MORTGAGE IN HOUSING FINANCE IN SLOVENIA

Warsaw, December 2002

MORTGAGE IN HOUSING FINANCE IN SLOVENIA

Matej MoreMinistry of Finance


CONTENTS

Where Slovenia currently is ?! Situation and problems

Development of secondary mortgage market

! Goals! Dilemmas! Alternative solutions


Situation in Slovenia – lending side

Weak role of mortgage finance in housing finance and other non-corporate lending

Mortgage as collateral is more widely used in corporate finance


Housing Loans by Collateral

Source: Surveys of MoF

13,7%

18,6%

58,9% 57,4%

27,5%24,0%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

mortgage loan insurance other

31.12.2000

31.12.2001


Mortgage Banking Loans in Housing Loans

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

1998 1999 2000 2001

18%14 %

21%

33%

Source: Surveys of MOF


Problems in Mortgage Banking

Land Land registerregister! Lenghty procedures to register real estate! Integrity of the land register! Land register is not up to date

Bad protection of mortgage lenderBad protection of mortgage lender!! Long lasting foreclosure proceduresLong lasting foreclosure procedures! Eviction procedures! Problematic foreclosure procedures on not

registered real estate


Situation in Slovenia – funding side

Deposit financing of housing loansof housing loans

No No secondary mortgage secondary mortgage marketmarket


Development of the Secondary Mortgage Market

Banks need new long term funding instrumentsBanks need to transfer risks (liquidity risk, interest risk, credit risk) to capitalmarketInstitutional investors also need such instruments


Capital Market Funding -- Choice of the Model

Needs of banksNeeds of banks!! High credit High credit profile profile of the fundingof the funding

instrument == instrument == low cost of refinancinglow cost of refinancing

!! Cost efficient instruments Cost efficient instruments –– low cost low cost of financial intermediationof financial intermediation

Needs of investorsNeeds of investors!! IssuancesIssuances ((volumevolume, , continuitycontinuity))!! Liquidity Liquidity on on the secondary marketsthe secondary markets


Choice of the Instruments (MB:MBS)

Not exclusive choiceAdvantages of MB for Slovenia! Simpler legal and tax infrastructure! Less developed financial markets

! Costs! Foreign investors


Institutional OptionsInstitutional Options

Universal banking Universal banking modelmodel –– Mortgage Mortgage bond actbond act

Specialized banking Specialized banking modelmodel ––MMortgageortgage bank bank actact

Cooperative centralized issuersCooperative centralized issuers


Specialized Mortgage Bank

TrendTrendAdvantagesAdvantages regardingregarding ratingrating, , costcostefficiencyefficiency, …, …Disadvantages regarding economy of Disadvantages regarding economy of scale and initial investmentscale and initial investmentSolution Solution !! OutsourcingOutsourcing ? ? !! Subsidiary with limited business functionsSubsidiary with limited business functions


Universal Bank

Simple solutionSimple solution!! Integration of mortgage banking Integration of mortgage banking in in existing structure existing structure !! No No need need to to new credit institutionsnew credit institutions!! No No initial investmentinitial investment, no , no additional staffadditional staff

Could the rating of bond be better then Could the rating of bond be better then the rating of the the rating of the bank ?bank ?Small issuances with low liquiditySmall issuances with low liquidityIs it Is it possible possible to to aquire advantages of aquire advantages of mortgage bond mortgage bond in in the framework of the the framework of the universal banking universal banking model ?model ?


Cooperative Centralized Issuers

Ideal Ideal solution from the point of view of solution from the point of view of market market size constraintssize constraints

Homogenity of the issuances and liquidityHomogenity of the issuances and liquidity

Problems with transfer of mortgage loansProblems with transfer of mortgage loans(legal, (legal, costscosts, , standardizationstandardization ofof thethe productsproducts))

Interest of banksInterest of banks: : cooperation or competitioncooperation or competition? ?


Public Support Measures

Change of legislation regardingChange of legislation regardinginvestmentsinvestments ofof institutionalinstitutional investors investors

!! Capital requirements Capital requirements ((banksbanks))

!! Dispersion of investments Dispersion of investments ((insuranceinsurance, , fundsfunds))

Tax exemptionsTax exemptions ??

GuaranteesGuarantees ??


MORTGAGE IN HOUSING FINANCE IN SLOVENIA

Matej More


Nizko tveganje investitorjev = nizek donos

Tri ravni zaščite investitorjev!! Prednostni položaj investitorjevPrednostni položaj investitorjev v primeru

stečaja izdajatelja! Kvalitetno kritno premoženjekritno premoženje za obveznosti

do investitorjev in nadzor skrbnikanadzor skrbnika

!! Specializiranost izdajateljaSpecializiranost izdajatelja (omejitev opravljanja drugih tveganih poslov)

Likvidnost in stalni tok izdaj obveznic


Nizki stroški posredništva I.

Obvladovanje tveganj ! hipotekarni kredit = nizko kreditno tveganje! transferiranje obrestnega tveganja na kapitalski trg

! načelo skladnosti med kritnim premoženjem in izdanimi obveznicami (ročnost, obrestna mera, drugo) zmanjšuje tveganje za banko in omogo ča nižjo maržo

! predčasno odplačilo kredita ?


Nizki stroški posredništva II.

Načelo specializacije! specializiranost znanj, manj ljudi! preprosta bilanca! enostavnejši nadzor

Ekonomija obsega

večja učinkovitost


Kritno premoženje -Kvaliteta : obseg (ekonomija obsega) I.

Prvovrstna hipotekaNepremičnine, ki so hitro prodajljive

! stanovanjske nepremi čnine in stavbna zemljiš ča

! komercijalne nepremi čnine! kmetijska zemljiš ča ?! proizvodne zmogljivosti ?! komunalna posojila


Kritno premoženje -Kvaliteta : obseg (ekonomija obsega) II.

LTVPosojilna vrednost Vrednotenje nepremičninTeritorijalni princip - samo Slovenija ali tudi tujinaSkupni ali ločeni “pooli” kritnega premoženja


Ekonomija obsega -Projekcija stanovanjskega kreditiranja

(v mlrd SIT)

9%

44%

72%

39%

74%

80%

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

2001 2012 2022

Stanovanjskihipotekarni krediti Stanovanjski krediti

Stanovanjska gradnja


Ekonomija obsega -Projekcija potencijala za izdajo hipotekarnih

in komunalnih obveznic (v mlrd SIT)

0

50

100

150

200

250

300

2001 2012 2022

komunalne obveznice ?

hipotekarne obveznice

KOMERCIJALNE

Č

KOMUNALNA POSOJILA

STANOVANJSKA POSOJILA

?


Obrestne mere (krediti in viri financiranja)v letu 2002

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

0 5 10 15

št. let

(v %

)

tolarski depoziti državne obv. v SIT bančne obv. v SIT Expon. (krediti)


Obrestne mere

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

1 2 3 4 5 6 7 8 9 10 11

št. let

(v %

)

tolarski depoziti depoziti z valutno klavzulo državne obv. v SIT

državne obv. v € bančne obv. v SIT bančne obv. v €


Stroški zavarovanja posojila

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

8,0%

9,0%

10,0%

0 2 4 6 8 10 12 14

kredit v mio SIT

stro

ški v

% k

redi

ta

stroški zavarovanja s hipotekostroški zavarovanja pri zavarovalnici


Mnenje bank - Anketa MF (2002)

Samo dve banki menita, da je potrebno iskati rešitve v smeri specializirane banke ali izdajateljske enote12 bank meni, da je potrebno ostati v okviru univerzalnega bančništva


Development of Mortgage Banking in Slovenia

Improve access of nonImprove access of non––corporate corporate sector sector to to banking loansbanking loans!! Long Long term financeterm finance!! Low interest ratesLow interest rates!! Development of capital Development of capital marketmarket

Investment opportunity for Investment opportunity for institutional investorsinstitutional investors ((insuranceinsurance coco., ., pensionpension fundsfunds, … ), … )


Banking Business Plans in the Area ofMortgage Crediting

Surveys of MOF! Increase offer of mortgage

products (more competitiveproducts, longer maturity, more attention, ...) 7 banks

!Conditional increase of offer –improved legislation 7 banks

! In present extent 3 banks


Typical Mortgage Loan in Slovenia

Slovenia

10 years

Grat Britain

GermanyandDanmark

Spain France

Maturity of the loan

25 years

25-30 years

10-15 years

15 years


Loan to Value

!8 banks up to 50%!5 banks up to 40%!2 banks up to 33%!Varies depending on location,

customer, …


Interes Rates for Housing Loans

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

0 5 10 15 20

odplačilna doba

obre

stna

mer

a (v

%)

komitenti

komitenti - z zastavo nepremičnine

nekomitenti

nekomitenti-z zastavo nepremičnine

Expon. (komitenti - z zastavo nepremičnine)

5 10


Problems in Mortgage Banking II.

Evaluation of real estate(questionable market value)

Favourable loan insurance with Favourable loan insurance with insurance companiesinsurance companies

No No legislation regarding funding legislation regarding funding instruments instruments ((mortgage bondmortgage bond, …), …)

Documents

MORTGAGE IN HOUSING FINANCE IN SLOVENIA