Bankers and microfinance organizations are driving mortgage borrowers into debt

Mired in loans

Russians owe about 500 billion rubles to microfinance organizations (MFOs). At the same time, debt to microfinance organizations, as a rule, is not the only loan for many citizens. As a result, a modern Russian borrower pays creditors, at best, up to half of his earnings. It is not surprising that moneylenders’ profits are growing year by year.

Last year, the Central Bank stated that more than a third of microloans are ultimately not returned. That is, borrowers are unable to repay the money. Which, in general, is quite logical – practice shows that citizens turn to microfinance organizations with their gigantic interest rates only when there is no other choice and banks refuse to issue unsecured consumer loans.

“People use this tool and have no understanding of the consequences of these actions. Over the past year, property worth more than 20 billion rubles was recovered from auctions, and the total overdue debt currently amounts to more than a trillion rubles, – economist Elvira Glukhova shared. – Debt is growing, and microfinance organizations are contributing to the growth of this debt.”

We didn’t earn money for the holidays. At the same time, the recent increase in citizens’ requests to microfinance organizations occurs against the backdrop of an increase in overdue mortgage loans. Thus, in the first five months of this year alone, the volume of housing loans overdue by more than 90 days increased by 16%. Thus, people who previously had the opportunity to buy an apartment and service a mortgage began to turn to “microbankers.”

Over the past four years, the 38-year-old Maria from Krasnoyarsk managed to lose her mortgage on her apartment and also took out 17 loans from microfinance organizations totaling 2 million rubles. “

She took out loans to cover the main loans. Earnings became very bad in 2020: everyone was sitting at home, I worked in a taxi service, – the local press quotes the woman. – At first it wasn’t very scary: it seemed like, well, what are these five thousand that you took? And then it somehow grew and grew. Once – and already 10 thousand rubles, you need to take a loan from another microfinance organization, because even these 10 thousand are nowhere to be found.”

Having finally begun to slide into a credit hole, Maria decided to contact the bank with a request to defer payments. This happened at the height of the covid epidemic, just when they began to actively introduce the mechanism of credit holidays. But the bank refused.

“They said that these are your problems, do whatever you want,” says the woman. – At one point I decided not to pay. I sold the mortgaged apartment and took another place to live in a small town. I was lucky that they bought an apartment with debts and I got rid of the mortgage.”

However, Maria still has to sort out 17 loans from microfinance organizations. Many of them are also already very long overdue and have been resold to collectors.
As practice shows, this case is not unique. 90% of borrowers who find themselves in difficult financial situations fail to negotiate credit holidays with banks. According to Central Bank statistics, in the first six months of this year, 163 thousand clients received bank holiday waivers.

Mortgages don’t come alone

The statistics are silent about how many of these “refusers” are mortgagees. But we can assume that the most problematic debtors today are precisely the buyers of credit apartments.

“There are problems with the debt burden of mortgage borrowers, the Central Bank itself has stated this. According to him, 46% of mortgage borrowers have at least one or two loans, and every fourth most likely took out a consumer loan for repairs. That is, in addition to the cost of the apartment, at least another 1–2 million rubles, – believes the managing director of the Metrium company Ruslan Syrtsov. – Mortgage payments account for on average 20–40% of household expenses, which means that securing other loans already creates a significant burden on the family budget.”

Nowadays, those who cannot pay their mortgage and want to get rid of loans are often advised to sell their mortgaged housing and use the proceeds for a down payment on a cheaper apartment. However, the only winners with this scheme will be developers and bankers: it turns out that they will already issue two mortgage loans to the same buyer, thanks to which they will earn even more on interest, the payment of which always falls on the first years of the loan. And this method may not always work. Vladimir from Tula bought an apartment on the secondary market for 8 million rubles, having managed to get a loan at an 8% per annum rate. Everything was going well until he started having problems with his job.

“There were rumors in the company about closure. Even taking into account all the payments upon dismissal, I will be forced to say goodbye to both the housing and the money invested in it. I won’t sell an apartment for 8 million, it’s unrealistic to find a buyer given the skyrocketing mortgage rates, and a person with real money will require a significant discount.”– Vladimir worries.

Other options are endless credit bondage in banks or microfinance organizations, which may only delay the loss of a mortgaged apartment, or the immediate loss of housing.

No apartment, no money

The shareholders, whose apartments have turned into endless long-term construction projects, also become hostages of the moneylenders. There is no housing, but the loan must be paid. Banks don’t care if the developer delays putting the house into operation: no matter what happens, please make the payment every month.

“Our house was not completed and was transferred to the fund for helping shareholders. At that moment I stopped paying the mortgage: it would be strange to continue paying for nothing, because the house was not completed,” – one of the shareholders shares his story.

As a result, the bank sued the defaulter. According to his decision, foreclosure was imposed on the mortgaged property, in this case, on the right of claim against the developer. “But since no one bought the right, it was returned to me.”states the shareholder. The history of this mortgage for unfinished construction ended with the fact that the debt was eventually resold to collectors, who went to court with a claim for bankruptcy of the debtor. During such a procedure, foreclosure could be imposed not only on the mortgage unfinished construction, but also on another apartment of the borrower, which was in his ownership and initially had nothing to do with the problematic mortgage. In order not to lose his only home, the shareholder had to spend heavily on lawyers who were able to competently handle the bankruptcy case.

Against this background, it is not surprising that both bankers and microfinance organizations (which are often owned by the same banks) do not see a problem either in the increasing debt burden of Russians, or in the fact that some of the issued loans may eventually be repaid. The moneylenders will get their money in any case. Not as interest on a mortgage – that is, in the form of earnings on microloans. If not through microloans, then through the sale of the mortgaged apartment and bankruptcy of the debtor. Each subsequent round of credit bondage brings more and more losses to the debtor, and more and more profits to the moneylenders.

By the way

Bankers’ profits are breaking new records this year. As the Central Bank calculated, for the first half of the year, the net profit of the Russian banking sector, taking into account dividends received from subsidiary banks, amounted to 1.829 trillion rubles – 8% more than the same figures last year.
The profit of MFOs for the first six months decreased by 9.2%. However, the “microbankers”, whose net income amounted to 24.2 billion rubles, are clearly not taking care of the impoverished.

Melissa “Mel” Carter

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