“We borrowed 9 million forints, paid back 5.8 million and still owe 16.2 million!”

May 15, 2015


The following comment was posted to the Budapest Beacon’s Facebook page by Melinda Szabó in response to a Facebook post linked to the article “Hungary’s FX loan holders are fed up“.

Borrowed beyond their means? Budapest Beacon, I would have expected a bit more from you. With the exception of those who took up multiple loans, or borrowed a large amount of money compared to their wages, I consider your statement unfair. The vast majority of people borrowed between HUF 3-12 million, I hardly consider this an extraordinarily large amount of money…and the current crisis wouldn’t have arisen, had the conditions of the loans and the conduct of the banks and government(s) been proper and fair.

Did you know that the banks denied many people approval for HUF loans between 2006 and 2008 (the short amount of time between which the vast majority of “CHF loans” were doled out), saying their credit wasn’t good enough (slightly higher interest rates, slightly higher starting monthly installments), thus pushing them into the Swiss franc construction? It boggles the mind how people whose credit was not deemed good enough to qualify for the relatively stable HUF loan were offered instead a loan which, according to the banks and government, is of UNLIMITED RISK, all of which fall exclusively on the borrower? Does this make ANY sense? And where is the responsibility of the bank, as the professional in this situation, to minimise risks? Why didn’t they take ANY actions when they saw the negative trend which started in 2010, such as converting all loans into forints when the exchange rate reached a certain level? (In fact, that banks denied the request of people who asked them to convert their loans to HUF when the exchange rate was still around 160-180!) If I go to the hospital and become a victim of malpractice, can the hospital defend itself, saying that I should have told them the treatment proposed wasn’t proper, and should have been aware of all the intricacies related to medical science???

Also, I must point out that you (as well as the government, the media, and even many “CHF loan” holders) misquote (or only partly quote) the Curia’s decision. (No such quote appears in the English version of the article -ed.).  They did not say that borrowers must assume all losses arising from the change in the exchange rate, period. What they said, is that they must assume all losses ONLY if they had been given adequate information regarding the risks associated with the loan at the time of signing the contract but that, if based on the information provided in the contract and/or by the bank’s loan officers, the borrower had reason to think that the risk related to the exchange rate was not real, or only affected them to a LIMITED degree, then the question of who must assume the losses COULD be considered. In fact, not providing adequate information regarding the risks associated with the exchange rate can be grounds for deeming the contracts null and void, according to the Curia (http://kuria-birosag.hu/hu/joghat/22014-szamu-pje-hatarozat). Many people will tell you first hand, that the loan officers portrayed the “CHF loans” as much more favourable than the HUF, but an MTI communique released by the Hungarian Bank Association in 2006(!!!), entitled “There’s no need to fear the foreign currency loans” also points to the fact that the bank sector consciously misguided the population regarding the safety of this construction (http://www.hitelesmozgalom.eoldal.hu/…/mti-2006…–nem-kell-felni-a-devizaalapu-konstrukcioktol.html). Especially in light of the fact that Dr. Jean-Pierre Roth, head of the Swiss National Bank had sent a warning to Zsigmond Járai, head of the Hungarian National Bank in 2004 regarding the potential risks associated with the CHF loans, and that the IMF also sent a warning regarding these risks to the Finance Minister János Veres in 2005. 

Another important aspect you missed mentioning in your article is that, in addition to the losses arising from the exchange rate, one of the main reasons for the impossible situation in which “CHF loan” holders find themselves has to do with the interest rate. Are you aware of the fact that even though the Swiss franc loan was provided under the promise that it was tied to the Swiss franc, the interest rate on the Swiss franc loans was increased by Hungarian banks at the same time as the interest rate was drastically decreased by the Swiss national bank? In Poland, they followed the Swiss interest rate, and if you take a look, the situation in which the Polish borrowers are in is much much better than their Hungarian counterparts. And if the “CHF loans” aren’t tied to the interest rate of the Swiss Bank (when it would affect borrowers positively), then how can anyone justify tying the loans to the CHF exchange rate (which has a negative affect). This is NOT what I consider fair practice.

I could also write about the government and their flawed ‘”solution” to the problem, but I think I’ve already written an epic. Suffice to say that cementing the CHF exchange rate at its (at the time) historical low does NOT solve the problem, it only preserves it. The law passed merely serves to legalize the otherwise completely unlawful contracts (this is another topic). 

János Lázár can tell us all he wants that everyone is better off after “settling with the banks”, but that doesn’t make it so. First of all, no one got ANY money back, unless their contract had already closed. All they did was deduct the amount from the borrowers’ “virtual” capital owed which is, in most cases, nearly double that which had been originally borrowed in forints. 

Citing our own example, our starting monthly installments were HUF 55,000 in 2008, HUF 97,000 in November 2014 (before the “government’s solution”), is currently HUF 80,000, but will be HUF 150,000 starting this October until the end of the contract in 2028!!!!! How does this help? (If the loan continued according to the monthy installments demanded in the original contract in CHF, we’d still be better off up to an exchange rate of 300 HUF/CHF!!!).

We borrowed 9 million forints, paid back 5.8 million and still owe 16.2 million.

And to add insult to injury, there is no way out for borrowers in Hungary: there is no opportunity to file for personal bankruptcy, and even though the mortgage loan is secured by property that was deemed enough to cover the loan by the banks, there is no option of giving the bank the property and erasing the loan. The bank merely sells the property greatly under value (if they can sell it at all), and you are left without a house, but with millions of forints still owed to the bank.

Our last hope is the EU, as both the CHF loan construction and the government’s interference in private contracts to the detriment of consumers goes against EU principles. Several groups and lawyers have already filed their complaints, here’s hoping the bank lobby is not strong enough in Brussels to prevent them saving us from our banks and government.