Mortgage Bank Refinancing : Proposals for Implementation of the European Covered Bond Directive in Hungary

Nagy, Gyula László and Incze, Zsombor and Landgraf, Erik (2020) Mortgage Bank Refinancing : Proposals for Implementation of the European Covered Bond Directive in Hungary. FINANCIAL AND ECONOMIC REVIEW, 19 (3). pp. 102-129. ISSN 2415-9271 (print); 2415-928X (online)

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Abstract

In this study, we summarise the operational models of mortgage banks and the new EU mortgage bond regulations. We analyse the most important challenges facing refinancing mortgage banks in the current framework. These are basically grouped into three subjects: (1) for historical reasons, the characteristics of refinancing loans do not support more efficient portfolio refinancing; (2) the refinancing loan guarantee scheme does not ensure fulfilment of the conditions laid down in other legislation in case of statutory portfolio assignment; (3) overcollateralisation in the current purely refinancing model cannot be achieved from ordinary collateral. On this basis, we propose the development of an alternative regulation for “refinancing mortgage banks”, while fully maintaining the current operation; with this alternative regulation, a revised collateral system would help to solve the problems and develop a more efficient mortgage loan structure.

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