Курсовая работа: Mortgage crediting
The amount of interest, which was paid by the borrowers to the bank for granted loan, exceeded the amount of the interest, which was paid by the bank to the holders of mortgage sheets. This difference was the main source of the bank profit. The amount of issued into circulation mortgage sheets should not exceed the joint stock and the stock capital more than in 10 times.
The joint stock land banks tried to develop the mortgage crediting also in the cities. However the government limited in the interests of landowners its operations in the cities in the frames of one third of the total of unpaid loans.
The joint stock land banks realized its activity with support and under control of the government. The body, which effected the immediate control over the bank activity, was special office on credit affairs of the Ministry of finances. The government realized the control over issuing of shares and mortgage sheets, provided coordination of private banks with state - Noble and Peasant – banks.
The structure of the profit of the joint stock land banks was typical. The long-term loans gave approximately half of the profit, the short-term credits and the securities, belonged to the bank, gave the other part of the bank profit.
The mortgage banks invested their capitals in the state and assured by the government securities, and because of this fact the demand on their mortgage sheets and shares was increasing constantly. The demand on the shares grew also because of constant high dividends.
Creating mortgage organizations, the government saw their tasks in the fact that the land and the city property, attracted into the banking circulation, was transferred from “weak” to “strong” owners, who could organize developed production and thus could serve for increase of welfare of Russia. /11/
In Russia before the revolution the dynamic market of houses was organized, which was based on strong crediting-financial system, which was founded on pledges and promissory notes. None the less the main object of the mortgage crediting was the land but not the dwelling. The mortgage credit at that time as a rule was associated with land credit and was granted by the different types of land banks, that is the mortgage without dwelling dominated. On the contrary for the period after revolution the granting of credit under dwelling, but without mortgage, was typical, because there were not conditions for development of mortgage: the land – the invariable factor of mortgage – was nationalized.
None the less, in the soviet period the experience of dwelling crediting was formed in our country, which is in principle the base of mortgage crediting. The practice of crediting of dwelling construction in the USSR presents considerable interest. So for a long period of time the organizations of the State Bank of the USSR granted long-term credits to the population for cooperative and individual dwelling construction. The typical feature of organization of individual dwelling construction was the absence of immediate contact of the borrower with bank. The credits were granted to the population not directly but through the organizations in which the individual borrowers worked; the enterprises were guarantors of loans return. The redemption was realized by deduction of payments for credit directly from salary of the borrowers of their enterprises. The credits for dwelling were not assured by real estate or other property, and withdrawal of the property for realization in the purposes of redemption of loan was not used.
In the future, with the reorganization of the credit system, the range of the granted credits developed. The loans began to be granted not only for individual construction of the house, but also for purchase of dwelling, and for construction of second house. The question of crediting of dwelling through construction cooperative societies was resolved.
The State Bank of the USSR had separate elements in the organization of crediting of individual construction which were typical for mortgage system. Particularly the connection of construction of house with land was stipulated.
The practice of bank right protection before the other creditors existed in the form of immediate redemption of the loan from the value of the house. In the case of insufficient amount from the sale of the house for covering the claim the receipt of necessary amount for account of collection of other property of the borrower was stipulated. There were features of mortgage accountability: in the case of full redemption by the borrower of indebtedness before the bank or organization, though which the crediting was organized, the notary was informed of the fact of cancellation of prohibition on sale or transmission of the house. /9/
The limited combination of home 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 in the transitional period.
Chapter 2.Construction of safe system of crediting in modern Russia
Legislation on Mortgage Crediting
The present chapter describes legal fundamentals of mortgage crediting in Russia, and also depicts the most important changes in legislation on mortgage for the last years. At the same time, I am trying to attract attention to main “perils” of considered legal relations and specifies basic directions of their optimal overcoming.
The term “mortgage” in legal practice usually covers two concepts:
1. “Mortgage” (as legal relation) is the gage of a real estate with the purpose of receiving a mortgage credit (as a rule, in a bank). For mortgage it is characteristic to leave property with the debtor. Gage in civil right is one of methods to back obligations - in this case of bank credit. In so doing, in all cases it is mandatory to register with the State bodies the gage of any real estate. In case of insolvency of the debtor, claims of the creditor are satisfied from the proceeds from sold property with priority before other creditors or by transferring the incorporated real estate in the property of the pledge.
2. “Mortgage” (as a security) means a “bond” - debt tool certifying the rights of the pledge on a real estate. Mortgage usually has a free circulation in the market.
Institute of mortgage has not received in Russia considerable development till nowadays due to different encumbrances, both economic and legal, therefore it is regulated by a rather small array of normative acts.
To the most important of such acts refer Federal Act of 1998 “On mortgage (gage of the real estate)”. General provisions on gage, not defined in the indicated law, are contained in appropriate articles of the Civil Code of the Russian Federation. Federal Act from 1997 “On State Registration of Rights on Real Estate and of Transactions With It” governs registration of real estate, the most important function of the state, absence of which would make stable turnover of real estate completely impossible.
Actual realization of bank’s rights on the mortgage is possible within limits of the law “On execution”. Separate special provisions, which nevertheless should be taken into account while making conclusions on the mortgage agreements, are scattered as well in articles of appropriate laws, such as, for example, the law “On companies of living accommodation proprietors”. In the mortgage of housing accommodations it is necessary to follow requirements of the branch housing legislation, including Housing code of RSFSR, and as well laws and regulations on registration of citizens in their places of residence. Members of the borrower’s family also have rights, established by legislation and described in Family and Civil codes of the Russian Federation. Special acts defend interests of infants, elderly persons and disabled persons.
Up to the beginning the ninetieth years mortgage practically missed. Temporary transfer of property rights on real estate, being the object of mortgage, to the creditor, was a kind of pseudo-mortgage. After settlement of accounts between the debtor and creditor rights on the real estate were transferred back. It was necessary to pay twice rather high State duties, levied from the borrower, and to be ready to run risks connected with possible dishonesty of the creditor receiving rights on real estate for undercharge. Besides, term of rights registration was rather long. In these conditions the above described scheme badly protecting the borrower, could not be distributed broadly. But also after legalization of the mortgage as civilized legal institution, in 1992, contradictions between the out-of-date branch laws did not give lawyers practical possibility to defend effectively rights, but this time not of a borrower, but of the bank-creditor. /11/
There was an impassable gap between “socialist” housing legislation and new Russian right.
Unfortunately, recent laws have only partly corrected this intolerant situation. For example, before acceptance of the law “On mortgage” there were no serious basis for ejection of insolvent debtor and his family from the gaged flat. The bank could hope only on transferring property rights with exception of the right of use or its limitation (depending on the size of living space per tenant). Nowadays ejection is quite possible, but under condition of... granting other living quarters in the same city - in our it means in Moscow, - and with allowance for all existing sanitary requirements.* There is no court practice on realization of the rights of creditor banks in new legal conditions. Earlier collection on gaged flat could be imposed only judicially. With the purpose of avoiding the indicated rule, there was widely used practice of conclusion with insolvent borrower an agreement “on buy off”. But from the moment of replacement of initial agreement with a new one, the mortgage contract was terminated and there emerged competition with other creditors. Not all banks took it into account and bargains on purchase and further disposal of the real estate received by agreement “on buy off” could be recognized invalid.
According to the new act “On mortgage” contractual selling of real estate is possible.
The most important novelty of this law was emerging “mortgage bond”-encumbrance as a kind of securities, freely circulating in the market.** Though Commissions on Securities under President still has not issued appropriate instruction, but at first glance, there are no encumbrances for issue of mortgage bonds already nowadays. There is no need to prove advantages of the mortgage over “simple” agreement on mortgage crediting. Mortgage bond is a nominal security certifying right of its holder on fulfillment of liability, backed by mortgage of property indicated in the agreement on mortgage, without submission of other proofs of existence of this obligation and the very
* Decree of the Moscow Government N365 from the 25th of April 1995 “On
principles of mortgage crediting in Moscow”.
** Chapter 3 of the Federal law N102-FL of July 16, 1998 “On Mortgage”.
right of gage on property indicated in the agreement on mortgage. The mortgage bond is issued to the initial pledge by body conducting State registration of mortgage, after actual State registration of the mortgage and is transferred by fulfillment of endorsement (partly similar to bill, under condition of observance rules of state registration).
The mortgage ensures payment to the pledge of capital amount of the debt under the credit agreement or other liability, backed by mortgage, completely or in a part, foreseen by agreement on mortgage.