NHB pushes for securitisation
Plans mortgage guarantee company with AIG, IFC.
The National Housing Bank (NHB) is drawing a roadmap including prudential norms to buy home loans from banks and housing finance companies (HFC) and securitise the portfolio at a later date. The scheme is aimed at providing liquidity and help release capital locked up in the home loan portfolio.
The roadmap is expected to be ready in two-three months. The apex body for housing finance aims to start operation by March next year.
Representative of banks and HFC’s today held discussions with in Delhi including conforming standards. “Securitisation will help apex housing finance body to provide assistance beyond the exposure limit,” NHB executive director R V Verma said.
Under the plan, NHB will carry out due-diligence of the portfolio it intends to purchase. After buying the portfolio, NHB will hold this in its book for a maximum of one year. Later, it will securitise this portfolio by issuing pass through certificates (PTCs) to investors such as insurance companies and mutual funds, said Verma.
Initially, NHB will focus on buying out home loans upto Rs 30 lakh. This is aimed at improving lendings in the Tier II and Tier III cities, Verma said. Home loans upto Rs 30 lakh carry a risk weight of 50 per cent and considered as part of priority sector lending.
He said the securitisation of home loans will not compete with refinance activity nor constrain other funding operations.
The home loan parcels which comes up for securitisation will be much more strong since it will go through intense scrutiny twice and gets credit enhancement . First, when NHB acquires portfolio and second, when rating agencies scan it assigns ratings to certificates.
Meanwhile, NHB is also working on plans for setting up a mortgage guarantee company. It is expected to be a joint venture involving global investors such as American Insurance Group and International Finance Corporation the World Bank’s private sector lending arm.
The proposed entity will buyout mortgages from lenders and resell them to investors. The mortgage company would also provide guarantee to investors.