Secured Transactions Reform and Access to Credit

Secured Transactions Reform and Access to Credit

Elgar Financial Law series

Edited by Frederique Dahan and John Simpson

The chapters presented here provide, for the first time, a comprehensive and cutting-edge view of the subject – from both a legal and economic perspective. They start at the macro level of financial systems, moving towards the behaviours of lenders (commercial banks and micro-lenders), policy options for government and the mechanisms of collateral law reform.

Chapter 8: Mortgages in Transition Economies

John Simpson and Frederique Dahan

Subjects: economics and finance, financial economics and regulation, law - academic, finance and banking law


John Simpson and Frederique Dahan INTRODUCTION In the transition countries of Central and Eastern Europe, South Eastern Europe and Central Asia, access to private home ownership is a relatively recent phenomenon, principally as a result of the privatisation policies of governments moving from a communist to a capitalist system. With a rate of private home ownership now exceeding 80 per cent in a number of transition countries,1 it is evident that there is a huge capital stock which can be mobilised as collateral to secure loans for financing not only property acquisition, but also improvements, business activities or personal consumption. It is also widely seen as one of the keys to fostering economic prosperity, political stability and wider equality.2 In the business sector a significant proportion of the assets of many companies is in the form of real property and can be used as a means of facilitating access to finance. In the early 1990s, the legal problems surrounding ownership of real estate were numerous in transition countries. The lack of reliable cadastral and title registration combined with uncertainty over restitution rights restrained the scope for using real estate as security for credit. Although mortgage over real property was often the most favoured security for credit for all the classic reasons, the security was generally tainted by lack of certainty of the mortgagor’s title and the threat of competing claims to the mortgaged property. The development since then of land registration systems across much of the region and...

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