In light of the recent regulations, there are some important information you have to know and action to be taken if you obtained FX based mortgage in Hungary.
1. Forced FX loan conversions to forint:
The Hungarian Parliament passed the law on fair banks in November, 2014 together with the legislative amendment which will, as of the beginning of 2015, automatically convert foreign currency or foreign currency-based consumer mortgage loan contracts into forints. Based on this, debtors may reckon with a HUF 256.47 exchange rate in the case of the Swiss franc, HUF 308.97 in the case of the euro.
Private individual “Forex mortgage” borrowers are scheduled to receive information letters from financial institutions detailing compensation (see below) and the forint conversion between 2nd of March and 30th of April.
2. Refund of exchange gap and unfairly applied interest rates as pert in Supreme court ruling:
The new law obliges banks to refund customers for charging bid-offer spreads on FX loans, a practice ruled unclear and unfair by the Supreme Court as well as for unilateral changes to interest rates on FX and forint-denominated retail debt.
The bill covers all loans issued since May 2004, with the exception of those closed out, more than five years ago. Forex mortgage borrowers are scheduled to receive information letters from financial institutions detailing compensation and the forint conversion between 2 March and 30 November.
These letters must clearly state the amount of compensation to be repaid to the customer or subtracted from the existing amount of debt. The letter must also reveal how much is still left of the total debt following the compensation, the rate of interest to be paid, tenure and monthly instalments. In case of loan contracts, which have already expired, the compensation amount must be repaid, while in case of existing loan contracts monthly instalments must be reduced. Financial institutions are required to use calculation methods of the National Bank of Hungary for the reckoning of the compensation amount.
3. Newly applied legislation “fair banking”
Hungarian legislation on fair banking also acknowledges the merits of the law on the conversion of FX retail mortgages into forints.
The law on fair banks ties unilateral interest, charge and fee increases to more stringent conditions, and regulates, inter alia, the provision of pre-contractual information. It covers the provisions relating to the amendment of credit contracts, the rules that govern the termination of credit contracts by consumers free of charge, the specific provisions that relate to foreign currency-based loans, and the rules that concern the changeover to the new contractual terms.
In practical terms, it means more predictable interest rate period (i.e. 3, 4, 5 years) and more transparent mortgage structure (interest applied, fees charged). Important note, that borrowers with FX mortgages after the currency conversion will be offered a HUF loan that must comply with fair banking regulation.
Action to be taken:
If you have taken out FX (or HUF loans) in Hungary, you should wait for the banks to deliver notification about the applied refund (till 30th of November) and about the forint conversion (till 30th of April). It is important to note that all communication will be done by registered mail, sent to their Hungarian primary address that is registered at the bank.
If the mortgage holder agrees with the amount to be refunded and accepts the terms of the new HUF loan, than no other action will be required. The bank will initiate the refund against the capital and convert the loan into HUF.
Should the new HUF loan proposed by the Bank cannot be accepted in terms that the barrowers can indeed seek for new financing at no cost to the borrowers. This case the supplicant should apply for a new loan from any bank at their choice to arrange the refinancing.
It is extremely important to receive and read the notification sent by the bank. So for those borrowers whose primary address located outside of Hungary, it is recommended to appoint a local delivery agent who can take over the registered mail on behalf of the mortgage holder.
Do you need help? Please contact us.
Source:
http://hungarytoday.hu/cikk/fair-banks-conversion-bills-approved-parliament-29239
http://www.euromoney.com/Article/3366590/Hungary-Banks-count-cost-of-FX-loan-legislation.html
http://dailynewshungary.com/orban-fx-loan-law-heralds-era-of-fair-banking/
