Mortgage crediting to great extent new for our country type of banking services, and there are serious obstacles, which impede its development
The purposes and problems in my thesis work involve the stage analysis of mortgage process for estimation legal side of Russia mortgage, study the factors influence on the reduction credit risks.
This work could not be prepared without of a number of persons. I would like to say special word of thanks to Anders Dahlquist-Sjöberg, LLD for his guidance, providing the ideas, which become the base of the structure of the thesis. I would like to say for the Land Management administration especially to Anders Graad, who has managed the practical materials.
I am very thankful for the possibility given by Sida through the Master of Science in Land Management programme, to come to Sweden and study at the Royal Institute of Technology.
As the mortgage operation creates an essential contribution to the development of real estate market the impotence of real estate credit is obvious. It might be used for involvement of additional investment to the different branches of economy: to agriculture, commercial activity, housing etc.
In the modern terms of general stagnation, crisis of non-payments and especially of bankruptcies of enterprises, from one side, and sharp necessity in renovation and technical re-equipment of production , from other side, the mortgage becomes the sole decision of problem.
The system of mortgage crediting for the Russian enterprises , which possess as a rule enormous fixed assets, from my point of view, represents not only acceptable, but solely possible in the present conditions.
The purposes and problems in my thesis work involve the stage analysis of mortgage process for estimation legal side of Russia mortgage, study the factors influence on the reduction credit risks. I will emphasise on the home mortgage, because this kind of mortgage occupies leading position in this section.
The thesis work consists of three main chapters, introduction and conclusion.
The introduction deals with the topicality of the subject matter, purposes and problems posed therein and contents of the thesis.
The first chapter “The essence of mortgage crediting” gives a general historical outlook of mortgage lending development and the reasons of necessity to introduce it in the modern Russia.
The essential second part of thesis deals with the current legal base on real estate issues and the possibilities to introduce mortgage lending to the bank activity.
The third part “ The problems and perspective of development of hypothecate crediting” describes the international experience in this field. The purpose of this to give overview of loan contracts in several countries and to describe American models of hypothecation, which are the most widely used in our mortgage system. Also this chapter is focuses on the existing problems of the mortgage lending and ways their optimal solving.
Chapter 1. The essence of mortgage crediting
1.1. The necessity of mortgage crediting
The establishment of market economy is impossible without attraction of the population masses to the business and production activity, and such forms of crediting investment, which will have not only urgent, paid and returnable character but the mass character, will have the priority development.
As far as the collateral is necessary condition for market crediting, and the main part of the population of the country did not possess at the beginning of the reforms and do not possess at the present time the large real monetary accumulations and considerable movable property, so the mortgage becomes the sole variant of getting credit .
The expectation of activity of investment process is strong as never before for the last years. In this case for restoration of the economy of the country the long-term credits are necessary, because it seems that the period of recovery will be long. In the situation when the wave of unpaid credits overwhelmed the banking system the presentation by the borrower of the most reliable guarantees of repayment of the loan in the time of debentures gets the determined meaning in the case of resolving of the question of granting credit. One of the most reliable means of collateral is real estate, which becomes the subject of collateral in the case mortgage crediting. In the case of appropriate care the real estate and the land almost never lose its value and on the contrary in the future its price will increase.
The actuality of this type of credit consists of the fact that in the terms of the deep crisis of the production and of the economy of the country as a whole, it is possible that the sole way for the national enterprises, which majority is at the edge of bankrupt, to get long-term credits is the mortgage of real estate belonged to them.
In the case of sharp shortage of financial sources of housing construction the necessity in dwelling increases for the account of inflow to Russia of refugees from near abroad and the change of location of troops.
In these conditions the objective necessity in long-term credits granted to the population for housing construction occurs which are not subject considerably to the inflation and which are assured in maximum form from the point of view of their return. Namely the mortgage credit is in conformity with these requirements, which is assured by the collateral of real estate.
The main purpose of creditor is receipt from borrower of the most reliable guarantees of loan return in the time of fulfillment of debentures. It is naturally that the creditor must in the first place have the strict information of financial position of the borrower, check his paying capacity, the condition of his property, the availability of debts and so on. But all that is not sufficient, especially, if the long-term crediting is considered. The mortgage is more reliable form of guarantee (in contradistinction to individual form warranty) of payment of loan under real estate which owner is not deprived of the right to manage it; the mortgage gives the creditor the right to collect and to sell the property of the borrower in the case of non-payment of indebtedness in the time of fulfillment of the obligation.
In the terms of general stagnation, crisis of non-payments and especially of bankruptcies of enterprises, from one side, and sharp necessity in renovation and technical re-equipment of production, from other side, the mortgage becomes the sole decision of problem for enterprise. Now the banks are ready to give credits for production only in the case of availability of reliable guarantees of loan return.
The system of mortgage crediting for the Russian enterprises, which possess as a rule enormous fixed assets, from my point of view, represents not only acceptable, but solely possible in the present conditions. The enterprises need for restoration of production in the first place the renovation of means of production in accordance with modern technologies. And for realisation of such modernisation the considerable long-term and relatively cheap credit resources are necessary. The mortgage credit is in conformity with such conditions.
The history of establishment and the experience of mortgage crediting in Russia.
The combination of experience of mortgage crediting of expenses for purchase of land before revolution with the practice of individual crediting of dwelling construction in the soviet time is the reliable theoretical foundation for development of recommendations on mortgage crediting at the present time.
In Russia the first mortgage organizations appeared in the second part of XVIII century. In contradistinction to the other countries where the land was the subject of mortgage, in Russia the subject of mortgage were serfs. In 1860 the state mortgage credit organizations which existed before reforms were liquidated. After cancellation of serf right by the decree of the tsar Alexandre II the commission for development of the mortgage law was organized on which basis the mortgage banks of different form of property began to arise. However the private banks had the problem of resources attraction for a long period of time, and in connection with that the necessity in the state guarantees on attraction of such means appeared. The state took measures operatively for increase of liquidity of mortgage bonds: the persons who had them got the possibility either to use them as collateral in the purpose to get credit or to sell them.
It is important that the section appeared in the banking legislation, which regulated the activity of mortgage credit organizations, and then this legislation was divided into two parts: one for commercial banks, which were considered as the banks of short-term crediting, the other for mortgage banks, which acted on other principles.
The establishment of mortgage credit after 1861 was stipulated by the needs of landowners holding, which faced the difficulties of the “reconstruction” in the period of reforms. The noblemen preserved their rights on real estate, but they did not have large capitals. The need of landowners in means was satisfied for account of land long-term crediting.
The considerable demand on mortgage loans was also in the cities among the house-owners from petty bourgeoises and merchants. The development of trade and business activity, the increase of the offers of stock values in connection with the wave of joint stock foundation, required the large cash means.
In the middle of 60 years of XIX century the mortgage organizations began to appear in Russia, which were founded on the capitalist principles of f