Hdfc, Housing Finance Bigwigs Scuttle Nhb

Housing finance companies led by HDFC have scuttled a National Housing Bank move to impose mortgage security for extension of refinance facilities.

The apex bank has gone back on its earlier stand and has agreed to stress on mortgages only for housing finance companies which indulge in similar arrangements for obtaining refinance from banks. At a meeting with the managing directors of housing finance companies last week, NHB chairman P P Vora assured that companies currently borrowing on the basis of a negative lien will not be required to mortgage assets for availing of refinance.

The NHB decision comes as a major victory for housing finance companies which were aggrieved by the recent proposal as they generally borrow on negative lien basis, which is effectively an undertaking from the housing finance company not to mortgage an earmarked asset to a third party. Smaller firms availing of refinance from banks by mortgaging assets will, however, have to follow a similar practice for obtaining refinance facilities from the apex housing bank.

 

NHB will soon issue a guideline on the new mortgage norms which is also likely to dwell on the net worth of the housing finance outfits. Although over 40 firms are registered with NHB, only a handful -- HDFC, LIC Housing, GIC Housing, SBI Home Finance, HUDCO and Canfina Homes, to name a few, avail of loans on negative lien basis.

As reported in Business Standard, HDFC had strongly resented the proposal and threatened to stop taking refinance from NHB, if mortgage of asset is made mandatory. Most of the large players have said any move to impose mortgage security on refinance will create asset-liability matches, besides violating their agreements with third parties.

Housing finance companies often mortgage assets of the borrowing companies for a period equivalent to the term of the loan, and remortgages of the same with NHB, was likely to create matching problems.

Refinances through mortgage of assets will require housing finance companies to create a charge on their assets for availing of NHB refinances.On the apex bank's proposal that mortgages given to housing finance companies be remortgaged with NHB, a managing director of a leading housing finance firm said such a scheme will complicate accounting methods.