The State Duma passed amendments to the law “On mortgages” in the first reading
On 23 April 2010, at a plenary meeting of the State Duma, amendments to the law “On mortgages (real-estate mortgage)” were passed in the first reading. For the first time in the practice of Russian legislation, the concept “Dutch auction” (descending-price auction) was introduced into the federal law.
In the version of the law passed by deputies, the law “On mortgages (real-estate mortgage)” contains the possibility of selling pledged property at auctions using the descending-price method, the so-called “Dutch auctions”. Deputies also propose to introduce a simplified method for registering deals on pledged property: in realization of mortgages outside of court, the record of mortgage at the federal registration service is cancelled on the basis of an application of the pledge holder over the course of three days.
372 deputies voted to pass the amendments.
Andrei Stepanenko, general director of the Auction House of the Russian Federation:
The initiative to develop amendments that were passed today by State Duma deputies in the first reading comes from the Russian Sberbank and the Auction House of the Russian Federation, and they were supported by the Committee of the State Duma itself. For the first time in the practice of Russian legislation, the concept of the “Dutch auction” (descending-price auction) has been introduced into the federal law. At these auctions, it is possible to sell private property that was pledged by mortgage agreements. The new possibilities will make it easier to realize problem assets – both pledge holders (banks) and borrowers are interested in this.
Information. A Dutch auction is an auction where the price of the object may not only increase, but also decrease. Initially, auction participants are given the chance to acquire the lot at the starting price, which is equal to the market price of the object. If there are several interested parties, the price will increase. If there is no one willing to pay the starting price, the auctioneer proposes to reduce it by one step. The reduction continues until at least one auction participant agrees to the proposed price. The price cannot drop below the cut-off point that is written down in the auction documentation. If several parties are interested in the object after the price drops, the price of the object begins to increase once more, until there is only one person interested in acquiring the object. In any case, the winner of the auction is the one who offers the maximum price.