OREANDA-NEWS. May 14, 2010. It is important for SEB to offer the best solution to clients who are struggling with payments and there are many options that do not require increasing the loan interest, said Acting Chairman of the Board of SEB Bank Riho Unt at the press conference held, reported the press-centre of SEB.

“We recommend the solution where you keep making payments, no matter how small, as extending the payment schedule offers a solution for a very long period. Interest-only periods are currently very helpful as the base interest is low. The payment burden decreases the most in the event of a grace period where neither loan principal nor interest payments must be made, but this cannot be a long-term solution,” said Unt.

SEB believes that the actual impact of unemployment is only about to manifest itself: the unemployment insurance benefits of about 13,000 people who have not found new jobs have expired and the same will happen to about as many people in the next four months. SEB predicts that unemployment will remain high and amount to 15 percent this year and 13 per cent in the next.

Extra loans with high interest should be avoided when home loans need repayment

SEB has issued 39,000 home loans in total and 900 or 2.3 percent of them have been overdue for a long time. “Such high payment discipline seems ‘too good’ when we consider the high level of unemployment that has been a problem for more than a year. It makes us suspect that people may be borrowing money to make home loan repayments, which would be a very dangerous thing to do,” noted Unt. “Taking extra loans that carry high interest rates makes the situation of families even more complicated and prolongs the duration of payment difficulties.

Unt says that despite grace periods and other solutions, clients may end up owing money to other institutions that initiate execution proceedings and threaten the client’s assets, incl. the home purchased with the loan. Such creditors may be apartment associations, providers of utility and social services and telecommunications companies.

Unt says that clients who are ready to cooperate do not have to fear losing their homes and the client’s reasonable financial discipline is a premise to such cooperation. “We terminate execution proceedings when we can restore cooperation with the client and find a better solution. Execution proceedings are usually initiated in the case of loan agreements when we are no longer able to contact the client. SEB has currently initiated execution proceedings in respect of 235 home loan agreements,” said Unt.

Loan repayment insurance has helped more than 100 borrowers

Unt pointed out that unemployment insurance will help in the case of such labour market backlashes in the future. The insurance offered by SEB against temporary unemployment and incapacity for work has been very well received. The bank has entered into approximately 5,500 contracts in two years. One-third of them are for property loans and every third new loan applicant also takes out the insurance. Insurance has helped more than 100 borrowers who have lost their jobs. The largest monthly insurance indemnity is 9,200 kroons; the insured loan is two million kroons. Insurance will pay loan repayments on behalf of the policyholder for up to 12 months if they lose their job or become temporarily incapacitated for work.

SEB avoids forced sales as it is the worst solution for both the bank and the client. The problems of natural persons are temporary – the labour market will recover and so will the client’s solvency. There are ways in which the bank can help the client in the meantime.