Chastened, Bank Leumi Freezes Home Foreclosures

Bank Leumi has temporarily halted home foreclosures after the explosion of protest over its tender treatment of a troubled tycoon, for whom the bank had agreed to forgive about NIS 150 million in debt.

As people howled that the bank wouldn't be so considerate of mortgage borrowers in default as it was of Nochi Dankner, first the bank suspended its agreement with Dankner, the owner of the IDB group. Then on Monday the bank told lawyers to suspend foreclosure proceedings against defaulting debtors. This is a temporary move by the bank; evidently, once things calm down, it will resume the foreclosures and evictions.

“At this time, we are behaving with a great deal of caution and sensitivity, and we have instructed our representatives to do the same. It should be emphasized that this does not contradict the fact that we act and will continue to act according to our policy in this matters,” a spokesman for Bank Leumi commented.

“Every year, the banks issue between 7,000 and 8,000 eviction orders. In practice the number of evicted borrowers is roughly about 1,000 families," says Ran Melamed, deputy director at the Yedid Association for Community Empowerment, which offers legal protection to borrowers in difficulty. Generally, he adds, the banks use eviction orders to put pressure on the borrowers to refinance their debt.

Also, since the law was changed in 2010, evictions have become rarer, Melamed says. Under the amended law from 2010, banks have to provide alternative housing to evictees for 18 months. They now tend to feel that it pays for them to reach a payment schedule that will allow the borrowers to repay their debt over time, than to bear the expenses of taking legal action.

“Of about 1.2 million outstanding mortgages in Israel, roughly 70,000 to 80,000 are up to three months in arrears, in which cases the banks absorb the cost of the delayed payment,” he says. “Another 20,000 borrowers are more than six months late with mortgage payments.”

About 80 percent of the borrowers who have not reached a debt arrangement with the banks are forcibly evicted from their homes, says Melamed, while 20 percent leave on their own after receiving the eviction order.

Of Bank Leumi’s decision to put a temporary halt to eviction proceedings against borrowers, he says, “The bank is doing that for the sake of its image. I wouldn’t advise anybody to wait with their mortgage payment, thinking that the bank will write off the debt.”