Stricter Mortgage Reforms for Borrowers’ Sake
28 February, 2013
Stricter Mortgage Reforms for Borrowers’ Sake
Stronger restrictions are supposed to be imposed on mortgage loans disbursement at financial institutions in order to protect borrowers from unreasonable loans. On the other hand, the administration plans to raise awareness of Georgian borrowers through TV ad-shots disclosing in-depth details of mortgage loans and risks related with the loan.
To mitigate the eviction problem of insolvent mortgage-borrowers deprived of living space and accommodation due to double impact of financial crisis and August war in 2008, Georgian government came out
with the initiative to reform the mortgage disbursement system and make mortgage disbursement more difficult. Tea Tsulukiani, Minister of Justice, trumpeted the idea on February 13, 2013.
According to her, the most painful aspect of the Ministry of Justice activity is execution of insolvent borrowers’ eviction process in spite of the fact that the process is legal and inevitable once a family laid its living space as collateral in the mortgage and could not pay it off.
Government decided to raise awareness of Georgian population [that still lacks due skills and knowledge of communication with financial institutions] through TV ad-shots elaborating intricate details of mortgage loan and related potential risks. The advertisement is already shot and scheduled to run on TV channels pretty soon. On the other hand, a governmental working group will work on reforms of mortgage related legislation aimed to impose stronger restrictions on mortgage disbursement at all institutes involved with the mortgage such as banks, credit unions and private creditors as well as notaries. The idea is to make mortgage loans not as easily available as today.
“But the key work is to be done with our citizens who have to “play” with the loans due to utmost poverty,” Tsulukiani stressed.
Paata Sheshelidze, President of New Economic School, finds inacceptable the state interference in the relationship between clients and banks or any other business. As to the advertisement that should raise awareness of population in loans Sheshelidze assess them as a money squander.
“It does not help. People should read contracts properly before they sign. Nobody forces them to go to banks and once they appeal a bank they should read a contract, if they do not then will face a loss and this will be the best lesson elaborating the contract and loan details,” he said.
According to Zurab Gvasalia, Head of Association of Georgian Banks, the problem lays with other credit institutes of limited responsibilities that also disburse mortgages rather than with banks. These private credit institutes and organizations are focused on collaterals when disburse mortgages and give out loans easily without proper analysis while banks implement an in-depth analysis before disbursing the mortgage, he assures. Gvasalia does not attribute the worsened social picture [eviction] with banks as far as based on statistics of 2012 only 1% of mortgage loan portfolio is problematic and the loans were restructured with 1800 personal borrowers.
Ditrich Muller, co-founder of Georgian Investment Group, believes banks are the key culprit in the aggravated picture of unpaid loans as banks pushed their clients in the claws of private credit institutions that impose even higher interest rates than banks.
“Banks did not pay due attention on risk management and used to disburse mortgages easily without due risk evaluation that led risky clients to insolvency. Meantime banks did not give to them more loans and the poor people to save their living space laid in banks mortgages appealed to private crediting institutions that demand higher yields on loans. Ultimately, they became insolvent,” Muller said.
According to Lia Eliava, an economic analyst, the key reason in this mortgage problem is the incompetence of the National Bank of Georgia (NBG) that failed to work out due normative basement to implement strong control over banks and their risk management skills.
“No bank in the EU will disburse a mortgage to a private client if the client backs the loan only by his/her single living space but banks pay no attention to such things here and this is due to improper regulation of the NBG,” Eliava said. “The NBG control must get stronger.”
On the other hand, creation of separate law on mortgages is a must to protect unaware clients as the best world practice shows. The loan disbursement is regulated by civil code in fact but it is too difficult to clients to gather information dissipated in sundry paragraphs of civil code.
“Some people in Georgia hardly distinguish banks from credit unions and private creditors. The latter two are not regulated by NBG and people fall as victims to them in the result,” Eliva said. “Therefore a voluminous law on different sort of loan disbursement and elaborating each detail related with the loan must be created that will prevent conclusion of hazardous loan contracts.”
Print
Other Stories
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
The procedures for exportating Georgian wine to Japan will be simplified
According to the National Wine Agency (the NWA), 4 Georgian laboratories have been added to the list of foreign laboratories registered in Japan, which will significantly simplify Georgian wine import procedures in Japan.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
23.09.2018
24.09.2018
USD
1
USD
2.6216
2.6216
EUR
1
EUR
3.0854
3.0854
GBP
1
GBP
3.4584
3.4584
RUB
100
RUB
3.9340
3.9340
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6216
EUR
1
EUR
3.0854
GBP
1
GBP
3.4584
RUB
100
RUB
3.9340