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The EMRC is a specialized financial institution that provides funds refinancing
to primary mortgage lenders, it will raise funds initially through long-term loans
from institutional investors and equity contributions from the founding investors
its shareholders and from bond markets by becoming a well rated and regular issuer
in the capital markets.
The EMRC is a wholesale institution with a majority ownership by its users. It can
neither take deposits nor lend directly to households. It will initially make refinancing
loans to PMLs (only shareholding banks and RELCs) collateralized by mortgage loans
at full recourse (the PML committing to replace any ineligible or defaulting loans).
The EMRC will provide term finance to PMLs in order to reduce the liquidity risk
(i.e., the risk that the money will be needed before it is available) incurred in
their provision of long term loans for housing. Its narrow and specialized mission
consists in providing loans to qualified PMLs, and issuing bonds and notes in the
capital markets.
The EMRC will be a centralized bond issuer facilitating the development of the Egyptian
bond market through frequent issuance of standardized, high quality debt. The EMRC
will provide PMLs with a cost-effective way to access the capital markets.
The EMRC will be a repository of mortgage market knowledge and expertise setting
appropriate standards for PML documentation and underwriting of mortgages benefiting
all mortgage market participants.
The company is structured as an open club whereby all primary market lenders (PMLs)
are invited to subscribe in its shareholding. Only shareholders will be allowed
to borrow from it. EMRC activities will concentrate on supporting the housing sector
through residential mortgage markets. Activities in the areas of commercial property
and construction finance will be disregarded during the inception phase.
The EMRC is legally empowered to effectively perform a number of key functions:
- refinance credit institutions with an immediate and priority access to their mortgage portfolios (in case of a PML bankruptcy),
- issue a large amount of tax exempted bonds, enjoy all creditors’ rights including foreclosure, and
- be subject to effective financial oversight by the Egyptian Financial Supervisory Authority (EFSA).
As a non-depository and non-banking specialist mortgage institution, the EMRC is
regulated by the Egyptian Financial Supervisory Authority (EFSA) and enjoy the ability to operate at leverage 9:1. The CBE will support the EFSA as an extension of its oversight functions for the banking system and The Egyptian Financial Supervisory Authority (EFSA) will oversee the EMRC’s bond issuance.
The net income of the EMRC will be taxed according to the same treatment accorded
to companies (20%). In addition, listed bonds issued by the EMRC would receive the
same tax treatment as corporate bonds, listed on the stock exchange, with interest
and capital gains exempt from taxation.
The primary source of funding for the EMRC will be notes and bonds sold in the domestic
capital market. EMRC will securitize the assigned financial rights, it will issue
bonds against a pool of assigned/transferred financial rights from primary market
lenders and by that will become a central bond issuer.
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