Last update - 00:00 09/05/2007
Family evicted over debt stemming from bank's 'technical error'
By Mijal Grinberg, Haaretz Correspondent
How does a $75,000 mortgage become a debt exceeding NIS 2 million? The answer has painful significance for V., who was thrown into the street with his blind wife and three children, aged seven to 15, over a NIS 26,000 debt that - due to a "technical error," according to his mortgage bank, Mizrahi Tefahot - turned into NIS 2,673,655.
V., 47, moved to Israel from the Soviet Union in 1990. He found work as a cable television technician, and in 1994, bought a $75,000 apartment in Be'er Sheva. His monthly mortgage payment was about NIS 800, which V. says he always paid, though sometimes a bit late. Thus in 1997, the bank informed him that he owes NIS 13,000 in interest on his late payments.
V. applied to an interministerial committee run by the Housing Ministry for help in rescheduling this debt. Over the last 10 years, the committee met three times on this case. According to V., the committee thought the debt could be rescheduled, but the bank rejected the terms suggested by the committee and demanded that he produce three new guarantors, on top of the ones who guaranteed his original mortgage. However, V. said, he was unable to find additional guarantors, so the debt remained unpaid and continued to grow. By 2007, it had doubled, and on account of this NIS 26,000 debt, the bank announced its intention to evict him.
V. said he then made a final effort to settle the debt, bringing the bank NIS 5,000 in cash and promising to bring the remainder in three days. However, he said, the bank refused to take the money. Soon, the eviction notice arrived - but it listed the debt as NIS 2,673,655.
Two weeks ago, V.'s family was evicted. For a few days, they remained homeless; then the welfare authorities loaned them an apartment for a few days. Now, he is facing eviction again.
Questioned by Haaretz, Tefahot said that V.'s entire debt, including principal and interest, actually stands at NIS 220,000, and not over NIS 2 million, as the eviction order said. Consequently, V. went to court, arguing that the eviction order was illegal, because it was issued over a debt that did not exist.
According to Tefahot, the NIS 2 million sum was a technical error: The Bailiff's Office computed the original 1997 debt (principal and interest) plus interest and linkage on that sum, but failed to deduct all the payments that V. had made since. However, it added, the NIS 26,000 debt stemming from unpaid interest remained unsettled, and therefore, the bank was justified in evicting him.
But according to Haim Bar Ya'akov, who heads an organization that helps people like V., the difference is significant, because courts will usually approve eviction for a NIS 2 million debt, but not for NIS 26,000.
Even discounting the error in V.'s case, the fact is that interest on late payments often results in debts far higher than the original loan, and according to Bar Ya'akov, the banks often refuse to reschedule such debts.
"The banks have a clear interest in not reaching a settlement, since the interest rate on late payments is tens of percent, giving the bank huge profits - either from the interest or from selling the apartment [if the lender defaults]," he said.
But Tefahot disputed this statement, saying that the bank loses every time it forecloses on a mortgage.