Foreclosures rise in wake of high unemployment

TALLINN - Home foreclosures have hit the 500 level in Estonia for 2009, according to the latest statistics. This means that more than 500 homes have been repossessed in 2009 due to unpaid mortgages, a number more than twice the amount in 2008. Hundreds of individuals and families have been forced to move out of homes as banks have moved in to take over delinquent properties.
The banks have put these houses up for auction. Around 400 home repossession auctions have been ordered by Swedbank, with more than 100 from SEB. In 2008, Swedbank repossessed 200 homes. Meanwhile the difficulties met by the unemployed are being reflected in a survey conducted by Statistics Estonia, where 533,000 people, 40 percent of the population, admit to struggling in coping with the existing economic situation.

The head of Swedbank Estonia, Priit Perens, notes that this year the assets of those having difficulties making loan payments will have to be auctioned off in even more cases than in 2009, as the unemployment rate keeps rising. The Statistics Office says there were over 100,000 unemployed persons in the third quarter last year. The growth in unemployment has slowed slightly, however this doesn’t count the number of people who don’t even try to look for a job anymore.
Perens added that the bank offers payment holidays to those who are facing payment problems. “The practice so far has shown that the result is surprisingly good: half of those who have used a payment holiday have overcome their problems. If unemployment grows and becomes long-term, things won’t be that simple,” he warned.

Sampo bank personnel and retail banking director Tonu Vanajuur said that the bank has used the foreclosure option in around 40 cases. “The bank does everything it can to reach solutions where the collateral does not have to be auctioned off,” said Vanajuur. He also forecasts ongoing troubles because of the unemployment.
Triin Messimas, SEB head of private loan business development, believes that the situation may already be improving. “The trend shows that the number and share of problematic housing loans is increasing,” she said. Messimas said that most of the debts are being resolved through cooperation between the client and the bank, and putting the property on forced sale is the last solution.

Messimas also mentioned giving the mortgagor a payment holiday, loan extension or other means to work out the debt restructuring. He considers that the bank will avoid selling the property through forced sale until there is no other chance “to make the loan work.”
Koit Semjonov, director of Swedbank’s finance division, fears that this year the number of repossessions might stay the same, or even increase, if the economy does not show signs of recovery.