Clarification on the Regulation Regarding the Limit Conditions for Allocating Mortgage Loans to the Population

The Central Bank of the Republic of Uzbekistan has approved the "Regulation on the Limit Conditions for Allocating Mortgage Loans to the Population" (registered with the Ministry of Justice under No. 3269 on June 30, 2020).

This Regulation was developed in cooperation with specialists from the Asian Development Bank, studying advanced foreign experience, and establishes the general conditions and rules for commercial banks in allocating mortgage loans to the population.

The Regulation defines mortgage loan directions, stages of formalization, analysis of the borrower's repayment capacity, and directions for managing risks associated with the allocation of mortgage loans.

At the same time, the rights and legitimate interests of borrowers, as well as alternative methods for resolving disputes, are reflected in this document.

Based on the Regulation, mortgage loans to the population are allocated by banks under the conditions of profitability, repayability, security, and term for:

• individual housing construction, reconstruction, and repair, observing established construction norms and rules;
• purchase of individual housing or an apartment in a multi-apartment building from the new construction or secondary market;
• exchange of individual housing or a multi-apartment building from the new construction or secondary market for the borrower's existing housing or multi-apartment building;
• refinancing mortgage loans allocated by other banks for the purpose of providing customers with favorable terms.

Furthermore, the Regulation details all stages of mortgage loan formalization, from the bank providing necessary advice to the customer to the closure of the loan.

To ensure the rights and legitimate interests of the borrower, banks are assigned tasks to:

• provide citizens with a free information sheet on the main terms of the mortgage loan;

• explain to customers whether their capabilities are sufficient (or insufficient) to make payments on the mortgage loan;

• inform customers of their right to take the draft contract for review.

Additionally, the Regulation grants the borrower the authority to independently select the insurance organization when insuring the mortgage subject for the benefit of the bank.

At the same time, the processes of reviewing applications for obtaining a mortgage loan and making decisions are detailed.

The situations that banks must take into account in the process of managing bank risks when allocating mortgage loans are fully embodied in this document.

According to the Regulation, banks establish criteria for selecting valuation organizations when assessing the mortgage subject.

Banks are recommended to update the collateral value every three years or when serious changes occur in the real estate market.

According to the Regulation, the term, amount, interest rate, and other terms of the mortgage loan are determined based on an agreement between the bank and its customer, in accordance with the internal credit policy of the commercial bank.

The terms for reviewing documents and making decisions must be open to all.