Smiles on bankers' faces

Good news for mortgage banks. At the end of May, a draft of the Mortgage Bank and Bonds Act was approved by the Senate. The Act is currently awaiting the President's signature. Two years after the establishment of the first mortgage bank in Poland, it looks like this sector is finally developing.

Not only does the Act extend the scope of mortgage banks, but it also gives to them new opportunities. Will borrowers benefit from all is? Bank directors certainly seem happy with the Act so far.

Gabriel Główka, President of Śląski Bank Hipoteczny:
,My opinion of the Act is very positive. It increases the options of mortgage banks as far as the sale of banking products is concerned, and, without violating the security of banks and mortgage bonds issued by them, it enables operation in new sectors."
,As soon as the Act comes into effect (which will most probably be after the summer holidays - editor's note), mortgage banks will be able to grant loans to local districts, mainly for financing infrastructure, including infrastructure related to housing construction. Loans granted to local districts will form the basis for the issue of public bonds, attractive because of their price and repayment terms of up to 15 years. Universal banks grant such loans for no more than 8-10 years."
,Moreover, the new Act dispenses with some of its restrictive regulations. This means that loans can now be arranged for up to 100 percent of the value of a property, making mortgage banks more competitive."

Jacek Furga, President of HypoVereinsbank:
,The Act enables us to keep accounts on credited investments, thanks to which cash flow is more transparent. This is extremely important in the case of residential developers, who we have so far avoided crediting. Now we will be able to offer them complex services, such as keeping trust accounts where developer's customers can pay in money, or granting customers mortgages for purchasing flats. By controlling the funds paid into an account and withdrawn from it, we will be sure that the developer is actually building the flats and not buying a site for its new investment, as has frequently been the case until now."
,The Act adopted by the Sejm allows banks to compete for customers. Moreover, since mortgage banks will be able to finance districts, we will be able to issue mortgage bonds faster, more efficiently and more often. I hope these bonds will become popular securities."
The Act, in its current form, should have been adopted in 1997 (when the first Mortgage Bank and Bonds Act was adopted), but back then mortgage banks were a new phenomenon on the Polish market. Institutions such as the National Bank of Poland or the Banking Supervisory Commission did not want to expose investors in mortgage bonds to risk, so they worked out strict conditions of operation for mortgage banks. During the first two years of their operation, however, mortgage banks have proved through the quality of their service amongst others that they are safe and useful. Despite certain freedoms, the new Act is still more restrictive for the banks than in other countries such as Germany.
The draft Act was prepared jointly by the 3 existing mortgage banks (HypoVereinsbank, Rheinhyp-BRE Bank Hipoteczny and Śląski Bank Hipoteczny) together with the Banking Supervisory Commission, the Ministry of Finance and the Mortgage Foundation.