Mortgage Execution Looks Vague
12 September, 2013
Mortgage Execution Looks Vague

A bill offering a six-month moratorium on enforcement of expired mortgages which was suspended till this September is pending a final decision whether it will be submitted for further parliamentary procedures or be called off. The bill was initiated in middle of this summer to alleviate the sprawling eviction problem but split opinions between the legislative and execution authorities after it passed the first hearing and was suspended until September at its second hearing by Georgia’s PM Bidzina Ivanishvili who

called the bill absurd.

However, things did not get clearer with the coming of September and the Parliament gathered again. Georgian Journal could not reach initiators of the bill whereas Davit Onoprishvili, Head of Parliamentary Finance and Budget Committee, explained that the bill is still under discussion. Zurab Gvasalia, President of the Association of Banks of Georgia, informed GJ that they have reached a certain consensus with the Parliament, which implies that banks will be exempted from the presumed ban and only private mortgage lenders would face it.
“These private lenders are beyond regulation [of the central bank] because they are not registered as financial institutions and receive huge profits,” Gvasalia said in his interview to GJ. However, Onoprishvili did neither confirm nor reject the idea of exempting banks from the six-month ban on mortgage execution until the debates are through. Economic analysts believe the ban is extremely unreasonable as far as it cannot solve the situation of unpaid loans, for sooner or later the borrowers have to clear the liabilities. It will only nurture false hopes that loans might be forgiven and thus undermine the already weak payment culture of Georgian clientele.
“There has been a certain infantile approach toward debt clearance in Georgia and we should not encourage this kind of initiatives,” economic analyst Soso Archvadze said. “Public should learn to respect agreements and contracts they conclude.” Yet, he believes if the bill goes ahead it should cover banks and private lenders equally as game rules must be fair for all players. “And non-profile activity of banks should be curbed at the same time; they already are under green house conditions and income taken through the seized property of unpaid mortgages must not be the main profit source for the banks (as it is at the moment),” Archuadze pointed out. Lia Eliava, financial market analyst, believes the bill is better to be called off as it cannot balance the situation and may affect depositors.
“Banks may go bankrupt if they are deprived of collaterals of bad mortgages that means depositors will lose their savings whereas it cannot solve the problem of insolvent borrowers for they have to pay sooner or later,” Eliava said.
Besides, such liberal initiations may undermine the weak loan-clearance culture of Georgian clientele. No exemption can alleviate the situation of banks as far as private lenders take loans. The banks will suffer at any rate if private lenders fail to pay.
While the situation is uncertain, the borrowers in question who face eviction as a result of unpaid mortgages organized rallies in front of Ministry of Economy in Tbilisi and at the premises of the Parliament in Kutaisi.


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