Banks are losing faith that clients will be able to pay off mortgages and are trying to get rid of those loans as quickly as possible – even in cases when this means losing quite a lot of money. “While up until now banks have been selling mortgages individually, now they are often being sold in bulk,” said Martin Horák, head of the collection agency Credit Management.
In an online auction by the company Clanroy, there was a package of 100 mortgage loans from Hypoteční banka. “Mortgage loans were always sold in online auctions. There is nothing new here,” bank director Jan Sadil told E15. Representatives of other agencies confirm that banks and building societies are unloading mortgages. “We expect that the trend of selling mortgage loans will continue,” said Vladimír Gazárek, head of the Association of Collection Agencies.
The volume of loans sold grew again this year – by about 30%. According to Martin Novák, marketing director of Profidebt, the big change is that banks are putting relatively new debts up for sale. “Some creditors have started selling loans at earlier stages after fee deadlines,” he said.
“Compared to last year, the average value of loan packages that banks are selling has fallen by a high percentage,” Gazárek said. “For example, last year it was possible to sell almost any loan on the market. Now investors are much more choosy and do more background checks.” According to Horák, higher quality loans in the past were sold at about 50% of their price; now it is about half of that.
Prices fall as unpaid loans increase
Collection agencies have hit a gold mine. The prices companies are paying banks and collectors for unpaid loans have fallen, but the profits being made have not. That remains about 50% of the original price. “For now, it’s paying,” Horák said. “We expect the situation to get worse at the end of this year.”
“Last year, mortgage loans were selling at 90% of the original price, but now it is around 60%,” Horák said. According to Sadil, this has to do with the quality and the age of the loan. “If this is a loan, say, 520 days after it was due to be paid off, the price will logically not be so high,” Sadil said.
“The current loan market has offered many opportunities to buy big portfolios or individual loans over the last two months,” Profidebt’s Novák said. “This situation means that loans can be bought more cheaply than in recent months.” Cyril Mores, head of Creditreform, says that the volume of sales of company loans has grown by roughly 20% compared to last year. “You can tell that companies are feeling the impact of the financial crisis,” Mores said. “The payment discipline is significantly worse than before.”
Bank representatives, meanwhile, confirm that there is pressure on the prices of unpaid debts. “The volume of sold unpaid loans this year increased, but the prices have fallen,” Raiffeisenbank spokesman Tomáš Kofroň said. The bank’s director, Lubor Žalman, said last week that, thanks to the situation on the market and the increase in unpaid loans, the bank would establish an online collection service.
Česká spořitelna has also seen a fall in the prices of delinquent debts. “This year the prices of unpaid loans are, in our experience, some 8% lower than in 2008,” spokeswoman Kristýna Havligerová said. The bank did not sell unpaid loans in the first quarter of this year, but, over the course of April and May, it sold 2,000 of them, according to Havligerová.
According to Gazárek, the monetary value of the unpaid loans on the market is hundreds of billions of crowns.