Parliament expected to pass mortgage bill
Posted by meb at February 15th, 2007
A long-anticipated mortgage bill has finally been put on the agenda of the Turkish Parliament, following the conclusion of discussions in the Parliamentary Planning and Budget Commission, and is expected to be enacted within the week.The mortgage bill, which will facilitate the purchase of houses through competitive loan options, has entered its final stage. The mortgage system is expected to go into effect in the second half of this year, bringing with it a number of advantages. The Banking Insurance Transaction Tax (BSMV) has been abolished as it would increase interest rates. With the mortgage law, loan rates for housing will decrease by 0.5 percent.
For example, this will ensure a decrease of nearly YTL 2,000 in interest in a home loan of YTL 50,000 with a 10-year term and a monthly interest rate of 1.08 percent, making the total interest payable YTL 39,762. Following enactment of the mortgage law, the average term, which is currently 10 years, will be extended, and longer terms will be beneficial to consumers, experts remarked. Terms and conditions of the existing home loans will be adapted to the mortgage system. The BSMV will be removed from the remaining sums owing on existing home loans, decreasing interest by 0.5 percent and reducing installment amounts.
The home loans provided by banks by the end of 2005 reportedly amounted to YTL 12.4 billion. According to banking experts, more than 300,000 consumers have availed themselves of loans to date. The 200,000 borrowers who are currently paying interest will be the beneficiaries of the 0.5 percent decrease. The mortgage system is also expected to play a key role in the elimination of unemployment in Turkey by boosting investment, especially in the construction sector, which in turn will be required to hire additional laborer. Customers who are currently using home loans but who do not want to be included in the mortgage system will request exclusion from the system by filing petitions. The mortgage bill envisages the establishment of a mortgage finance institution and allows local and international investors to take advantage it.
“No discrimination will be made between local and international customers. The mortgage finance institution can issue securities that can be purchased by anybody,” said Kenan Işık, Şener’s adviser.
Parliament is expected to start discussions on the long-awaited mortgage bill later this week, though the government is reluctant to add the exemption of mortgage interest payments from the tax base. “By any means, we don’t want any kind of tax redemption of interest payments. Our intention is clearly this,” said Turkey’s Finance Minister Kemal Unakıtan, responding to the questions of reporters after his speech at the 4th International Congress on Public and Local Administration.
Upon a question about whether Halkbank’s privatization will be delayed or cancelled altogether, Unakıtan emphasized the government was decisive on the privatization and would not retreat its intention from selling the public bank: “If God permits us, we will continue (with the privatization) from now on, as we did in the past.” Citing the advice of government consultants, Unakıtan said that first selling a part of the institution and then selling the rest is the best way to proceed with the privatization. He underlined the government’s decision to sell 25 percent of the bank through an IPO and then selling the remaining 75 percent through other means doesn’t mean a change in mind, but a change in method. “Halk Bankası is a big bite to chew. All of the applicants, except one, have to increase their capital to be able to annex Halkbank,” said Unakıtan. Unakıtan also touched on the fate of 45 percent of public shares in Türk Telekom. “Certainly, these shares will one day be privatized by either opening them to public or other ways. Because the studies on it are still ongoing, I am unable to give you any specific schedule,” said Unakıtan.
How will the system work?
* A person will purchase a house from a contractor.
* A real estate appreciation expert will determine the value of the house.
* Insurance will be mandatory for mortgage loans. Within the mortgage system, no house will be sold or purchased without insurance.
* At least one-fourth of the price of the house will be paid in advance.
* The remaining part of the price of the house will be financed through the mortgage loans secured from banks. The customers who are currently using housing loans may request inclusion in the system by filing a petition.
* The bank will arrange a mortgage deed to be arranged for the housing loans provided.
* A mortgage finance institution will be established. The mortgage deeds issued by banks may be transferred to the mortgage finance institution.
* The banks will transfer these deeds to the mortgage finance institution in consideration for a commission.
* The mortgage finance institution will turn mortgage bonds to securities. Based on mortgage deeds, asset-backed securities will be issued.
* The mortgage investment organizations may purchase receivable-backed securities and issue them in the stock exchange. In this case, local or international investors may purchase these securities.
* An insurance system will be in place to eliminate repayment risks. In case of default for two consecutive installments, the house can be sold.
source: Today’s Zaman
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