Chairwoman Mariann Lenard said in a telephone interview.
“Middle-class people with decent salaries are calling by the thousands,” Lenard said. “There are 2 to 3 million people out there who have no idea how they’ll make the next payment.”
Sleepless Nights
Aniko Karacs can’t work because she takes care of her disabled child and her husband lost his job as a brick layer in 2009. The family of four stopped paying on their 9 million- forint mortgage.
“I don’t know what will happen to us once the foreclosure moratorium ends,” said Karacs, 35, who lives in the southern city of Taksony. “We have sleepless nights.”
The government has declared a moratorium on foreclosures until April 15, 2011, preventing banks from evicting non-paying debtors. The Cabinet is planning a national asset management company that would pool bad loans and convert borrowers into renters with the government as the new landlord.
Details of the program will be released by the end of August, Economy Minister Gyorgy Matolcsy said in an interview on July 2.
There were more than 2 million overdue household loans at the end of March, including 100,000 mortgages, Karoly Szasz, the newly appointed chairman of Hungary’s financial regulator Pszaf, said on July 7 in a Magyar Nemzet interview.
IMF Objections
The International Monetary Fund, whose bailout helped keep Hungary afloat, opposes the mortgage plan because it sends the message “that there are problems with Hungarian banks,” said Christoph Rosenberg, head of the IMF’s mission to Hungary.
That isn’t the case, he said. Taking over bad loans from banks would also undermine credit morale as people would be tempted to give up on repayments, he said. “We agree that certain borrowers need to be helped, but this should be done directly and in a transparent manner.”
The nation’s banks are restructuring loans, extending maturity periods and using fixed exchange rates to aid distressed customers. FHB introduced a “discount” franc exchange rate of 205 per forint for three months beginning July 6 to decrease the repayment burden of clients with Swiss franc mortgages.
OTP, which passed the Europe-wide stress test with the second-strongest results after Spain’s Banca March, has so far restructured 110 billion forint of loans for 41,000 clients, Deputy CEO Antal Pongracz said July 28.
“The current situation calls for extraordinary measures,” said Laszlo Harmati, deputy chief executive officer of Budapest- based FHB Bank Nyrt., the nation’s No. 2 mortgage lender. “We can’t sit back and wait for things to sort themselves out.”
To contact the reporters on this story: Edith Balazs in Budapest at Ebalazs1@bloomberg.net. Zoltan Simon in Budapest at 1181 or zsimon@bloomberg.net
Rate These Stories
Rate this Page