ArmInfo. On Feb 8, the National Assembly of Armenia adopted draft amendments to the Law "On housing mortgage lending" and related laws in the first reading.
Deputy Chairman of the Central Bank of Armenia Nerses Yeritsyan said that the amendments aim to protect the interests of the people who have been provided with mortgage loans to improve their housing conditions.
Earlier the Law "On protection of consumers' rights" was adopted and it runs counter to the current Law "On housing mortgage lending", Yeritsyan said. So, a decision was taken to address this issue. First of all, the matter concerns enhancement of transparency of transactions. Consumers shall be aware of the core of the contracts they sign, the interest rates of their loans, as well as all the expenditures and fines. These requirements are fixed in the new draft law. One more requirement concerns possible termination of the mortgage contract by the borrower within 7 days after signing in case the borrower finds the provisions of the document unfavorable. To enhance the borrowers' confidence, the document suggests liberalizing the mortgage security concept. Earlier the first lender was to give consent to the borrower to transfer his/her collateral to another bank, but now no such consent is needed. The document also suggests introducing a provision allowing possible redemption of the loan any time the borrower likes, without any tangible expenses or transferring the collateral in case of loan refinancing. This will allow the borrowers to tell their conditions to the credit organizations. Three years after signing of the contract, no fines or penalties will be applied. Upon expiry of this period, the citizens of the country will get an opportunity to repeatedly refinance their mortgage loans.
Another provision concerns restrictions on fines and penalties. If the contract fixes the interest rate, the bank shall have an opportunity to influence the interest rate when imposing the fines and penalties. In case of a fixed interest rate, the fines and penalties shall be reduced, while in case of a floating one - the fines and penalties shall not exceed 0.2-0.6% of the loan amount. The draft law has a clear provision about appraisal of property. If the borrower has a good credit history, the bank shall take this into account. If the provisions are violated, the bank shall compensate for the damage in the amount of 300 thsd AMD.
Yeritsyan also noted that in 2016 the mortgage and other credit portfolios of Armenian commercial banks grew by 15%. The quality of the loans improved. The aggregate loan book of the commercial banks exceeded $250 mln, and the aggregate mortgage lending portfolio rose to $400 mln. He added that in 2016 the deposits in Armenian banks grew by 20%, with half of them being personal deposits. The matter concerns growth worth a total of 2 bln AMD. Every year the banks pay over 140 bln AMD to the citizens in deposit interest payments. The capital of the commercial banks grew by 30% or 200 bln AMD. At present the total capital of the banks is about 600 bln AMD, which allows increasing the assets. Yeristyan expressed confidence that the upcoming parliamentary elections will have no negative effect on the banking system of the country.
According to the National Statistical Service of Armenia, in 2016 the deposits in Armenian banks rose by 23.7% (by 14.3% in Q4 2016) to 2.413 trillion AMD ($5 bln). The share of residents made up 73% or 1.8 trillion AMD, while the share of non-residents grew by 27% or 651.5 bln AMD. In the deposits of residents the share of call liabilities made up 28.2% or 496.7 bln AMD, and the share of time deposits made up 71.8% or 1.3 trillion AMD. By Jan 2017, household deposits in Armenian banks exceeded 1 trillion AMD.