Mortgage Securities as Funding Source for Mortgage Loans in the European Union

Main Article Content

Saša Stefanović
Hasan Hanić
Dejan Erić

Abstract

In this paper we analyzed mortgage securities as a source of financing credit activities in the mortgage market of the European Union. Although they basically provide the same products – mortgages, credit institutions differ in the way of financing their activities. While some institutions finance their activities by deposits, others issue mortgage securities (mortgage bonds and mortgage-backed securities) through the capital market. This analysis based on relevant literature and appropriate statistical data showed that the importance of mortgage securities vary from country to country. At the level of the European Union its overall importance is very high, since more than ¼ of all credit activities on the mortgage market are financed by these instruments. Moreover, it has been proved that mortgage bonds and mortgage backed securities in many ways satisfy various needs of creditors. The selection of the instrument depends on the creditor's and investor's requirements and it is determined by historical, legal and regulatory framework, as well as with the structure of the mortgage market in which the creditor operated. In many countries, mortgage bonds and mortgage backed securities are accepted as alternative and complementary source of finance, which results in the coexistence of these two types of mortgage securities. Historical data and recent trends suggest that, in the future, both of these instruments (especially mortgage bonds) will represent a significant source of financing credit activities in the mortgage market.

Article Details

Section
Articles

References

Association for Financial Markets in Europe (AFME). 2014.Securitisation Data Report, Fourth Quarter 2013.
Blommestein, Hans J. et al. 2011.“Outlook for the Securitization Market”. OECD Financial Market Trends, 2011(1).
Directive 88/220/EEC (available at:http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31988L0220&from=EN)
European Covered Bond Council (ECBC). 2014. ECBC European Covered Bond Fact Book 2014.
European Mortgage Federation (EMF). 2014. Hypostat 2014.
Hardt, Judith, andDavid Manning. 2000. European mortgage markets: structure, funding and future development, EMF and OECD - June 2000.
Hardt, Judith, and Jung-Duk Lichtenberger. 2001. "The economic and financial importance of mortgage bonds in Europe." Housing Finance International 15(4): 19-29.
Stefanović, Saša. 2009. Hipotekarna tržišta i instrumenti. Beograd: Zadužbina Andrejević.
Stefanović, Saša. 2006. „Sekjuritizacija aktive: koncept, ekspanzija i nove tendencije kontekstu globalizacije finansijskih tržišta“, Ekonomske teme br. 1-2/2006, 417-426
Suarez, Jose L. 2009. European Real Estate Markets. Palgrave Macmillan.
Suarez, Jose L., and Amparo Vassallo. 2004. “European Mortgage Market:an Overview 1992-2003”. University of Navarra - IESE Business School Working Paper 562.