Mortgage Bank Research Articles

Bank loans denominated and indexed to foreign currency ‒ a Polish, Ukrainian or Europe-Wide problem?

The institution of a bank mortgage denominated/indexed to foreign currency (referred to generally and not very precisely as “foreign currency loan” or “loan adjusted to foreign currency”) is an instrument commonly used by a broad group of citizens of European states for acquiring capital with a view to purchasing a housing unit. Until recently, such loans were popular not only in Poland and other countries belonging to the so-called “New Union” (those whose accession took place within the last decade or so: Czech Republic, Slovakia, Romania, Hungary and Croatia), Austria, Spain, Italy, Portugal, but also outside of the borders of the Union: in Russia, Serbia and Ukraine (however, one difference was the currency in which obligations were evaluated – whilst loans in EU countries were dominated by the Swiss Franc, Ukrainian lendees more frequently relied upon loans “adjusted” to the U.S. dollar). Regardless of differences persisting in legislative regimes, peculiarities of national legal systems and local economic and social conditions, in all those countries doubts have arisen whether a drastic change in currency rate (which results in an obligation to pay off a loan on conditions much less attractive than beforehand) constitutes a legally relevant circumstance that could permit one to release oneself from having to perform one’s contractual duties or, at least, facilitate granting some relief in fulfilling increasingly more onerous obligations towards banks. To discuss the permissibility and legal aspects of foreign currency loan contracts is complicated not only from the juridical point of view, but is also of interest to society, politics and economics. Still, the problem attracts strong emotions, particularly among lendees who took out a foreign currency loan and now feel deceived due to a change of the currency rate. The lendees and their organizations often expect involvement, particularly from EU bodies, where, in their estimation, domestic authorities have failed or “succumbed to the banking lobby”. Unfortunately, having observed the course of events over the last several years, one may surmise that the low number of judgments in cases concerning denominated bank loans, and especially the sceptical approach of the Court of Justice, have generated a lot of disappointment.

A QUEST FOR UNFETTERED CREDIT: HOW MONETARY POLICY DRIVES CREDIT RISK TRANSFER OF STRUCTURED FINANCE PRODUCTS

This study examines the effects of monetary policy contractions on bank loans to households and firms and instruments in three different credit risk transfer (CRT) capital markets over two separate time periods (1995–2006 and 2007–2015). The findings show that in both periods, banks decrease business lending but increase lending to consumers through a combination of mortgage, auto, credit card, and student loans from more liquidity produced by consumer‐related CRT activity. Additional results reveal relative CRT movements toward securitized mortgages from bank mortgage debt over both periods and toward securitized and insured business loans from bank business debt in the latter period, which suggest vulnerabilities among interconnected credit markets. (JEL E44, E51, G21, G23)

Valuation of Residential Premises for the Purposes of Securing the Receivables of the Creditor in Poland

The study presents an analysis of the theoretical and practical issues connected with securing the receivables of creditors, in particular the principles connected with the appraisal of real property value used for the purposes of granting loans in Poland. The scope of research included the basic elements of the functioning and organisation of the Polish banking system, legal forms of securing debt receivables and the principles of real property valuation for universal and mortgage banks. Additionally, the authors have conducted an analysis of the number and amount of loans granted in Poland in the years 2009 – 2016

Unleashing the Potentials of Housing Sector in Nigeria as Perceived by Users

Housing is a basic need and a human right. The role that housing plays in the social and economic development of a country cannot be underestimated. Interventions in housing by government are widely acknowledged as one of the ways by which the social aspect of the life of the citizenry can be impacted especially through mass housing otherwise called social housing. This paper aims to examine the various potentials in the housing sector in order to enhance the delivery of more housing to Nigerians. A survey research approach was used in the study. Descriptive analysis was employed to explain the potentials in the housing sector. Housing deficit in Nigeria currently stands at about 17 million units. Efforts to meet and rectify the deficit will need a concerted effort of individuals and government. It requires unleashing the potentials in the housing sector to stimulate growth in the economy, thereby diversifying the economy from the mono to a multi sector economy. Interventions of governments at all levels as well as the involvement of informal sector in the housing sector will have a multiplier effect. It will generate multiple employment opportunities which will in turn stimulate the economy through the circulation of money in the system. The paper noted that interventions in housing sector will stimulate industries in the production of local building materials. Additionally, ailing companies will be revitalized, thereby improving the standard of living of the citizens. The paper concludes that strengthening and repositioning of agencies such as the Federal Mortgage Bank of Nigeria, Real Estate Developers Association of Nigeria, Nigeria Mortgage Refinance Company, will accelerate the release of the potentials in the housing sector and thereby enhance the delivery of affordable houses for Nigerians.

Australian Bank Mortgage Price-Setting Behaviour Pre- and Post-GFC: Does International Funding Cost Matter?

This study is motivated by an ongoing controversy over banks’ interest rate setting conduct in the Australian mortgage market. We examine heterogeneity in the response of variable interest rates on owner-occupied housing loans to the ‘cost of funds’ rates, including the cash rate and the cost of overseas borrowing. The stability of the pass-through mechanism in the post-crisis period is further evaluated in comparison with the pre-crisis epoch. Our results highlight that Australian banks set their mortgage interest rates on funding costs. We also confirm a declining transmission of the cash rate after the GFC consistent with previous studies. Importantly, the close alignment of mortgage rates and international funding cost exists before and after the crisis. Banks partially transmit changes in the cost of offshore funding to their home-loan rates in both short and long term. Short-term pass-through coefficients of the offshore funding cost are heterogeneous, while the long-term traverses are fairly homogeneous. The fuller sizes of these long-term coefficients in the post-crisis subsample signify that Australian banks’ mortgage price-setting practices have been relatively stable after the crisis.

MORTGAGE FINANCING AND HOUSING DEVELOPMENT IN NIGERIA

This study examined mortgage financing and housing development in Nigeria. The main focus of this research was to ascertain the impact of mortgage loan in housing development in Nigeria. To achieve this objective, data were extracted from CBN statistical bulletin and National Bureau of Statistics from 1990 to 2014. Three hypotheses were formulated and tested using econometric models such as Augmented Dickey-Fuller unit root test, the co-integration tests revealed the existence of a long-run relationship among the variables. The Error Correction Model established causal links and dynamic interactions between variables by granger causality test. The result of the findings showed a significant relationship between mortgage financing and housing development in Nigeria. Variables such as mortgage loan and interest rate had positive and significant impact on housing development while cost of building had a negative effect on housing development in Nigeria. Further findings revealed that mortgage bank deposit had positive effect on mortgage investment while inflation had a negative effect on mortgage investment. The study recommended that mortgage institution in Nigeria should develop strategies to mobilize more deposits and explore new sources of fund such as funds from the capital market via housing bonds, savings and loans from co-operative societies. Government should create an enabling environment for private housing sector in housing development in Nigeria by providing infrastructure and enhancing soundness and competitiveness of mortgage institutions in Nigeria.

Mortgage Matrix and Bank Lending; an Evaluation of Mortgage Consent

The act of bank lending has fast become a globally acceptable transaction as it has facilitated several investment schemes with the availability of financial support. However, this has not been without several hitches as to the consent requirement, especially in Nigeria, which must be given by the Governor to facilitate such a transaction. This article examined the impact of mortgage consent, as a security for bank lending, towards guaranteeing that a loan obtained by a mortgagor will be repaid, and in the event that the mortgagor fails to repay, the mortgagee is entitle to recoup his mortgage loan from the security. The article revealed that the doctrine of mortgage consent is paramount in the provisions of Land Use Act, and failure to comply with such provision will lead to the invalidity of any mortgage transaction. It is the proposition of the writer that the court should interpret the provisions of Land Use Act in a way as not to constitute a ridicule to the judicial process, and to encourage economic investment be providing a smooth opportunity for banks to recoup their loans when a mortgagor fails to repay a loan. This article established that mortgage consent is the only guarantee or assurance needed to back up a security or collateral given to the mortgagee and to subsequently facilitate bank lending.

Did Pre-Crisis Mortgage Lending Limit Post-Crisis Corporate Lending? Evidence from UK Bank Balance Sheets

Was the bank credit crunch following the collapse of Lehman Brothers in September 2008 in many economies due to a loan supply collapse or to a decrease in loan demand? This paper investigates the effects of UK banks’ pre-crises exposure to residential property markets on their post-crisis business lending to explore the existence of a negative post-crisis loan supply shock. We isolate the loan supply effect from a loan demand effect by using a unique quasi-experimental setting and a rich, tailor-made micro-level data set on bank lending volumes, bank balance sheets and mortgage loan characteristics. Controlling for a range of bank-specific factors, we find that banks with larger shares of residential mortgages in total loans in 2008 Q2 reduced their lending to business more after 2008 Q3. Post-crisis lending to business is also sensitive to the riskiness of banks’ mortgage portfolios. Banks having more mortgages to borrowers with impaired credit history, or more mortgages to the self-employed, or mortgages with higher loan to value ratios prior to the crisis reduced their lending to non-financial businesses more.

Rozwój rynku listów zastawnych w Polsce w kontekście nowych zmian regulacyjnych

Covered bonds are securities which purpose of the issue is to be the refinancing of mortgage loans granting by banks. In Poland, covered bonds are still undeveloped, although the legislation in this area has existed since 1997. The article draws attention to the problem of a small development of covered bonds in Poland and the chances of their development in the context of the amended Act on Covered Bonds and Mortgage Banks and the newly introduced into the Polish legal order of the EU directive CRD IV and CRR regulation (called CRD IV/CRR package). In the article it is also described the way of functioning of covered bonds, mortgage banks and mortgage loan.

INSTRUMENTY FINANSOWE NOTOWANE NA RYNKU ‘CATALYST’ – WYBRANE ZAGADNIENIA PRAWNE

The Financial Instruments Listed on the Catalyst Bond Market: Selected Legal Aspects Summary The Catalyst Bond Market, which was launched on 30 September 2009, comprises four trading platforms which operate on the transaction platforms of the Warsaw Stock Exchange and BondSpot. Two of them can be classified as multilateral trading facilities (MTF) (in the meaning of art. 3 point 2 of the Trading in Financial Instruments Act of 29 July 2005) and the other two are an off-exchange regulated market (in the meaning of art 15 paragraph 1 point 2 of the Trading in Financial Instruments Act of 29 July 2005). Although the name of this market may suggest otherwise, bonds are not the only subject of the market transactions on the Catalyst Bond Market. This simplification may be due to social communication and marketing requirements. Besides bonds issued by companies (corporate bonds) and co-operative banks (co-operative bonds), other kinds of debt securities are listed on this market (i.e. issued by mortgage banks, cities, or even the State Treasury). Thus it would be more accurate to call Catalyst an organised debt securities market. Debt securities can be much more attractive for an issuer than equity securities. The issuer may for some reason wish to discourage the buyer of securities from exercising his ownership rights, e.g. by voting at the shareholders’ general meeting. The aim of this article is to describe this kind of organised debt securities market from the legal perspective, taking into consideration the growth of the debt market in the modern economy.

Análisis de riesgo de los deudores hipotecarios en Chile

espanolEn este trabajo caracterizamos los deudores hipotecarios bancarios en Chile y proponemos modelos para analizar el riesgo de credito de este segmento. En particular, estudiamos el comportamiento de pago de los deudores hipotecarios sobre la base de un analisis empirico con informacion de mas de 150.000 nuevos deudores que ingresan a los registros entre los anos 2012-2014. Tanto las caracteristicas especificas del credito hipotecario como monto y plazo contractual, asi como tambien caracteristicas del deudor como su historia crediticia, liquidez y cobertura estan relacionados con la probabilidad de incumplimiento del pago de este tipo de creditos. EnglishIn this paper we characterize the bank mortgage borrowers in Chile and propose models to assess their credit risk. In particular, we study the mortgagors’ payment profile based on an empirical analysis that includes information of more than 150,000 new debtors during the period 2012-2014. Both the specify features of mortgage debt as initial loan amount and maturities, as well as debtor´s characteristics as credit history, illiquidity and coverage ratio are related to the probability of mortgage default.

Monitoring 15 Years of Residential House Price Development in Hungary With the Help of the FHB House Price Index

The working paper presents the development of the housing market in Hungary between 1998 and 2013 through the history of the FHB House Price Index. For computing the FHB House Price Index FHB applied the hedonic method. At its first publication in 2009 the Index was based on actual transaction data of residential real estate collected from the year of 1998 from appr. 1,000,000 residential properties located in appr. 3,200 municipalities. The source of data include the valuation records of FHB Mortgage Bank ,as well as the buying - selling transaction database purchased from NAV, the national tax authority. Since its first publication the Index is updated on a quarterly basis. The average index value in 2000 was 100 later it peaked at 200,7 in the first quarter of 2008. The 15 years of the housing price history were divided into 4 significantly different eras. When analysing the development of the housing market, relations between selected macroeconomic and financial environment indicators , money market and credit market indices and other data of the housing market were also taken into consideration.

Do Banks Differently Set Their Liquidity Ratios Based on Their Network Characteristics?

This paper investigates the impact of interbank network topology on bank liquidity ratios. Whereas more emphasis has been put on liquidity requirements by regulators since the global financial crisis of 2007-2008, how differently shaped interbank networks impact individual bank liquidity behavior remains an open issue. We look at how bank interconnectedness within interbank loan and deposit networks affects their decision to hold more or less liquidity during normal times and distress times and depending on the overall size of the banking sector. Our sample consists of commercial, investment, real estate and mortgage banks established in 28 European countries. We conduct instrumental variable estimations to examine the relationship between interbank network topology and bank liquidity. Our results show that taking into account the way that banks are linked to each other within a network adds value to traditional liquidity models. Our findings have critical implications with regards to the implementation of Basel III liquidity requirements and bank supervision more generally.

PRIVATE LENDERS, BANKS AND MORTGAGE CREDIT IN PERU. EVIDENCE FROM NOTARISED LOANS

ABSTRACTThis article examines the mortgage credit market of Peru during the guano era and analyses the effects of the creation of mortgage banks on the allocation of credit. It shows that mortgage banks served as interregional intermediaries and facilitated access to long-term credit for large estate owners. However, banks did not broaden access to credit. As private lenders, mortgage banks loaned largely to Lima’s merchants and renters and tohacendadosfrom the main coastal valleys.

ACCESS TO MORTGAGE CREDIT AND HOUSING PRICE DYNAMICS

In real estate studies, arguably the most important topic revolves around what actually affect the price of properties. In addition to various macroeconomic factors, the mortgage industry is also believed to play a major role. Nonetheless, despite its profound implications on the banking sector, the property market, and the economy as a whole, there is no consensus as to the relationship between property price and bank mortgage lending. In light of this, this paper aims to investigate the relationship between property price and mortgage lending, along with other macroeconomic variables, in two housing sub-markets of Hong Kong (i.e. the mass housing market and the luxury housing market). The findings illustrate that one-way directional relationships are discovered 1) from mass housing price to mortgage lending; 2) from luxury housing price to mortgage lending; and 3) from mass housing price to luxury housing price. Macroeconomic factors such as GDP, inflation rate, and interest rate are also found to play a major role in influencing the prices of both property markets and the amount of outstanding mortgage loans. Implications based upon these findings are also discussed.

Mitigating the Deadly Embrace in Financial Cycles: Countercyclical Buffers and Loan-to-Value Limits

This paper presents a new version of MAPMOD (Mark II) to study the effectiveness of macroprudential regulations. We extend the original model by explicitly modeling the housing market. We show how household demand for housing, house prices, and bank mortgages are intertwined in what we call a deadly embrace. Without macroprudential policies, this deadly embrace naturally leads to housing boom and bust cycles, which can be very costly for the economy, as shown by the Global Financial Crisis of 2008-09.

Mitigating the Deadly Embrace in Financial Cycles: Countercyclical Buffers and Loan-to-Value Limits

This paper presents a new version of MAPMOD (Mark II) to study the effectiveness of macroprudential regulations. We extend the original model by explicitly modeling the housing market. We show how household demand for housing, house prices, and bank mortgages are intertwined in what we call a deadly embrace. Without macroprudential policies, this deadly embrace naturally leads to housing boom and bust cycles, which can be very costly for the economy, as shown by the Global Financial Crisis of 2008-09.

The Real Consequences of Bank Mortgage Lending Standards

Bank loan underwriting standards are important for credit availability. We match the Federal Reserve’s Senior Loan Officer Opinion Survey with the Home Mortgage Disclosure Act and other datasets over 1990 to 2013. Tightened standards are associated with a 1 percentage point increase in application denial rates – more for banks holding more loans on balance sheet – and a 16 percent decrease in riskier loans. Markets with more exposure to banks tightening standards see mortgage delinquency rates fall by 3 percentage points two years later, and house prices, sales of newly-constructed homes, and residential construction employment decline by 2.5, 9, and 6.5 percent, respectively

ОРГАНІЗАЦІЯ БЕНЧМАРКІНГУ ІПОТЕЧНИХ ОПЕРАЦІЙ В БАНКУ

Досліджено сутність бенчмаркінгу та його організація при здійснення іпотечних операцій в банку. Систематизовано та виокремлено головні класифікаційні ознаки бенчмаркінгу у сфері іпотечних операцій банку. Обґрунтовано, що бенчмаркінг іпотечних операцій слід проводити виходячи з його цілей і завдань і в загальному процес бенчмаркінгового дослідження іпотечних операцій повинен включати сім етапів. Упровадження в організацію економічного аналізу іпотечних операцій банків бенчмаркінгу дозволить вийти на більш високий рівень застосування можливостей іпотеки

The First Limb of Barnes v Addy: A Taxonomy in Tatters

<em>This lecture is given in tribute to Tony Lee. That is only fitting. He is a scholar of international significance and he was personally responsible for much of the core statutory law reform in this State on the subjects of Trusts and Succession Law. Not long after the High Court’s decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (‘Farah’), I asked Professor Lee what he thought about it. He said this: ‘Well, David, after all these years of reading cases I think that cases where plaintiffs don’t win generally don’t decide very much about the law.’ Then he said: ‘But I don’t know, what do you think?’ I was taken aback. At that time, I was full of the joys of the High Court’s decision. First, I thought it had rescued indefeasibility from the scrap heap, particularly so far as bank mortgages were concerned. Secondly, whilst I now agree with Professor Keith Mason’s point of view that the High Court’s treatment of the New South Wales Court of Appeal was intemperate, I was not unhappy then that the High Court had stemmed the tide of those who were intent on bending first limb Barnes v Addy liability into a restitutionary framework.</em>