Central and Eastern European Mortgage Finance
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SEE Conference "Developing Secondary Mortgage Markets in Southeast Europe" (February 2003)

The Urban Institute

Institute for Market Economics (IME)



The Southeast Europe Financial Sector Conference — "Developing Secondary Mortgage Markets in Southeast Europe" — was held in Sofia, Bulgaria on February 4 and 5, 2003. Over 200 persons participated, drawn primarily from the countries of Southeast Europe (SEE)1, but also including participants from the U.S., Europe, and Central and Eastern Europe. Speakers were drawn from SEE, the U.S., U.K., Belgium, Germany, and Poland. The Conference, supported by USAID's Office for Economic Growth, Bureau for Europe and Eurasia, was sponsored by the Urban Institute, Washington, D.C., assisted by the Institute for Market Economics, Sofia, Bulgaria.

The Conference discussed the various models for funding mortgage finance used worldwide and the key issues facing development of effective mortgage markets in transition nations. Mortgage lending is growing rapidly in several countries in Southeast Europe and banks see it as a profitable new growth area. Financial institutions and regulators alike must adopt new policies and procedures to deal with the growth in mortgage lending and the new risks this entails. This is spurring interest in drafting, strengthening or refining related legislation and regulations. It is also opening the door to mortgage-backed debt as a key alternative to government paper in local markets.

Consequently, the Conference sought to help ensure that the laws, policies, and documentation relating to mortgage markets that are established in individual countries in SEE are harmonized with international standards. Adoption of international standards can promote more effective mortgage markets in the region and also assist the integration of these markets into the European and international financial systems. It may also be an appropriate time to work on a regional basis to ensure that the laws and practices for mortgage markets in individual SEE countries are harmonized on a regional basis.

As mortgage lending continues to grow, the need for longer-term funding from local or international capital markets will intensify, thus highlighting the importance of secondary mortgage markets. Finally, the Conference addressed the question of regional approaches to secondary market development and standardization, and, in particular, what role donors and international agencies might play. In sum, the Conference provided a forum, especially for private sector practitioners, but also for government policy makers concerned with mortgage finance, to discuss the practical issues involved in:

  • development of strong primary mortgage markets,
  • the merits of various secondary market funding methodologies,
  • issues surrounding development of mortgage-backed debt, and
  • the standardization requirements for successful market development and for regional and international liaison.

1. Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Macedonia, Slovenia, Yugoslavia (Serbia and Montenegro) and Kosovo.