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THE RF MARKET FOR RESTRUCTURING OF MORTGAGE CREDITS THE RF MARKET FOR RESTRUCTURING OF MORTGAGE CREDITS G.Zadonsky The volumes of granted and refinanced mortgage credits are decreasing, the interests rates are on the rise. The Agency for Restructuring Mortgage Credits (ARMC) is planning this year to provide support to approximately 100 thousand borrowers. Permits were issued to 23.4 thousand citizens for using mothers capital to redeem the loans granted to them in the amount of approximately 6,3 billion rubles.

As of 1 March 2009, according to the data of the RF Central Bank, a total of 11.thousand housing mortgage credits in the amount of 15.138 billion rubles was issued, whereas in Q 1 2008 the total amount of issued housing mortgage credits was ten times higher 150.759 billion rubles (no information on housing mortgage credits for the first two months 2008 is available to us). The data for March 2009 will diminish this gap, but the drop in the volumes of mortgage credits in Q 1 can hardly be expected to be less than fivefold. In St. Petersburg the volume of mortgage credits in Q 1 2009 dropped eightfold on the same period of last year by the number of credits issued, and nearly tenfold by their volume.

The outstanding debt against housing mortgage credits as of 1 March 2009 was 1,trillion rubles, and the amount of that against all housing credits was 1.28 trillion rubles.

The share of mortgages denominated in foreign currencies in the first two months was only 6.7 % of the total volume of issued mortgages, whereas in Q 1 2008 their share was 24.8 %. Consequently, the share of housing credits denominated in foreign currencies was 7.5 % in the first two months 2009 and 13.2% in Q 1 2008.

According to the RF Central Bank, the average weighted interest rate on rubledenominated housing 16,mortgage credits as of 1 March was 14.3%, 14,and that on the credits 12,issued since that 10,months beginning was 8,14.5%. The same index for housing mortgage 6,credits denominated in 4,foreign currencies as 2,of 1 March was 13.1 % and 14.5 % respectively.

0,The average weighted interest rate on rubledenominated housing average weighted interest rates on credits issued in rubles since years beginning., % credits issued since average weighted interest rates on credits issued inforeign currencies since years the years beginning beginning, % was, as of 1 March, 14,5%, and that for the Source: RF Central Bank credits issued since Fig. 1 Average weighted interest rates in issued housing mortgage credits that months beginning junjunjunoctoctoctoctfebfebfebfeb...apraprapr........augaugaugdecdecdecdec..........RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES 14.7 %. The same index for housing credits denominated in foreign currencies as of March was 13.7 % and 14.6 % respectively.

According to Kreditmart, the fixed average weighted interest rates on mortgage credits on offer calculated by the programs of 25 banks are higher than the average weighted rates for mortgage credits issued since the months beginning (the RF CBs data as of March) and are indicative of growth by 19.38 % of the offered rates on ruble-denominated credits with fixed rates, while growth of the average weighted fixed offered rates on USDdenominated mortgage credits has been by 15.45 %. The average weighted floating offered rate on ruble-denominated mortgage credits, after having reached its historic high of 36.% in late January 2009, went down to 25 %, while the floating USD-denominated rate is fluctuating around 11 %.

Only the passage of time will make it clear as to what extent the credit rates will be influenced by the lowering, from 24 April 2009, of the RF Central Banks rate of refinancing (from 13 to 12.5 % per annum), as well as of the interest rates on the operations carried on by the Bank. Nevertheless, President Medvedev supported the measures undertaken by regional authorities in order to subsidize the rates established for certain categories of citizens, and he also believes it necessary to lower the rates on housing mortgage credits.

Sberbank, in Q 1 this year, issued mortgage credits in the amount of 16.5 billion rubles and launched a program envisaging the signing of agreements with the regions for subsidizing the interest rates established for young families.

The growth of average weighted crediting periods for loans granted since a years beginning observed throughout 2008 in 2009 gave way to decline.

Table AVERAGE WEIGHTED CREDITING PERIOD FOR LOANS GRANTED SINCE THIS YEARS BEGINNING (MONTHS) 01.01.2009 01.02.2009 01.03.Housing mortgage credits in rubles 219.8 211.2 202.Housing mortgage credits in foreign currencies 210.5 178.1 173.Housing credits in rubles 209.6 197.5 193.Housing credits in foreign currencies 203.6 146.7 137.Source: RF Central Bank.

Mortgage debt outstanding, according to the data of RF Central Bank, as of 1 March 2009 increased by 7,014 billion rubles, or 0.87 % of outstanding debt for ruble-denominated credits and 7,615 billion rubles, or 2.89 % of credits denominated in foreign currencies. As of 1 January, outstanding debt for granted ruble-denominated mortgage credits was 0.%, and 2.86% for credits denominated in foreign currencies. If IAC are applied, the figures become different: mortgage debt outstanding in Promsviazbank in 2008 increased tenfold:

from 1.1 % to 11.5 %, and so now it is close to the level of the Agency for Housing Mortgage Lending (AHML)s mortgage debt outstanding; the situation demonstrated by MDM-Bank with regard to mortgage credits is somewhat better, growth in 2008 having been from 4.% to 7.4 %.

According to the Association of Regional Banks, the number of bad loans is 110 thousand;

the number of court proceedings for non-payment of mortgage credits is 10 thousand; the number of court decisions concerning claims on mortgaged homes is 3 thousand.

Debt outstanding against the rights of claim acquired by credit institutions under housing mortgage credits was, as of 1 March 2009, 102.67 billion rubles. In accordance with the AHML standards, as of 17 April 144 052 mortgage credits in the total amount of 113.19 billion rubles were refinanced. In Q 1 2009, the AHML refinanced credits in THE RF MARKET FOR RESTRUCTURING OF MORTGAGE CREDITS the amount of 7. 73 billion rubles. From 1 April, the AHML discontinued the buying-out of pledges against the credits issued prior to 1 December 2008. At the same time, the volume of refinanced credits decreased by comparison with buying-out by 8 % during the same period - to 343.2 million rubles. According to the Agencys experts estimations, at present the amount of mortgage credits remaining on the balances of banks and issued in accordance with the AHMLs standards can be up to 250 billion rubles.

In the 2009 budget it is planned that the AHML should be granted government guarantees in the amount of 36 billion rubles for the issue of its corporate bonds, for which, as it is intended, banks mortgage assets can also be traded. Banks can also attract refinancing from the RF Central Bank under the mortgage of these securities. However, none of these refinancing schemes have started to work so far. In April, in addition to the AHMLs bond loans in the total amount of 38,675 billion rubles, the Federal Financial Markets Service registered issues of four series of the AHMLs non-convertible documented bearer coupon bonds, in a total amount of 28 billion rubles, secured by government guarantees of the Russian Federation.

The housing availability coefficient (HAC) for families (the ratio of housing value to annual income), estimated by year and determined on the basis of the terms of mortgage credits refinanced by the AHML, varies for the Russian Federation on the whole between 2.93 years and 3.7 years, and for federal okrugs between 2.12 years and 3.99 years. The last figure indicates that the HAS value of 4 years represents an availability threshold.

Those families whose incomes when set against the current housing prices yield HAS values of 4 years and more have no practical opportunities to purchase a dwelling on the Russian market.

Table THE HOUSING AVAILABILITY COEFFICIENT BASED ON MORTGAGE CREDITS REFINANCED BY THE AHML 2006 2007 2008 Federal Okrug June Sept. Dec. March June Sept. Dec. March June Sept. Dec. March Central 2.12 2.73 2.98 2.85 3.72 2.68 3.34 3.85 3.69 3.77 3.61 3.North 3.21 3.40 3.61 3.69 3.39 3.44 3.60 3.49 3.39 3.99 3.60 3.Western Southern 2.81 3.11 3.17 3.78 2.54 2.95 3.13 3.35 3.85 3.71 3.50 3.Volga 2.82 2.96 3.23 3.48 3.63 3.56 3.63 4.17 3.67 3.69 3.38 3.Urals 2.89 3.15 2.91 3.53 3.48 3.56 3.16 3.60 3.62 3.15 3.24 3.Siberian 2.82 3.38 3.54 3.65 3.15 3.24 3.18 3.50 3.83 3.43 3.37 3.Far - 3.05 3.01 2.81 2.75 3.09 2.62 2.73 2.73 3.01 3.51 2.83 3.Eastern RF, total 2.93 3.16 3.31 3.53 3.37 3.32 3.35 3.70 3.64 3.62 3.40 3.Source: AHML.

On 31 March, the Federal Antimonopoly Service initiated a case against the Moscow Oblast Hypothecary Corporation (MOHC) and the Moscow Oblast Duma. Oblast parliament and the Corporation, which is a large-scale builder, are suspected of conspiracy within the framework of the program of resettling the dwellers from decayed buildings and buildings which are under the threat of collapse. Besides, the Federal Antimonopoly Service has notices certain indicia of conspiracy between the MOHC and the administrations of some towns in Moscow Oblast.

This year, the Agency for Restructuring of Mortgage Credits (ARMC) intends to restructure the mortgages of no more than 100 thousand Russian citizens. Out of the total number of borrowers who have applied to the ARMC for help in restructuring their credits, RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES refusals were issued to 52 % citizens whose documents did not comply with the standards established by the Agency. The ARMCs decision to soften the restructuring standards for the borrowers who are failing to make their interest payments in due time as a result of the crisis will have to be approved by the AHML.

The AHMLs Supervisory Council made the decision in April that the list of documents to be collected by a borrower on his own should be shortened, and abolished the requirement of compulsory sale of a car rated in the low-price class in order to redeem an outstanding debt under a mortgage; it supported the suggestion that the older tranches of mortgage securities should be entered into the investment declarations of the RF Pension Fund and the RF National Welfare Fund; besides, the Council assigned to the AHML the task of implementing pilot projects aimed at target financing of Russian credit institutions designed to enable them to issue credits to citizens and juridical persons for developing housing construction, including on the primary credit market, as well as share partnership construction.

The analytical materials released by the Builders Association of Russia (BAR) and the Union of Surveyor Engineers demonstrated that the prices in rubles for secondary housing products across Russian regions since the autumn 2008 had decreased by 13.1 %, while the average cost of new construction products had gone down 7.31 %.

This year, the RF Ministry of Defense is going to spend 109.5 billion rubles on providing military personnel with housing.

The Ministry for Regional Development raised, practically in every Russian region, the average market price of housing, at which in Q II 2009 the authorities are going to purchase finished apartments from builder companies in order to satisfy the existing social needs. The purchasing price of apartments (established for builder companies) in Moscow increased by 13.48 % to 83.74 thousand rubles per square meter, and in St. Petersburg - by 18.51 % to 52.5 thousand rubles. In Moscow Oblast this index rose by 12.11 % to 48.thousand rubles per square meter; in Leningrad Oblast by 12.42 % (to 35.75 thousand rubles); in Krasnodar Krai by 18.39 % (to 36.05 thousand rubles); in Sverdlovsk Oblast by 6.7 % (to 35.85 thousand rubles).

In April, the Administration of Tver Oblast and the State Company SU-155 signed an agreement on a program for preferential mortgage crediting, under which the buyer of an apartment is granted not only a 10 % exemption on its price if he chooses to take a preferential mortgage credit, but also the right to receive a subsidy from the oblast budget for partial redemption of his initial contribution towards the buyout of the apartment The new mortgage crediting program is designed to help SU-155 in increasing the availability of its housing construction products to an average buyer.

As of 3 April, 35.2 thousand persons had already submitted their applications to the territorial branches of the RF Pension Fund concerning the disposal of their core capital funds for the purpose of repaying their loans. The total amount covered by these applications is 9.4 billion rubles. With regard to these applications, 23.4 thousand positive decisions were made, the total amount to be disposed of being 6.3 billion rubles.

At St. Petersburg, the Center for Restructuring of Mortgage Credits was opened. Loans are to be granted to those residents of St. Petersburg who had concluded a credit agreement prior to 1 December 2008. Under this agreement, the mortgaged dwelling must be the only one available to a given family, while that familys monthly income should not exceed the doubled subsistence minimum per member.

MILITARY EXPENDITURE IN THE 2009 FEDERAL BUDGET MILITARY EXPENDITURE IN THE 2009 FEDERAL BUDGET V.Zatsepin In accordance with the latest changes introduced in April into the current federal budget, its allocations under the National Defense section are cut 10.5 % by comparison with the initially adopted version of the budget. At the same time, despite federal budget expenditure having been increased on the whole by 668 billion rubles by comparison with the initial version, secret expenditure was unexpectedly reduced by 99 billion rubles which may indicate important changes in Russias budgetary policy.

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