Nordea Bank has launched a new form of repayment under mortgage deals - covered irrevocable LC

20.04.2011

Nordea Bank has launched a new form of repayment under mortgage deals - covered irrevocable LC

Effective from the middle of April OJSC Nordea Bank offers its clients a new form of mortgage repayment – covered irrevocable LC.

Covered irrevocable letter of credit is a form of cashless payments under a mortgage deal, when the Bank places a borrower’s funds to special account and this amount shall be transferred to a seller’s account only after the latter submits documents on title transfer to the borrower. During validity of LC the borrower also have no access to the funds on this account. If documents on title transfer are not presented prior the expiration date of a letter of credit, the funds will be returned to the borrower’s account. This setllement format can be an alternative to safe-deposit boxes with the requirement to grant special access rights, for example, in case when one of the participants of a deal is a legal entity.

The basic term of such settlement payments is the following: mortgage deal participants should have accounts in Nordea Bank. Validity of a letter of credit is the period established for state registration of real estate rights extended by 2 (two) months. The commission fee for opening LCs in Nordea Bank is fixed - 2 000 RUB. Document receipt and verification, as well as payments under letters of credit are free of charge.

«We proceed from the assumption that introduction of covered irrevocable letter of credit will have positive impact on the increase of mortgage lending volumes in the Bank, especially in the regions of Russia, where legal entities very frequently act as real estate sellers» – comments Andrey Maltsev, Deputy Chairman of the Management Board.

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