We currently face a threat – to our health and to our economic well being. To help us all come through this period as financially strong as possible, every day at 2pm I will appear on Facebook, live, to give you updated information and guidelines.
In this article, I will address the banks. Last Thursday, the Union of Family Finanical Advisors, to which I am an active member, gave an excellent webinar on how to deal with banks in the coronavirus crisis. The first subject covered was how to contact your bank if you are restricted to the home. Banks are working because they are considered “אנשי מלח – אנשים חיוניים במצב חירום”, meaning that they are an essential service to be provided in times of crisis. However, to adhere to the stringent rules being implemented by the Ministry of Health and the government, branches have a skeleton staff. So, actually going to the bank is not a good idea since you will have to wait in line.
I highly recommend working digitally – accessing the bank’s website. All banks have a website in English, though it is generally not as extensive as their Hebrew sites. If you find this to be true of your bank’s English website, I suggest you access the Hebrew website and use Google translate. During the coronavirus crisis, the banks have streamlined the process for using their websites. So if you haven’t previously used your bank’s website, you no longer need to go to your branch to receive a username and password. You can receive a username and password through your bank’s moked (telephone center).
That brings me to my next tip. The waiting time for contacting bank mokeds by phone, which is the method most people use, can be lengthy – sometimes over an hour. (This is still worth the wait if you need to perform a transaction that you are unable to do on the bank’s website.) The best alternative is to access the bank’s website and use their online messaging service; they are quite efficient in serving its customers. Every branch also has its own email address, however again, since branches only have a skeleton staff, it might take them time to answer you.
Now that we have established how to contact the bank, let’s talk about the changes in banking regulations. The most import message I have today relates to the subject of limited accounts – חשבון מוגבל. Previously, if 10 of your cheques bounced, your account would be turned into a חשבון מוגבל which means that the type of transactions you could perform would be restricted. Not a good place to be, since your credit rating would also be affected. Now, because of the coronavirus crisis, the government has waived this very strict regulation. However, they have placed a restriction: if you have given out cheques to pay your rent, service charges, chugim, or other purchases, and you don’t have the funds to pay them, you must contact these people and businesses and ask them not to deposit until further notice. I suggest that you also send them a written notification – by email, SMS or Whatsapp. Also remember it is illegal to cancel a cheque, so don’t do that.
The next waiver offered by the banks is a freeze on your mortgage. Mortgage payments are divided into two parts, the first being the principle and the second, the interest. The first option is to stop payments of the principle, and just pay the interest, which is normally called a balloon payment; the banks are granting a grace period of three months. I recommend that, if possible, you take this option, which is also the banks’ preferred option.
The second option is to actually freeze the entire payment. What effect does that have on future payments (i.e., after the three month grace period)? Your mortgage may be extended for another three months, while some banks are talking about adding the amount onto future mortgage payments. You, therefore, need to discuss this with your bank when freezing mortgage payments.
There has been talk that doing this would affect your credit rating, which means that it would be more difficult to secure a loan in the future. The Union’s Thursday webinar informed us that this will not happen, which is great news.
Mortgage banks are offering הלוואה לכל מטרה – an all purpose loan, which you can take out on your mortgage, like a second mortgage, or use to increase the total amount of your mortgage, ensuring that you remain debt free. Previously, the banks only offered this type of loan on up to 50% of the value of your property, but because of the coronavirus crisis they have increased the amount to 70%.
The banks have also agreed to offer the same two options for any other loans you may have taken.
However, before you run off to take out a loan, or use your savings to cover your overdraft, you should know that the banks have also offered to extend your line of credit. This is the first option that I recommend before you take any drastic steps. Remember: in a short term crisis you must be careful not to make any decisions that will cause a long term financial disaster.
If you want to freeze your mortgages or loans, be advised that your bank should not charge any commission in dealing with your file. Be sure to reconfirm this with your loan officer before taking any further steps. In order to freeze your mortgage or your current loans at the Bank you have to ask them to do it, they will not do automatically.
The last point that I would like to talk about is what you do if your bank goes bankrupt. We have seen this in the past in Israel. Most of the banks in Israel are big and they also have to adhere to the strict rules imposed by the Bank of Israel. During the subprime crisis we saw how efficiently and quickly the Bank of Israel acted. stepping in to save Bank Hapoalim. So what happens to our money if your bank does go bankrupt? Well, your money is guaranteed by the Bank of Israel, which will do its utmost to ensure that no bank goes bankrupt. Israel has a very strong economy and I do not believe that we will see such a problem with the banks.
I have received an abundance of questions and am here to help you get through the coronavirus crises with the minimum of financial damage, for free, so if you need any assistance, please contact me on 054-4217207.
Please stay at home, and be safe and healthy.