Local banks reject more mortgage requests

Bank clerks are being hindered from freely approving mortgages by more strident examinations of applicants.

As the US subprime mortgage crisis continues to reverberate around the world's stock markets, Israeli banks have started to stiffen their mortgage lending policy towards applicants with problematic credit histories, according to a report released on Sunday by the AMG Mortgages company. According to the survey, applicants found a firmer approach to mortgage lending from Israeli banks, AMG said, noting a 35 percent increase in rejections of mortgage requests over the past three months. Amit Kaminsky, CEO of AMG, said bank clerks were being hindered from freely approving mortgages by more strident examinations of applicants, resulting in 73% of mortgage requests being approved in recent months, as opposed to the 80% approval rate registered by AMG during its last survey. AMG Mortgages is part of the AMG Financial Models corporation, and provides consultation services to individuals and the business sector seeking bank loans. Every month, AMG represents some 115 mortgage applicants. The current survey was based on the responses from bank clients encountered over last three months of 2007 (345 applications). Speaking to The Jerusalem Post, Kaminsky said Israel was not at risk of a subprime crisis since, unlike the US, no banks here specialized in providing loans exclusively to those with poor credit histories, but added that Israeli banks were concerned that liberal lending policies could lead to complications down the road. "Banks are fearful of questions being raised in the future if mortgage lenders fail to repay," Kaminsky said, citing a 2007 court ruling which determined that banks shared responsibility for a situation in which lenders couldn't meet mortgage repayments. Knesset proposals for new legislation forcing banks to provide alternative housing solutions to those evicted from their homes after failing to keep up with repayments also played a role in the new approach, Kaminsky added. "All of these factors are raising concerns among banks, causing them to harden their position on mortgages," said Kaminsky Two of Israel's largest banks denied AMG's findings that a change in policy had occurred. In a statement sent to the Post, the Bank Leumi Mortgage Company said that "AMG's survey was not coordinated with the bank's performance," and cited a "sharp increase in activities in the last quarter." Bank Hapoalim said it had "not changed its mortgage approval policy," adding that "every loan is examined individually." "The banks can deny it, but we're seeing a hardening of their stance, and we're seeing it at the local branch level," Kaminsky said. "They're asking for more securities and more loan guarantors." If an applicant does have mortgage application rejected, they could take a few steps to cause the bank to reconsider, by acknowledging their credit problem and showing the bank what steps they've taken to rectify their situation, Kaminsky said. "The best thing to do is to be honest, understand why this happened, and tell the bank about the reason. Credit problems can be produced by temporary pinpoint reasons such as a divorce," said Kaminsky stressing, however, that "overturning a rejection is a very difficult process."