Home Loans for allHousing loans for all
Approximately 60% of Ulaanbaatar's population - or about 700,000 inhabitants - live in large conventional tented rural areas, and the construction of adequate new housing and the affordability of credit will be a major concern. Banks are expecting that about 24,000 new loans would be needed under the program, or about the same amount as maturing loans in mid-2012, but a wide range of option limits on interest rate loans were still under discussion at the end of 2012.
5 billion ($459,6 million), according to Mongolian Equity Corporation (MIK). "Most of the mortgagors is in the capitol, with a gossip in Darkhan City and Erdenet City," said James France, the chief finance officer of MIK, OBG. In 2008, the Bank of Mongolia (BoM) issued the Regulation on Mortgages when it began to publish a three-month house index with the National Statistical Office in order to harmonize the lending procedure.
Although this has made it easier for business bankers to enter the market, the conditions for loans remain different. According to the BoM, the maturity of corporate loans ranges from three to ten years, with mean maturity of 9.5 years in mid-2011, while interest in mid-2012 ranged between 15% and 18% in the mongolian tropics and around 8% in dollar exchange rate.
According to the Trade and Development Banka (TDB), in the first half of 2012 11% of loans were secured by real estate loans. Overall, the value of loans in circulation has increased compared to MNT164. 4 billion ($523.2 million) by July 2012, or an increase in indebtedness per mortgagee of MNT10. Growing housing loans were not offset by non-performing credit rates, which remained below 1% and rose from 0.44% in April 2012 to 0.66% in the following five month period, according to MIK.
As a result of the shortage of cash since the end of 2011, advance deposits have risen to 30% of the value of the home after many financial institutions needed 10% at the beginning of 2011. Well, with interest on loans at 15. by 49% in July 2012 after a decline of 17. The MORTGAGE Corporation: As there were practically no loans in place in 2003, the Asian Development Bank (ADB) started a residential construction financing scheme to help developing the industry.
MIK was founded in 2006 with 10 business partners in order to establish a derivative fund for asset-backed security (ABS), which will provide a fund base of long-term assets. In 2009, MIK provided KfW Bankengruppe with a line of credit of 4.8 million ($ 6.34 million) and also entered into an arrangement with USAID's Development credit Authority to provide half of the value of up to $ 4 million of Pfandbriefe outstanding.
The inclusion of mortgage-backed securities in the 2008 Federal Reserve Security Schedule and the adoption of an asset-backed securities (ABS) law by Congress in 2010 should help more Mongolians to own their own homes. The purchase of mortgage loans from the accounts of 10 bankers, the overwhelming majority of these loans were then resold to the bankers who write the mortgage at all.
Instead of reselling securitized loans to third-party borrowers, MIK has not distributed the exposure efficiently to a larger number of borrowers by issuing mortgage-backed bonds. However, at the end of 2012 MIK was in talks with the European Reconstruction and Growth Institute (EBRD), the Netherlands Economic Cooperation and Development Corporation (OECD) and business banking institutions to stimulate financing and look for alternatives to securitising loans, such as issuing an off-shore loan to fund further loan purchases, an options it had examined with the Netherlands ING financial institution.
STATE CONVENTION state convention: the state banking operation, founded in November 2009 as a bridging body for ailing banking institutions, has become another viable options for directly issuing mortgage loans at the private sector as well. Whilst business lenders believe that the institute should be privatized for a period of about 50 to 60 million dollars, this seemed to be off the agenda by the end of 2012.
Financing by the Development Bank of Mongolia (DBM), which borrowed USD 20 million through a November 2011 privately placed note and USD 580 million through a Euro note in March 2012, led to some increase in the State Bank's letter of credit during the year. Whereas most of the DBM resources at the end of the 2012 building seasons had stayed with the Federal Reserve, in the second half of 2012 the major DBM provided the State Banks with around USD 30 million in semi-annual loans.
The Capital Bank had also agreed to take part in the programme in August 2012, although it had not received any financing from the German Development Bank (DBM) until the end of 2012. It was the goal of the state creditor to set longer-term mortgage rates of 15 to 20 years with an upper limit of 6% interest. The Ministry of Finance unexpectedly granted the State bank a loan guaranty to take out a loan from DDBM, even though DDBM's debts were already covered by a State guaranty, while the brief six-month reimbursement deadline for DDBM loans gave rise to doubts about a shortfall in maturities.
Meanwhile, BoM has expressed concern about the State Bank's mix of deposits and government-backed lending. Also in October 2012, the state creditor heralded that it would not write any new loans until the longer-term funding framework of the program was clarified. "It is our expectation that we will use part of the revenue from our forthcoming off-shore loan to buy residential property from corporate lenders, either through MIK or another institution", O.
Chuluunbat, the Vice Secretary of Economic Development, said OBG. Skeptical of the State Bank's more aggresive approach to private client business and invoking past instances of government bank abuse, bankiers have remained focused on standard loans to wealthier customers. Assuming US Dollar loan financing of the order of 8-9% in 2012, bank-issuers anticipate only a decline in the number of corporate loans to 12-15% in the medium run.
"There is a great deal of growth to the mortgage bank business, but its performance depends not only on the bank, but also on the state's involvement and policy of supporting the segment," D. Bat-Ochir, XacBank chief executive, said to OBG. "Whilst bankers like TDB see the possibility for sub-prime loans to treble to MNT2trn ($1.4 billion) by 2015, the state should be covering the interest differential between interest payments on loans and their 6% ceiling, the means to finance the program and who will be paying the grant remains open.
It appears that the cost potentials of the scheme are quite high, as Mongolia, through a mix of institutional arrangements, is likely to generate large sums of external funding.