“I borrowed for my house, mortgage. We sold our apartment in Rīga, and then the prices were terribly big. We paid half from the sale, borrowed the other half. Then when the bubble burst, and the price fell lower than grass,” said Iveta. She is one of the roughly 10,000 residents of Latvia who had the 2008 crisis nip their dreams in the bud. When the family bought a private house near Bauska, the situation was carefully assessed. They had a profitable business and in the event of difficulties, they were convinced the house can be sold. The sale of the house failed, however, and it was auctioned by the bank to recover the debt.
After the house was auctioned off, there was no longer a property for the debt recovery, but there was a monthly payment of more than €200 to the bank because prices of the 'fat years' had gone down heavily. Iveta's life was also changing; her husband died, and later twins were born. So she became a mother with disadvantaged status and took occasional jobs because the bank would immediately take away any legal income.
“We had to leave. And we still don't have our own roof above our heads. We live here and there. There is no particular joy about all this,” she said.
Two years ago, she received a letter from the bank that, because of a number of criteria, including the status of a multi-child family, all her debts could be deleted. Now Iveta has returned to working legally.
In spring of 2020, the President of the Latvian central bank Bank of Latvia Mārtiņš Kazāks encouraged commercial banks to write off the unrecovered debts of the so-called fat years, which would allow more than 10,000 people to return to the economy.
In the summer of 2020, the Saeima approved amendments to two laws in order to allow credit institutions to unilaterally erase their debt on mortgage loans taken before the economic crisis of 2008.
Swedbank, the largest commercial bank in Latvia, has erased debts of €124 million made in 'fat years' and calls for the remaining debtors affected by the 2008 crisis to settle their liabilities this year. The debt to be deleted next year will be subject to personal income tax.
An example of a 'typical' debtor was provided by the head of Swedbank's Emergency Restructuring Solutions Division, Laila Bankovska:
“So the typical customer: There was a standard apartment in īiga that was purchased for, say, 80 or 90 thousand euros. The client was unable to meet the obligations. The property was sold at auction. The auction price was well below and the average fee remaining on those commitments was around €50,000. We asked customers to pay around 10%, or €5,000. This was about the average cost of insolvency to the customer. Most often, he has a bailiff on account, not only on our part, but also on very many other commitments. Either he is abroad, or he is here in Latvia, earning illegally."
The head of the “SEB Bank” Customer Management, Veronika Vīksne, also encouraged debtors to hurry.
“They are already over 500 customers who have been cleared of these obligations, because we believe that the most important thing is to talk about those people who are completely released from their obligations, and that is to say, with the next day you can start life without a burden of commitment,” Vīksne said.
The Financial Industry Association explained that the exact amount of non-paid debts of the 'fat years' will be accounted for next year, while estimates show that some €500 million have been borrowed but not returned.