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PSzÁF to file public suits against some mortgage lenders

Hungarian financial market regulator PSzÁF will file public suits against several mortgage lenders in the interest of their clients in March, PSzÁF head Ádám Farkas said.

PSzÁF found serious infringements of regulations at the lenders in investigations, Farkas said.

The regulator has already started fining these businesses, and, in a further step, will raise the capital requirement of commercial banks who refinanced them, Farkas said.

The higher provision requirement will affect four large banks, and their capital provisions to be set aside against such risky assets will double as of March 1, the announcement on PSzÁF's website reveals.

PSzÁF decided on the measures after it carried out investigations with ten mortgage lenders and two financial businesses involved in property leasing in the second half of 2009. Most investigations were prompted by clients' complaints.

PSzÁF reviewed some 18,000 loan contracts during the investigation, a fraction of the total market of around 1.1m retail mortgages, PSzÁF director Áva Istvánovics said. Most of the contracts were for mortgage loans of HUF 6 million – HUF 7 million.

Infringements included partnering up with businesses banned because of prior problems found by PSzÁF, and putting provisions in loan contracts which gave borrowers who fell more than 90 days behind on payments little recourse to save their loans from being cancelled.

The share of cancelled contracts was almost 14% of the total stock of the case of the investigated businesses in the autumn of 2009, far exceeding the 4.6% rate of non-performing - more-than-90 days overdue, but not necessarily cancelled - mortgage loans of commercial banks at the time, PSzÁF noted. (MTI – Econews)