Land and mortgage lending in Russia: interaction, securitization and refinancing schemes

The lack of their own funds in many branches of Russia's growing economy requires a search for different ways of attracting investment resources. A reliable collateral all over the world is real estate, primarily, land. Analysis of the development of mortgage lending practices and structures of attracted funds of commercial banks in the Russian Federation showed that deposits attracted for more than 3 years is less than 6 % of the total volume of attracted funds. Moreover, the features of the Russian banking system create an opportunity for investors to withdraw their money. Therefore, the primary source of banks' financing land mortgages is their own capital, which results in limited volumes of mortgage crediting. In this connection, the effective functioning of the credit institution refinancing system becomes more important. The term "refinancing" can be interpreted in two ways. From the point of view of the creditor, it is a creditor's compensation of costs of mortgage loan delivery by issuing mortgage-backed securities or by reselling receivables to mortgage agents. From the point of view of the borrower, refinancing is paying off the borrower's debt in one or more mortgage loans at the expense of obtaining a new mortgage loan. Refinancing characterizes the mortgage-market feature: the distribution into the primary and secondary markets. In the primary market, mortgage loans are secured by land. Funds can be attracted to the market of individual mortgage loans through commercial banks in the secondary mortgage market, where buying and selling of the rights to claims on already issued mortgage loans occurs. Here a mortgage becomes a bond paper, which can make it to a third party. For this purpose, mortgage has a security status, i.e. traded on the secondary market are special securities giving the right to receive interest income on loans. This is a transition of the loan from one lender to another institution. Mortgage loan servicing functions can belong either to the primary lender or transfer to the new creditor. The process of refinancing of mortgages is inseparably connected with the process of securitization. The following definition most accurately reflects the essence of the process: "Securitiza-tion is the process of issuing securities provided for by the pools of mortgage loans." The chief feature of securitization is that claims on the loan are not sold, but instead securities are issued that represent claims on the principal and interest payments as well as on mortgaged property. In the conditions of financial globalization, refinancing of mortgage loans helps to renew the credit resources by issuing mortgage-backed securities, by investing funnel loan sale proceeds in new mortgage loans, by mortgage loan option and resource balance with the aim of increasing the volume and profitability of credit investments, redistirbution of risk between the parties.

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