Economy
Hungary cabinet meeting to discuss FX loans to lower monthly installments (2)
In the wake of a new scenario resulting from an inconclusive legal opinion reached by Hungary's Curia (Supreme Court) on foreign currency loans earlier this week, the government will discuss the issue at a cabinet meeting convened for Monday, 23th December. Hungary is currently awaiting a European Court of Justice verdict before it proceeds with policy measures on the exchange rate margin and amendment of foreign currency loans; the court is not expected to hand down a decision before mid-February.
Népszabadság is citing a source close to the government, who has claimed policy objectives remain unchanged - that is, the government is seeking a solution to ease the financial burden FX mortgage holders are facing. A legally sound solution is being sought before the 2014 general elections to facilitate a 17%-20% reduction in monthly loan installments. However, the government is seeing its own role as a "thid party" regulator, while the costs would be shared by clients and banks.
According to a source close to the government, banks have failed to prepare clients for the massive and progressively worse exchange rate fluctuations, and did not take the latter into consideration in creditworthiness assessments. According to the insider information obtained by the newspaper, there is a proposal to re-calculate monthly mortgage payments at the exchange rate valid at the time when the contract was signed, and set the monthly installment at that amount. However, this information has not been confirmed by other sources. Even if such measures are taken, they cannot be used with retroactive effect, the sources concurred.
What the Curia said on Monday
1. Loan contracts denominated in foreign currencies are agreements that enabled borrowers to take advantage of more favourable interest rates compared with forint loans, therefore all risks associated with currency rate fluctuations are to be borne by the borrower.
2. The risks associated with exchange rate fluctuation alone do not constitute sufficient grounds for invalidating such contracts as being illegitimate, unethical, usurious, false. The risks alone do not render the service as non-viable. The unforeseeable shift in the financial burden in itself does not render the agreement null and void.
3. Financial institutions were required to inform clients on the possibility of currency rate changes, and its impact on the monthly payments due.
4. In the event that a court verdict finds a contract null and void, courts must seek a way to amend the contract and restore its validty, if it is possible to eliminate the factor that rendered the contract null and void.
5. Should one of the terms and conditions of a contract be found null and void, the contract remains binding in all other respects.
6. As concens one-sided amendments to the contracts by the lender, the Curia defers its decision until the European Court of Justice reaches a preliminary ruling on the issue.
7. Court verdicts are intended by the law as a means of rectifying individual cases in which the change of circumstances resulted in substantial disadvantage to one of the parties. They are not suitable to rectify contracts on a massive scale. If legislation is made to amend the disadvantageous consequences, such legislation leaves no room for individual judiciary deliberation.
Népszabadság is citing a source close to the government, who has claimed policy objectives remain unchanged - that is, the government is seeking a solution to ease the financial burden FX mortgage holders are facing. A legally sound solution is being sought before the 2014 general elections to facilitate a 17%-20% reduction in monthly loan installments. However, the government is seeing its own role as a "thid party" regulator, while the costs would be shared by clients and banks.
According to a source close to the government, banks have failed to prepare clients for the massive and progressively worse exchange rate fluctuations, and did not take the latter into consideration in creditworthiness assessments. According to the insider information obtained by the newspaper, there is a proposal to re-calculate monthly mortgage payments at the exchange rate valid at the time when the contract was signed, and set the monthly installment at that amount. However, this information has not been confirmed by other sources. Even if such measures are taken, they cannot be used with retroactive effect, the sources concurred.
What the Curia said on Monday
1. Loan contracts denominated in foreign currencies are agreements that enabled borrowers to take advantage of more favourable interest rates compared with forint loans, therefore all risks associated with currency rate fluctuations are to be borne by the borrower.
2. The risks associated with exchange rate fluctuation alone do not constitute sufficient grounds for invalidating such contracts as being illegitimate, unethical, usurious, false. The risks alone do not render the service as non-viable. The unforeseeable shift in the financial burden in itself does not render the agreement null and void.
3. Financial institutions were required to inform clients on the possibility of currency rate changes, and its impact on the monthly payments due.
4. In the event that a court verdict finds a contract null and void, courts must seek a way to amend the contract and restore its validty, if it is possible to eliminate the factor that rendered the contract null and void.
5. Should one of the terms and conditions of a contract be found null and void, the contract remains binding in all other respects.
6. As concens one-sided amendments to the contracts by the lender, the Curia defers its decision until the European Court of Justice reaches a preliminary ruling on the issue.
7. Court verdicts are intended by the law as a means of rectifying individual cases in which the change of circumstances resulted in substantial disadvantage to one of the parties. They are not suitable to rectify contracts on a massive scale. If legislation is made to amend the disadvantageous consequences, such legislation leaves no room for individual judiciary deliberation.
