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Mortgage default rates in Poland

convex 20 | 3,930  
30 Nov 2009 /  #1
Does anyone have information on current and historical mortgage default rates in Poland?
Avalon 4 | 1,068  
30 Nov 2009 /  #2 > Gazeta Wyborcza

"Bankers reassure that, according to the report, the default rate is the highest in cash loans, where it's approximately at 10 percent. As far as mortgage loans are concerned, accounting for half of Poles' total household debt, 'only' 1.13 percent borrowers were in default as of May this year."

This is only up until June, 2008.
jwojcie 2 | 762  
30 Nov 2009 /  #3
One word of advice: default in Poland is entirely different animal than in USA.
In Poland you cann't walk away. Debtor is responsible with entire wealth. As a matter of fact recently new default law for individuals was passed, but still it is hard to default for debtor in Poland. Conclusion is: default rates in Poland and defaults rates in USA are two different things, hard to compare.
OP convex 20 | 3,930  
30 Nov 2009 /  #4
Do you know what happens when someone can't make the payment? Do banks usually change the terms? Force a sale? Go straight for other assets?
jwojcie 2 | 762  
1 Dec 2009 /  #5
From what I've heard they go straigh for other assets. It is very easy for them because in Poland banks can take other assets without court verdict when someone can't make the payment. Besides often banks requires guarantor(s). Banks can also take assets of guarantor without court verdict. So there is really long way for bank to sell property, which by the way is hard thing to do because there is no easy eviction in Poland. If owner want to throw people out of property, then if those people don't have place to go, owner has to give some other place to live.

To sum up banks in Poland have to much power ower debtor, but paradoxically because of that people are not so eager to make big loans.

PS. I'm not banking expert and I'm not a lawyer, so don't treat above as some kind of legal advice :-).
nierozumiem 9 | 118  
1 Dec 2009 /  #6
To sum up banks in Poland have to much power ower debtor, but paradoxically because of that people are not so eager to make big loans.

In my opinion the situation is the reverse. As you pointed out it is difficult for the bank to foreclose on a property when the debtor defaults, and even more difficult to remove the debtor and sell the property. For this reason the banks, particularly now, are very shy to lend large amounts of money for the purchase of property.
jwojcie 2 | 762  
1 Dec 2009 /  #7
It is reverse but only at the end of the process. Problem is that till then they can rip you off (and guarantor) entirely without the court. Until resently individual person couldn't default. Now it is possible, but still extremely hard in comparison with USA (interesting thing: what would happen to guarantor when debtor default?).

PS. there is law problem wich I have to consult with my friend before I dare to use it in this debate: I know that bank can sell property with inhabitants (of course with big discount) if bank own this property. What I don't know is if bank can reposes indebted property (probably yes), and if so, how hard is that.

Ok, I have an update :-)
Yes, usually banks can reposes indebted property (I've been told that banks usually make some registration in mortage deed when they give mortage which gives them priorority in case of debtor problems).

PS. I have to correct myself. It is not bank who has to give surrogate living place but commune (state). But still bank has to wait. Effectively it is long process because of lack of commune property. Secondly, this concerns only some groups of society (social issues etc.).

For this reason the banks, particularly now, are very shy to lend large amounts of money for the purchase of property.

This could be part of it, but I think it is more complicated, for example there is almost no securitization in Poland as it is in USA. So effectively banks carry long term risk, in USA banks just lended money and then via securitization moved risk onto bonds buyers. Besides, many banks in Poland lended borrowed money from the western banks. There was a moment when they simply run out of cash to lend...
nierozumiem 9 | 118  
2 Dec 2009 /  #8
Do you still think that the banks have too much power over debtors? I think it sounds quite reasonable for a bank to seize a property that the debtor has defaulted on.

I'm interested in this idea of the bank taking personal assets without a court order. I've heard stories that in the "old days", you could get a knock at the door and a repo service would just walk in and start taking everything from the apartment; furniture, electronics, etc. This could be over a small debt, or maybe even an unpaid fine. (like getting caught on the train without a ticket). All without a court order.

I never believed that this could be true. Is that what you are referring too? Is this still permitted?
jwojcie 2 | 762  
2 Dec 2009 /  #9
It could be true, but it depends. I don't know how many entities has such right, but I'm sure that currently banks have right to do something like this. It is one of the reasons that I believe that banks in Poland have to much power over their clients. It is called "Bankowy Tytuł Egekucyjny", I don't know how it would be precise in english. Again, I'm not a lawyer and to describe details I would have to consult a friend of mine, but putting all legal issues aside in reality it allows banks to fast seizure debtor property (guarantors too). When bank makes mistake, debtor of course can go to court but damage is already done. I'm not sure if this law is "old times" legacy.

And again, second thing which makes banks position better vs client in Poland than it is in USA is "no walking away" posibility, but I must add that maybe new default law for individuals will change that (but what I've read it is highly restrictive).

In my opinion these two differences between Polish and USA banking law makes it very hard to compare defaults rate in Poland and USA in mortgage bussiness, because as I said before, it is long way before Polish bank has to sell indebted property.
magdalenaG 2 | 67  
14 Dec 2009 /  #10
it's normal for a bank to insist on you signing a bill of exchange when taking out a mortgage . this bill of exchange gives them recourse to all your personal assets & is enforceable through the courts.

Magda G.

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