In central and eastern Europe and central Asia, access to private home ownership is a relatively recent phenomenon, principally as a result of the privatization policies of governments moving from a communist to a capitalist system. It is widely seen as one of the keys to fostering economic prosperity, political stability and wider equality. With the rate of private home ownership now exceeding 80 percent in many transition countries, it is evident that there is a huge capital stock that can be mobilized as collateral to secure loans for financing not only property acquisition but also improvements, business activities or personal consumption. In the business sector, a significant proportion of the assets of many companies is in the form of real property and can be used as a means of facilitating access to finance. Mortgage financing has always been a favorite form of financing for banks. The primary credit risk is supported by solid security that does not move and which normally maintains its value. The incentive to avoid default is high, especially with the residential property because a borrower will make every effort to avoid losing his home. But mortgage markets are not only growing. They are changing fast with more and more new mortgage products. On the legal front, the challenge facing transition countries is not just to ensure a suitable legal environment for established forms of mortgages but also to have in place the rules and institutions that are sufficiently adapted to the latest techniques of the market, and further will be able to adapt to the new techniques of tomorrow. And those techniques concern both the product that is offered to the customer and the way it is financed.

Currently, mortgage activity is booming. In particular, the use of mortgage financing in residential housing markets is growing fast and is seen as having a high potential for future growth. The techniques for financing the providers of mortgage loans have also changed with an increasing interest in using the mortgage loans themselves as collateral, whether for secured borrowing (with the mortgage lender issuing covered bonds (CBs)), by divesting the mortgage loan portfolio through securitization (with the acquirer issuing mortgage-backed securities (MBS)). The European Bank for Reconstruction and Development (EBRD) published a list of minimum standards for mortgage loans in May 2004, which are adopted by all financial institutions receiving mortgage credit lines from the EBRD.