Adrian Vasilescu: "The homes that borrowers live in will become important collateral"

Using the homes that borrowers live in as collateral for mortgages will be extremely important, Adrian Vasilescu, advisor to the governor of the NBR said yesterday.

He said: "The quality of the collateral will be important. The home that the borrower lives in will be important collateral and will be the first element they will be able to use for real estate loans".

The advisor to the governor of the NBR added that using summer homes as collateral for loans will not be as important.

"People will do everything they can to pay off their debts, when using the home they live in as collateral", he said.

Adrian Vasilescu explained that mortgage collateral will not be easily seized, to prevent people from losing their homes.

"It will more difficult of foreclosing on real estate collateral, because it is a fundamental part of the individual household", he said.

Furthermore, the advisor of the Governor of NBR said that, according to the Financial Stability Report published by the NBR, buildings are the most important collateral.

Adrian Vasilescu added that the new Civil Code includes numerous banking provisions, and the new regulation proposed by the NBR concerning lending, was drafted to accommodate the new Civil Code. These regulations place a lot of emphasis on collateral and also introduce the real estate investment category, which will be based on real estate mortgage collateral.

He said: "This collateral will have a colossal importance. It will be used for the drafting of the regulations intended to support those who want to build or repair a home".

Adrian Vasilescu warned that, paradoxically, the risk of non-payment is the greatest when it comes to small loans.

"In Romania we can speak of the small loan disease. (...) Small loans have a 40% default rate, whereas big loans only have a default rate of 4%", he said.

Small loans are those of less than 20,000 lei or of up to 5,000 Euros.