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Eastern Europe mortgage laws developing well but much remains to do - EBRD says
Transition economies in Central and Eastern Europe and Central Asia have made remarkable progress towards the development of a sustainable legal and institutional framework for mortgages and this could ultimately lead to the creation of an active secondary mortgage market, according to a new EBRD publication*.
The study says these countries have to some extent overcome legal obstacles to change and] seized the opportunity to make the sort of profound legal reforms needed to produce efficient mortgage markets that benefit both lenders and borrowers.
However it also concludes that there is still much to do, especially in the context of removing cumbersome and unduly complex elements in mortgage regimes.
Based on an analysis of the legal requirements for mortgages and on data on laws and institutions collected in 17 jurisdictions of the region (as well as some Western markets for the purposes of producing a benchmark), the EBRD study demonstrates that:
- The region has embraced modern technology: a large number of countries now offer fully computerised, internet based land registers where property titles can be searched and mortgage rights registered electronically.
- In a few jurisdictions, mortgage registration can be completed within a week, at a relatively low cost. In others, registration can be slowed down by complicated procedures.
- Enforcement procedures are reported to be generally efficient, in some cases on par with Western Europe, but they have not yet been tested by a market downturn.
The development of more complex mortgage products as well as covered bonds and mortgage-backed securities will also further test the system. The EBRD will cooperate fully in the development of reforms to help this process proceed smoothly.
“Mortgage markets may appear hugely complex”, say Emmanuel Maurice, EBRD General Counsel, “but the legal basics for mortgage are in all models fairly similar and quite simple when one is able to separate the essential ingredients from those that are country-specific or simply inherited by way of tradition.”
It is the role of the EBRD to provide partner financial institutions in the region with long-term mortgage credit lines as well as advice on sound mortgage lending policies and also engage with governments and to assist them in the modernisation of their laws and institutions, Maurice added, stressing especially the economic and social benefits of sound mortgage markets.
*The new publication (Mortgages in transition economies: the legal framework for mortgages and mortgage securities) was partly financed by the Swiss government and is available on the EBRD website athttp://www.ebrd.com/pubs/legal/mit.htm.
For further information on EBRD legal transition programme in general and secured transactions (pledge and mortgage) reform seewww.ebrd.com/law and www.ebrd.com/st.
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