In: Root » Legal and finance » Loans and mortgages
Hungary has adopted a number of progressive new laws to facilitate recovery of housing loans. As a result of changes in the legal framework, Hungary has been at the forefront of countries in Eastern and Central Europe in establishing the requisite legal tools for securing real estate loans and assuring expeditious access to collateral in the event of default in a mortgage loan. For example: • the Rent and Sale Law of Housing in 1993 exempts private landlords from providing alternative housing to an evicted tenant; • amendments to the Civil Code sections on mortgages and liens adopted in 1996, and 1994 laws on court procedures permit foreclosure and repossession without the lengthy judicial proceedings required under previous law; • the Civil Code now permits the lender to sell the property itself without court intervention if the parties so agreed in the loan documents; • Civil Code amendments provide that for residential real estate, the parties may agree that the borrower must deliver the property empty of occupants in the event of foreclosure; • the 1997 Law on Mortgage Banks and Mortgage Bonds changed the priority for payment to a mortgage lender from the proceeds of a foreclosure sale from last place to fourth place, ahead of taxes, social security and other public debt. This extensive array of regulation has not been tested in concrete instances. Moreover, these legal powers of support did not have substantial effect in actual property lending and recovery practices used by Hungarian banks. According to the available data, it seems that a reduction in its delinquencies by OTP was not possible from 1993 to 1997. However, the most favoured lending after subsidization is the mortgage loans. This might be due to its low interest rate that fluctuates between 3% and 6%. The government spent up to HUF 25.7 billion of saving subsidies by 2004. The Contractual Savings Scheme for Housing (CSSH) in Europe was followed by HSB and has been implemented in some of the Central and East European countries including Hungary. The Hungarian HSB has offered low rates on loans from which the customer ultimately benefits in the form of a low interest loan (6%). However, buying a house in Hungary involves a large amount of savings anyway, so it is unlikely that this will mean much additional saving. Owing to the ongoing decline in inflation, the rate of return to saving under the contract was set higher than that available on alternatives. As a result, almost 300,000 contracts were concluded at the 1997 subsidy rates. Since the government did not cut the subsidy back in line with its official forecast of declining interest rates in 1998, the system has become recognized as a generally attractive vehicle for savings. Mortgage loans have been expanding rapidly since the introduction of the Mortgage Bond Act of June 1997, which encouraged the usage of mortgage bonds. By the middle of 2003, the residential mortgage loans outstanding amount and the volume of mortgage bonds reached EUR 4.2 billion and EUR 1.9 billion respectively.
|
|||||||||||||
Disclaimer
1) E-articles is not responsible for the information contained by this article as well for any and all copyright infringements by authors and writers. E-articles is a free information resource. If you suspect this article for any copyright infringement, please read the terms of service and contact us or use the "Report this article" button on this page to investigate the problem.
2) E-articles is not responsible for inaccuracies, falsehoods, or any other types of misinformation this article may contain and will not be liable for any loss or damage suffered by a user through the user's reliance on the information gained here. |
|||||||||||||
