Israel's banks have tightened their mortgage policies in recent months. In addition to raising their mortgage interest rates, they have also reduced the maximum funding they will extend to borrowers, even safe borrowers. Some banks have also stopped working with Ezer Mortgage Insurance Company Ltd (EMI), and will not provide borrowers with financing amounting to 90-95% of a home's value.
Most of the Israeli banks that still work with EMI's parent company, American International Group Inc. (NYSE: AIG), which the US government nationalized after the insurer became financially troubled, have lowered the maximum mortgage financing.
"Globes" staffers posed as mortgage applicants to various banks, and asked for a 20-year Consumer Price Index (CPI) linked mortgage for 70% of the value of a NIS 900,000 home; i.e. for a NIS 630,000 mortgage. The applicants declared that they were married, with a joint net income of NIS 25,000 a month, which makes them safe borrowers. The applicants also asked about loan options at a higher proportion of the home valuation or through EMI. All the applications were made through the banks' national mortgage service centers. In cases of banks with no national mortgage service center, the applicants applied to mortgage officers at central branches.
Union Bank of Israel (TASE: UNON) offered the lowest financing level: a maximum of 60% of a home's value. The bank was prepared to increase this level to 70% through EMI. The bank said in response, "The maximum financing offered by the bank is between 60% and 70%. As for EMI, each application is judged on its merits."
Mizrahi Tefahot Bank (TASE:MZTF) offered the highest financing level: 70%, and up to 90% for mortgages with EMI. These levels are barely changed since the outbreak of the financial crisis, when the bank offered up to 95% financing through EMI.
Bank Leumi (TASE: LUMI) subsidiary Leumi Mortgage Bank, which has the second largest share of the mortgage market, offered financing up to 70% of a home's value, and up to 80% through EMI. Previously, the bank offered up to 95% financing, in special cases.
First International Bank of Israel (TASE: FTIN1;FTIN5) offered financing up to 70% of a home's value. A mortgage officer told the applicant, "Even before the crisis, we almost never worked with EMI."
Israel Discount Bank (TASE: DSCT) subsidiary Discount Mortgage Bank, which has a 13% share of the mortgage market, offered financing up to 70% of a home's value for good borrowers. It previously offered up to 90% financing. A bank spokesman confirmed that the bank no longer worked with EMI, and that any applications for more than 70% financing would be reviewed on the merits of the case.
Bank Hapoalim (TASE: POLI; LSE:80OA) subsidiary Mishkan Mortgage Bank, which had a 19% share of the mortgage market in the first half of the year, offered financing up to 70% of a home's value. The bank said that it did not work with EMI "in order to minimize risk."
Bank of Jerusalem (TASE: JBNK) said that it offers financing up to 70% of a home's value, and up to 75% in extraordinary cases. The bank said, "We used to offer up to 80% financing". The bank added that it still works with EMI, "but only up to 80% financing, not 85% or 90%."
EMI said in response, "EMI is the only insurance company in Israel that specializes in credit insurance for homes secured by mortgages. The company has work agreements with all of Israel's mortgage banks, as well as with Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS). The company's activity is independent domestic activity, which is independent of the situation and conduct at AIG."
Published by Globes [online], Israel business news - www.globes-online.com - on November 5, 2008
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