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No New Mortgage Funds in '09 Budget

http://www.themoscowtimes.com/article/600/42/375161.htm

10 March 2009

By Yelena Khutornykh, Yevgenia Pismennaya, Nadezhda Ivanitskaya / Vedomosti
The revised 2009 budget will not have additional funding for mortgages, a source in the Finance Ministry said, meaning that the Agency for Mortgage Lending will have to cut back on the number of loans it purchases and toughen demands for borrowers.

"Allotting funds to AIZhK is being discussed, but a decision has not yet been made," presidential economic aide Arkady Dvorkovich said, referring to the agency by its acronym.

Two sources in the Economic Development Ministry said additional funding for the agency had not been under consideration since the government began reworking its budget for this year.

In December, Finance Minister Alexei Kudrin promised AIZhK as much as 200 billion rubles ($5.6 billion) to purchase mortgages from state banks. The agency's chief, Alexander Semenyaka, repeated that talks were being held on giving the state mortgage lender 200 billion to 300 billion rubles -- the question was only whether it would be loans or a capital boost.

The government also considered giving AIZhK money from the budget as a government capital boost and part from the National Welfare Fund in the form of loans, or allotting the agency some of the free budget money returned by other state corporations. All of these options are now off the table.

Semenyaka, however, has not lost hope and is counting on budget money and the National Welfare Fund.

"For now, we're planning our operations based on the statements and orders from our shareholder: that additional state support in 2009 would total 200 billion rubles," he said.

If there won't be additional money for mortgages, AIZhK will have to rely on its own cash flow, buying home loans with income from its current portfolio, Semenyaka said. That would be roughly 1 billion rubles ($28 million) per month, or 700 mortgages, he said.

"Given such a figure, our priority will certainly have to become buying up the best mortgages from the best lenders in the best regions," Semenyaka said, adding that AIZhK wouldn't "sharply increase" rates to attract such loans.

To help the agency lower its credit risks, he said, it would make sense to follow banks' example and toughen criteria regarding the size of the loan compared to the borrower's earnings and down payment. AIZhK will also focus on improving its standards and technology to improve the quality of its portfolio and productivity, Semenyaka said.

That's not a lot, given that AIZhK has become just about the only buyer of banks' mortgages. Under the precrisis rate that mortgages were being approved, an average bank from the top 100 would require about 1 billion rubles in the two months, said Alexander Chernyak, head of refinancing company Atta Ipoteka.

"Demand for loans under AIZhK's terms here is really high now -- a lot of borrowers come in from other banks to refinance since it's more dependable," said Andrei Shinkarenko, chief of the agency's branch in Perm.

Seeing the amount of missed payments at its competitors, Shinkarenko's agency decided to toughen its demands from borrowers: Previously, they accepted as many as half of all loans, a figure that has now fallen to 10 percent.

"We'll allow a 20 percent down payment from borrowers, but generally we demand 30 percent. We take into account all of the risks connected to the borrower's employer," he said. "Before, a family of two in Perm with monthly income of 15,000 rubles could afford a mortgage, but now the minimum is 25,000 rubles."

Semenyaka, the AIZhK chief, said the agency now "saw itself as a reserve force, waiting for the government's command to fight the crisis."
Crisis comes just in time for Russia

http://www.businessneweurope.eu/story1491/Crisis_comes_just_in_time_for_Russia
bne
March 10, 2009

"This crisis came just in time for Russia," says Christopher Granville, the founder of consultancy Trusted Sources. The international crisis has hurt Russia badly, but the damage it could have done if the meltdown came a year later would have been far worse, he argues.

Russia's detractors describe Russia as a mono-economy: its wealth is all due to oil and gas exports, and little else. True, but this ignores what Russia has done with its oil revenue windfall.

Finance Minister Alexei Kudrin has managed to fend off enormous pressure from the Duma, Russia's parliament, to spend the $560bn that had accumulated in the reserve fund as of September. The bulk of the money was squirreled away in a reserve fund - an unusually prudent policy for a petro-economy.

Oil money was used to subsidise the rest of the economy, where corporates enjoy low taxes and the state has been investing in badly needed infrastructure. Not even the oil companies had access to the profits from sky-high oil prices last year. "As most of the oil windfall was accumulated in the reserve fund, companies were forced to borrow on the international capital markets to raise money for their investment needs - the oil money wasn't touched," says Granville. "As the crisis hit, the state's reserves were slightly more than the total external borrowing by companies and banks. But if the crisis had come a year later, companies would have over-borrowed and this crisis would have been far worse." According to the Central Bank of Russia, total external debt was some $527bn as of September, against total reserves of $560bn. In other words, every dollar of debt was covered by $1.06 of reserves. And of that debt, only an estimated $160bn is due to mature this year, which should be a more than manageable number, even after reserves fell to just under $400bn as of the start of March.

The state is now spending its rainy-day reserves to bolster the economy. The trick will be to spin the money out until oil prices go back above about $60, say analysts, at which point Russia Inc. goes back into profit. Predicting oil prices is a mug's game, but currently the consensus is the cost of a barrel could be over $60 sometime next year, well before Russia runs out of money.