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The amendments to the Insolvency Law regarding introduction of the so-called non-recourse loan principle caused wide response in the society, and the opinions are quite different. On the one hand, the implementation of this principle is a logical step in reducing the burden of the debt liabilities of a debtor, on the other hand, changes in laws and regulations restrict the ability of young families to acquire housing through government support programs, stresses Mr. Aigars Šmits, Chairman of the Board of Directors of ARCO REAL ESTATE.
Answering the question how the introduced principle will influence the young families, Mr. A. Šmits reminds of the response of the major Latvian banks, namely, the withdrawal from the support program for young families, adding that "those credit institutions, who will continue granting loans to young families, will increase the down payment to up to 40% wishing to reduce their risks". Despite the fact that the state support program will be available for the families in the future, however, such a move would not solve the down payment problem, which often becomes "stumbling block" for the new family in acquiring property, stresses the expert of ARCO REAL ESTATE.
The expert compares the situation in the field of issue of loans for purchase of real estates before and after the introduction of the non-recourse loan principle: "For a young family who wanted to purchase a home in Riga or in the neighbourhood of Riga before the introduction of the non-recourse loan principle and without using the state support program, needed a lesser investment for the down payment. Although the state support program for young families partly - according to the number of children - reduces the amount of the down payment, the bank changes in the lending rules, namely, the increase of the amount of the down payment, will restrict the potential program participants more than before, as the amount of the down payment will increase significantly.
Answering the question how Mr. A. Šmits evaluates the response of the banks refusing from participation in the state support program, the expert of ARCO REAL ESTATE states that he understands the desire of banks to reduce their risk, but at the same time considers this refusal to be exaggerated emotionality. "The procedure of evaluation of solvency of customers is not cancelled upon implementation of the the non-recourse loan principle, therefore, the individual nature of loan granting will continue also in the future," adds the representative of ARCO REAL ESTATE.
Taking into account the funds allocated for state guarantees for support to young families, the program will affect only 0.5%, or approximately 13.5 million euros of the total loan portfolio of the country, which in 2013 amounted to 2.6 billion euros, so it can be concluded that changes in the bank lending sphere will not be significant.
"If we assess the situation in the real estate industry from the point of view of absolute figures, the impact of the non-recourse loan principle on the ability of young families to buy a property can best be understood schematically," proposes Mr. A. Šmits.
09.10.2014.