Abstract
In the summer of 1991, Russia began its economic and political transformation with a complete lack of experience in mortgage lending. Mortgages were not a legally recognized form of lending. Loans were originated uniquely by the State Savings Bank, where loan underwriting and servicing were primitive. By early 1994, this bank essentially quit long-term housing lending after suffering losses on its pretransition loan portfolio. The government of Russia formulated a new program of housing lending in 1993 and has supported it with a law on collateral, presidential decrees, and regulations, which have created the minimum conditions for such lending. Still, the important law on mortgage has not been passed by the State Duma. Meanwhile, a number of Russia's numerous commercial banks have experimented with mortgage lending, developing ways of coping with interest-rate and credit risk. The result of these endeavors, combined with the growing macroeconomic stability, is that an increasing number of banks are making long-term home-purchase loans a significant part of their lending operations.
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