Mortgage Bank Act (in force until 2005)

Before the uniform Pfandbrief Act (PfandBG) entered into force on July 19, 2005, the issuance and the structuring of Pfandbriefe issued by banks in the form of companies on shares were governed by the Mortgage Bank Act (HBG) (as well as the Public Pfandbrief Act (ÖPG) and the Ship Pfandbrief Act (SchBG)).

Because the PfandBG is largely based on the provisions of the HBG, information on the HBG may be helpful in interpreting the PfandBG.
Wording of the Mortgage Bank Act (HBG)
I. Last version of the Mortgage Bank Act (HBG), as at April 2004:

German English

II. HBG amendment 2004

The 2004 HBG amendment entered into force on April 9, 2004. The main purpose of this amendment was to set forth fundamental and detailed rules with regard to the special assets character of the cover pool and the introduction of a cover pool administrator in the event of a Pfandbrief bank’s insolvency

Version of the amendment published in the Federal Law Gazette of April 8, 2004 >> New version of the HGB (changes versus the 2004 amendment highlighted) >> The following documents provide an overview of the most important changes: HBG amendment 2004 >> Amendment and Modernization of the Mortgage Bank Act (excerpt from the VDH Annual Report 2003) >>

III. HBG amendment 2002

The 4th Financial Market Promotion Act entered into force on July 1, 2002. Many provisions of the HBG were changed as a result.

The following files contain:

Wording of the 4th Financial Market Promotion Act (Federal Law Gazette I, p 2010 ff) >> Artikel die das HBG, ÖPG und das Schiffsbankgesetz betreffenden Artikel 11, 11a, und 12 (Bundesgesetzblatt I, S. 2059 - 2064) >>

The Federal Government‘s draft law with explanatory remarks (BT-Ds 14/8017) and the report of the Bundestag Finance Committee (BT-Ds 14/8601) may be found on the website of the Deutscher Bundestag: www.bundestag.de > "Datenbanken" > "Bundestags-Drucksachen"

The provisions of the HBG that entered into force as from July 1, 2002, are dealt with in the following:

Schematische Darstellung der HBG-Novelle >> Novellierung des Hypothekenbankgesetzes (Auszug aus dem Geschäftsbericht des VDH 2001) >> Textfassung mit Änderungen markiert (Stand: August 2002) >>
Articles on fundamental issues regarding the HBG

You will find a brief account of the history of the Mortgage Bank Act here.

For articles and references concerning the Mortgage Bank Act, please see:

The 10 % Limit. Ensuring the Preferential Right in Case of Insolvency for Creditors of German Pfandbriefe >> Structure of a mortgage bank and the security of the Pfandbrief >> Behrends, Okko-Hendrik / Hoegen, Peter H. (Allen & Overy): Insolvency-remoteness of voluntary over-collateralisation. Frankfurt, 11/2003 >> Goedecke, Wolfgang / Kerl, Volkher / Scholz, Helmut: Die deutschen Hypothekenbanken. Frankfurt 1997 >> Goedecke, Wolfgang / Kerl, Volkher / Scholz, Helmut: German Mortgage Banks. Frankfurt 1998 >> Grieger, Jürgen: Zur Zukunft des Pfandbriefemissionsrechts, Berlin, May 2004 >> Hagen, Louis: Zur Novellierung des Hypothekenbankgesetzes, I&F 16/2003, p 580 f >> Kerl, Volkher: Zur Sicherung des Pfandbriefes - Hypothekenbankgesetz und Aufsicht, DLK 16+17/98, p 518 ff >> Kerl, Volkher: Die Struktur der Hypothekenbanken als Qualitätsmerkmal der Pfandbriefe, DLK 15 + 16/2000, p 510 ff >> Stöcker, Otmar: Realkredit und Pfandbriefsicherheit. Der Beleihungswert im Bankenaufsichtsrecht, Schriftenreihe des VDH, Bd. 18, Frankfurt 2004. >> Stöcker, Otmar: Die HBG-Novelle 2004: Neue Benchmark für insolvenzfeste Pfandbriefe, Die Bank 5/2004, pp 332 - 336. >> Stöcker, Otmar: Ausländische Deckungswerte und Insolvenzvorrecht der Pfandbriefe, I&F 16/2003, p 574 ff >> Stürner/Stadler: Ergänzende Stellungnahme zum Gutachten "Pfandbriefe und Beleihung in Spanien", Freiburg/Konstanz, 12/2003 >> Stürner/Stadler: Pfandbriefe und Beleihung in Spanien. Ein Gutachten im Auftrag des VDH, Bd. 15, Frankfurt 2002 >> Stürner/Schumacher/Bruns: Der deutsche Pfandbrief und englische Deckungswerte. Ein Gutachten im Auftrag des VDH. Schriftenreihe des VDH, Bd. 10, Frankfurt 2000 >> Stürner/Stadler: Deutsche Pfandbriefe und Deckungswerte in den Netherlandsn. Ein Gutachten im Auftrag des VDH. Schriftenreihe des VDH, Bd. 9, Frankfurt 2000 >> Stürner, Rolf: Die Sicherung der Pfandbrief- und Obligationengläubiger vor einer Insolvenz der Hypothekenbank. Geltendes Recht und Reformvorschläge. Schriftenreihe des VDH, Frankfurt 1998 >> Stürner, Rolf: Hypothekenpfandriefe und Beleihung in Frankreich. KTS-Schriften zum Insolvenzrecht, Bd. 4, München 1994 >>
History of the HBG

History of the Mortgage Bank Act

The Pfandbrief is a European financial product par excellence. With its roots in the Greek mortgage and the Italian and Dutch debentures, the milestones of the Pfandbrief’s development lie in the Silesian “Landschaft” and the Crédit Foncier de France .

The roots of the German Pfandbrief system go back to the year 1769, when Frederick the Great issued a “cabinet order” pertaining to the introduction of the Pfandbrief system as a means of easing the nobility’s credit shortage in areas of Prussia which had been ravaged during the Seven Years’ War (1756-1763).

The “Landschaften” were compulsory public-law associations of noble landowners within individual provinces, through which the members could obtain cheap agricultural loans. Besides one Landschaft with its seat in Breslau (today Wrocław) there were seven “provincial Landschaften”, which had their own legal personality and operated in part according to different principles, for instance with regard to the valuation of properties.

These forced members had a right to credit, i.e. a claim against the “Landschaft” to the issuance of a Pfandbrief and its transfer for realization (sale to an investor who provided capital). Initially there was a close relationship between the estate encumbered by mortgage and the respective Pfandbrief (referred to as “Güterpfandbrief”), which was similar to the present-day mortgage deed; it was transferred to the owner to be sold or was sold by the Landschaft.

Thus, under this original Pfandbrief system the loan was not paid out in cash but in the form of Pfandbriefe which the borrower himself could convert into money by selling them (or the Landschaft sold them for him). The high standard of safety of this first form of Pfandbrief lay in the fact that, first, the Pfandbrief creditor acquired a direct claim over the individual estate that served as security for the liabilities of the borrower. Over and above that, all the estates lent against by the Landschaft served jointly as security.

Later, this close relationship between property and Pfandbrief was loosened, and the Pfandbrief became a debt instrument that was issued by the Landschaft itself and was secured by all the mortgages that the Landschaft had created in respect of the individual properties.

This Landschaften system proved so successful that it was adopted outside of Prussia in German states with a similarly large extent of agricultural activity and with dominant, aristocratic large estate owners, for example in Hanover, Mecklenburg and Saxony. Modeled on the Silesian Landschaft, the Kur- und Neumärkische Landschaft was set up in Berlin in 1777, the Pommersche Landschaft in Stettin (1781), and the East Prussian Landschaft in Königsberg (1788). Others followed. This idea was quickly adopted in the Russian Baltic provinces and in Poland as well, and eventually spread to North, Central, South-East and Eastern Europe (Denmark, Sweden, Norway, Finland, the Baltic states, Poland, Romania and Austria).

Inspired by the Landschaften system for predominantly agricultural credit, a similar system was soon developed to finance urban properties.

It took many years until a uniform German Mortgage Bank Act came about. The starting point of the development of this law may be seen in the statutoryl requirements for the Prussian mortgage banks of 1863. These requirements were principles stipulated by the ministries for the awarding of mortgage bank licenses in Prussia. Only mortgage banks that subjected themselves to these legal requirements were to receive the license and the right to issue Pfandbriefe. These legal requirements were improved in 1867 and 1893, resulting in the establishment of a number of new mortgage banks.

The legal requirements of 1893, in turn, served as the basis for the German Mortgage Bank Act (HBG) of July 13, 1899, which entered into force on January 1, 1900.  


Stöcker, Otmar, Die Hypothekenbanken und der Pfandbrief in den mitteleuropäischen Reformländern, Frankfurt am Main 1998 (Schriftenreihe des VDH/vdp, Band 6), pp 2 – 21.

Foundation of the first mortgage banks

The first German mortgage bank operating as a private company was Frankfurter Hypothekenbank, founded in Frankfurt am Main on December 8, 1862, by Senate resolution. Numerous other mortgage banks were established in rapid succession in almost all German states, so that by the beginning of the 1900s, a total of 40 private-sector mortgage banks were in existence. From the outset, the main focus of the mortgage banks’ activities was on property finance, in particular the financing of housing construction and business properties in towns and cities in which industrialization was driving rapid growth.

By end-1897 there existed a total of 40 mortgage banks which together had an aggregate volume of lendings totaling 5.9 billion Marks and bonds outstanding totaling 5.6 billion Marks. Of these, 11 institutions were so-called mixed mortgage banks. At the start of the 20th century the mortgage banks were by far the biggest institutional lenders in the property market, ahead of savings banks, Landschaften, other public-sector land credit banks, and ahead of insurance companies. This was due mainly to the fact that they extended the mortgage loans as cash loans, placing the Pfandbriefe directly with the investors .

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