The Law of Ukraine
On Mortgage Bonds
Date of Entry into Force:
January 24, 2006
The Law determines legal grounds for issue and circulation of mortgage bonds, requirements to their mortgage reimbursement, as well as the peculiarities of state regulation and supervision in this field.
Mortgage bonds are the bonds fulfillment of issuer’s obligations under which is guaranteed by mortgage reimbursement. Mortgage bonds are nominal securities. Mortgage bond certifies payment of money by its owner and confirms issuer’s obligation to compensate him nominal value of this bond and money income. In case of failure to perform issuer’s obligations under mortgage bond it gives its owner the right to satisfy his claim at the expense of mortgage reimbursement.
According to the Law the following types of mortgage bonds may be issued:
- straight mortgage bonds;
- structured mortgage bonds.
The issuer of straight mortgage bonds is a mortgage creditor that bears responsibility for the fulfillment of obligations under such mortgage bonds by mortgage reimbursement and all other property on which according to the legislation levy may be imposed.
The issuer of structured mortgage bonds is a specialized mortgage institution that bears responsibility for the fulfillment of obligations under such mortgage bonds only by mortgage reimbursement.
The state registration of issue and prospectus of mortgage bonds emission is performed by the State commission on securities and stock market. The mortgage bonds are issued in a non-documentary form.
The Law sets the list of data which the prospectus of straight mortgage bonds emission shall contain and separately the prospectus of structured mortgage bonds emission.
The interest under mortgage bonds may be fixed or floating. If a floating interest is applied the emission prospectus shall contain criteria or formula for its calculation.
The issuer is entitled to redeem mortgage bonds pre-term only provided that it is envisaged in the emission prospectus.
For the moment of registration of mortgage bonds issue the mortgage reimbursement is formed exclusively out of mortgage assets. During the term of mortgage bonds circulation the mortgage reimbursement may also include other assets. Mortgage and other assets that are included into the mortgage reimbursement of mortgage bonds are considered pledged which guarantees fulfillment of issuer-pledger’s obligations before the owner of mortgage bonds – pledgee. Pledge of mortgage reimbursement does not require conclusion of pledge agreement and arises from the moment of state registration of mortgage bonds issue. The owners of mortgage bonds – pledgee enjoy priority regarding mortgage reimbursement with respect to other persons’ rights or claims.
Mortgage reimbursement is separated from the issuer’s other property. Mortgage reimbursement is not included into the issuer’s liquidation bulk. Mortgage reimbursement and monetary incomes from it cannot be the subject of tax pledge until full fulfillment of obligations under the respective issue of mortgage bonds. Levy may be imposed on mortgage reimbursement only upon claim of mortgage bonds owners. Other persons, including creditors of issuer, manager or owner of mortgage bonds are not entitled to demand mortgage reimbursement, impose levy or encumbrance mortgage reimbursement in other way until full fulfillment of obligation under the respective issue of mortgage bonds that is guaranteed by the respective mortgage reimbursement.
A separate mortgage reimbursement shall be formed for each issue of straight mortgage bonds. The mortgage reimbursement of straight mortgage bonds shall not include mortgage assets, debtors’ liabilities under which are guaranteed by the mortgage of unfinished construction objects or the property rights mortgage. The Law also sets other peculiarities of forming mortgage reimbursement of straight mortgage bonds. Simultaneously the Law sets the peculiarities of fulfillment of obligations under the straight mortgage bonds.
The Law also sets the peculiarities of forming mortgage reimbursement of structured mortgage bonds and peculiarities of fulfillment of obligations under the structured mortgage bonds.
The manager of mortgage reimbursement of the structured mortgage bonds may be bank or non-banking financial institution that received the license for mortgage reimbursement management from the State Commission on Securities and Stock Market.
The functions of state regulation, supervision and control in the field of issue and circulation of mortgage bonds and activity of financial institutions are performed:
- regarding issue and circulation of mortgage bonds – by the State Commission on Securities and Stock Market;
- regarding activity of banks – by the National Bank of Ukraine;
- regarding activity of non-banking financial institutions – by the specially authorized body of executive power in the field of markets of financial services regulation.