Nordea and Property Managers Agree upon Joined Support Measures to Debtors

Nordea Bank and Riga Property Managers Association have agreed to give common support to customers facing financial difficulties. The support mechanism foresees temporary support to customers who have faced a sharp decrease of income by means of reducing their monthly payments both for housing loan and also for property management services until the income of the customer increase again.

„The continuing economic recession will cause increase of the number of delayed payments of the housing loans; equal increase is anticipated also by the providers of public utilities services. Until now each service provider has attempted to individually recover customers’ debts. Though application of the ultimate solution – debt collection litigation is an unpleasant and inconvenient solution for all parties concerned – the client, the bank and other service providers. Nordea invites to mutual cooperation in order the customer would benefit from retention of its property and the service provider would obtain a permanently solvent customer”, explains the Member of the Board of Nordea Latvia Antra Bergmane.

Scope of the support – encourage debtors and assist in arranging daily payments

The Chairman of Riga Property Managers Association Igors Trubko underlines: „According to our estimates the number of debtors to property management companies is already exceeding 20%. We hope that this cooperation between banks and property managers will result in decrease of the number of debtors of property management companies approximately for one fifth. We expect that this publicly uttered initiative will serve as an encouragement to customers facing financial difficulties not only to approach the bank for assistance in loan restructuring in timely manner, but also to arrange the relations with their property managers, by agreeing upon reduced monthly payments and scheduled  repayment of the accrued debt. Also for property managers it is not an easy way to initiate debt recovery litigation, unfortunately till now, often it has been the only way to start negotiations with the debtor.”

A survey demonstrates   that according to the opinion of general public, priority payments are settlement of loan obligations: mortgage loans, consumer credits and car lease (77%, 65% and  61% accordingly). On its turn, payment of monthly utilities bills seems important for half that many respondents (38%). Whereas, by facing circumstances of sharp reduction of income, half or 54% of the respondents would attempt to refuse from less important services to be able to settle all payments, 22% would settle all payment by leaving a tiny part of income for sustenance, though 12% would pay only „important” bills or settle them according to the „random principle” – one month to one service provider, next month to some other service provider (8%).

„If telecommunications, internet and cable television are services that can be easily disconnected without incurring any additional costs, the services rendered by property managers and public utilities are a daily necessity. According to the survey, in case of income reduction and lack of money for payment of bills part of the population would choose to pay „the most important” bills. The scope of this support program is to motivate customers to „arrange the relations” with all service providers and pay smaller, though all payments due to service providers”, indicates A. Bergmane.

The support program to debtors foresees that customers facing financial difficulties should approach Nordea Bank to agree upon restructuring of their loan obligations with Nordea. Simultaneously the customer and his advisor should also evaluate the monthly payments to property managers. If necessary, the payment schedule is revised and consequently submitted to the property manager for revision who accordingly takes the decision on application of support measures to the customer. Currently two types of support measures are available. If the customer already has debt obligations against the property manager, repayment of the debt is temporarily postponed, and only the „current” bills are settled. Whereas in case there are no debt obligations so far, the monthly payment is temporarily reduced, if necessary, by accumulating the remaining amount. Such support is provided for the time period of 6 months, by anticipating the possibility of prolongation to 12 or 18 months.

The support initiative is foreseen for customers that have taken a mortgage loan for acquisition or repair of their sole property and classify as bona fide customers both for the bank and also the property manager.