Mortgage banks aim for 100%

In order to compete better with universal banks, mortgage banks hope soon to be able to issue mortgages of up to 100% of the banking-mortgage value. They also want to broaden their horizons, to include services such as lending money to local authorities. But for these and other changes to take place a new mortgage banking law needs to come into effect.

There are currently 3 mortgage banks in Poland: HypoVereinsbank, Rheinhyp-BRE Bank Hipoteczny and, most recently, Slaski Bank Hipoteczny. The law, they believe, gives them a disadvantage against universal banks. "Both the three mortgage banks and the Banking Supervisory Commission realised the need to introduce changes to the current act of Parliament which governs mortgage banking," says Jacek Furga, President of Hypovereinsbank. "Together with Rheinhyp-BRE we reported our reservations to the commission at the beginning of 2000, suggesting some changes to the law to make us more competitive. We are also working with the Mortgage Loan Foundation (Fundacja na Rzecz Kredytu Hipotecznego) on this."
The Banking Supervisory Commission went to the Minister of Finance with their proposals in August 2000 but this resulted in only a fraction of the changes they were looking for. "The government made only one minor amendment and submitted it to Parliament," says Furga. Now, however, a more comprehensive draft is under proposal. Furga believes the amendments should be in front of Parliament by the beginning of May and hopes it will be voted through as part of the government's pro business legislation.

Up to 100%
"It (the legislation) is very important for us," confirms Beata Latoszek, Director of the Commercial Loans department at Rheinhyp-BRE. "As it stands now we are less competitive than universal banks because we can only loan up to 80% of the mortgage value. But if you apply the bank's appraisal, which lowers the value of the property by 20% in comparison to its market value, we are actually able to finance only 60%." Barbara Latoszek herself believes that most customers are happy with a loan of 85%. "We can't provide that extra 5% so we have to try and enter into a consortium with another bank. But which universal bank wants to be second in the queue behind us?" she asks, referring to the fact that a mortgage bank has priority in claiming money owed. The new law also proposes an increase in the number of mortgage bonds a bank is allowed to issue to investors. Because loans are currently paid from a bank's equity, which is more expensive than bond raised finance says Furga, the new law will make their mortgages cheaper for developers and investors.
Another proposed change in the law is for banks to be allowed to issue loans without the mortgage actually being registered in the mortgage registry. If the amendment is passed application will suffice, although with certain exclusions.

5 banks for the Polish market
Jacek Furga raises one more important issue, that of currency. "The current legislation is based on the German system, which does not account for the possibility to issue loans in different currencies," he says. "This causes problems related to maintaining the regulatory limits for loans granted in various currencies, as well as difficulties in determining the property value in zlotys because of exchange rate fluctuations. A possible solution could be to publish the banking-mortgage value in euros and zloty's at the same time, with re-calculation recommended when considerable and durable changes in the exchange rate occur."
How the position of mortgage banks operating in Poland change once the proposed legislation is adopted is an open question. But what can be expected is that their ranks will be swelled by two more mortgage banks entering the market before the end of the year. Danish bank Nykredit has submitted an application to operate a mortgage bank in Poland, and PKO BP and Bank Gospodarstwa Krajowego would like to jointly open one. These five, says Jacek Furga, will be enough for the Polish market.