From the television screens during news broadcasts, the intricate phrase “mortgage auction” often sounds. The result of his activity in the last century, as a rule, was the predatory appropriation of the largest enterprises owned by the state. However, the essence of such an event, as well as the process of forming a certain oligarchic stratum in society as a result of it, remains unclear for most ordinary people.
Historical background of the appearance of collateral auctions
In 1995, the state owned a huge number of blocks of shares of the largest enterprises, but such property did not bring the money necessary for the budget. Along with this, large banks that have earned their capital in servicing the mentioned enterprises have found it profitable to purchase their own shares, but at the lowest cost. For this, a collateral auction was created.
Founder of the idea of collateral auctions in Russia
The very idea of such events belongs to the American Boris Yordan, although Vladimir Potanin is considered their author in Russia. The fact is that it was he who in 1995 at the next meeting of the Cabinet of Ministers proposed this scheme of lending to the state on the security of his property. The Russian government in the person of Deputy Prime Ministers Anatoly Chubais and Oleg Soskovtsev supported this idea.
The essence of secured auctions
The scheme for such auctions is extremely simple. The state, in dire need of replenishment of the budget, held auctions. Winning in this case provided the winner with the conclusion of a loan agreement with the state. Of course, only the largest financial organizations of that time had the necessary amounts to participate in the auction. In order to secure a loan, the state, in turn, pledged securities to the bank as collateral - the assets of large enterprises that are federal property.
Features of government collateral transactions
It is believed that in case of non-repayment of credit by the state, the creditor bank became the owner of the pledged enterprise. However, it is not. According to the classical model of collateral relations, the creditor could only get some satisfaction according to the value of the pledged securities, but not privatize them. The sale of collateral was possible only in the event of insolvency held by the pledge holder of public tenders, for which purpose special auctions of collateral property of banks were arranged.
The auction procedure was regulated by presidential decree. It was originally planned that the state would pay off the debt on loans taken and buy back the shares of privatized enterprises pledged to banks. However, in reality everything happened differently, and it was no longer a question of a temporary pledge, but privatization under the guise of a pledge.
In addition, the mortgage auction itself, as well as the sale of mortgage property of banks, in most cases had nothing to do with the free market, since their winners were determined even before the auctions and tenders.
Real Estate Mortgage Auction
Today, for the sale of housing, bidding is extremely rare. As a rule, for the sale of real estate of persons who have failed to pay the loan or mortgage, similar collateral auctions are arranged. Venues where events are held, and other information about them are posted on the official website of the government.
Collateral sale is unprofitable for the owner of the property, since the main task of the bank is to receive funds issued under the loan agreement as soon as possible.Therefore, banks, as a rule, are not interested in ensuring that the collateral value of the property suits its owner. The former owner receives only the difference between the cost of the apartment sold and the loan amount minus all kinds of fines, penalties and interest.
Initial liquidation price the collateral is determined by the court on the basis of an independent expert assessment. It is often below the market by 25-35%.
Sale of collateral vehicles
Auctions collateral property of banks for mortgagees - an event that is disadvantageous in itself. This statement is explained by three facts.
First: the procedure for "alienating" the mortgage car, or, in other words, its confiscation, is carried out in court, so car mortgage auctions are significantly complicated and stretched over a long period of time.
Second: in today's conditions of falling demand in the automotive market, the sale of mortgaged cars at initial cost is an almost impossible task. Especially considering the fact that the vehicles were already in operation. In this case, only the buyer has a profit, since in order to return the funds spent on the loan, the bank significantly reduces the cost of the car.
Third: cars that are pledged by the bank will not get to the auction site themselves, respectively, this requires additional financial costs.
Thus, the only party that benefits from the collateral sale of the car is its buyer. Of course, there are times when a car was sold at a price that also suits its former owner. However, for this, the vehicle must be in perfect condition, which is quite difficult in a modern metropolis.
Going to a collateral car auction, you need to know that having bought such a car, you won’t be able to immediately get it for yourself, because until the loan is repaid, the car will be considered the property of the bank and will be specially registered.
Risks of secured auctions
Mortgage auctions are usually held to sell real estate with a clean history. If the bank agreed to take the apartment as a guarantee of a loan, then there can be no legal claims against it. The only problem that the new owner may have is the previous owner of the mortgage. In the practice of law, there are frequent cases when the trial between the former and the current owner of the mortgaged property lasted for years!
In addition, such opposition often develops into an open conflict, sometimes ending in a physical confrontation. Former owners who have not paid a loan are subject to eviction and often refuse to do so.
That is why collateral auctions are not as popular in Russia as the acquisition of real estate on the secondary housing market. According to official figures, only half of the auction in our country ends with a deal.
Thus, if you decide to buy an apartment or a car at a price lower than the market price, you should consider an option such as collateral auctions. However, before you conclude a deal and pay off the loan of the previous owner, you need to carefully weigh the pros and cons of such an acquisition.
