|
The availability of advances to each member is based on the financial condition of the member, the adequacy of collateral pledged to the EMRC to secure such advances, and the member’s compliance with the prevailing laws and regulations.
A member’s access to advances is contingent upon:
- Shareholding in the EMRC. Members also include Primary Mortgage Lenders (PML's) which have indicated their commitment to participate in EMRC's capital provided they present a commitment to participate as shareholders in the coming fiscal year and to inject the funds required upon receipt of a letter from the Board of EMRC indicating the exact amount to be injected;
- Demonstration and maintenance of creditworthiness and the required commitment to residential housing finance as required by applicable laws and executive regulations;
- Execution of an appropriate Advances Agreement;
- Adequate collateral as per Qualified Collateral covering at least 120% of requested borrowing; and
- Full recourse on the member in case of any default on the underlying mortgage loans.
Prior to accepting a commitment for an advance or disbursing an advance, credit and collateral analyses will be performed to ensure compliance with EFSA's regulations and advances guidelines, and to verify the borrowing institution's financial integrity.
Borrowing capacity, as determined by the member's ability to repay principal and interest, will be reviewed as outlined below. At a minimum, the following will be reviewed:
- capital adequacy at least 10% for banks and mortgage finance companies ;
- availability of qualified collateral;
- trends in operating ratios;
- nonperforming-asset ratios;
- adequacy of reserves;
All extensions of credit to shareholders by EMRC must be secured by sufficient qualified
collateral at all times. In accordance with applicable regulations, EMRC is not
permitted to lend to members on an unsecured basis. In addition to qualified collateral
EMRC will have full legal recourse to members. A detailed listing of the types of
collateral that EMRC is able to accept is included in
Appendix A
of the Policy. The amount of collateral pledged establishes a ceiling on the member's
borrowing capacity with EMRC. EMRC's senior management, with the approval of the
Board, may grant exceptions to the provisions of this policy when necessary or in
EMRC's interest. Extensions of credit will be:
- In compliance with EFSA's regulations
and advances guidelines; and
- In accordance with the Mortgage Finance
Law and relevant executive regulations.
- In conformance with EMRC's credit and
collateral requirements.
- Properties must be valued by appraisers
approved by EFSA.
Total borrowings obtained from EMRC should not exceed the value of a member's qualified
collateral. Qualified collateral is computed according to
Appendix A
of this policy.
- For the purposes of this computation, "advances" comprises
all extensions of credit and credit services.
- A member that does not comply with any of its regulatory
capital requirements may be subject to maturity and/or other borrowing restrictions.
Certain restrictions may also apply to members that are affiliated with a holding
company or other financial institution that is not in compliance with its regulatory
capital requirements.
- EMRC may curtail the availability of advances without
prior notice when EMRC determines that market or other conditions warrant such restrictions.
EMRC may also change the terms of this policy at any time. In determining the availability
of advances and lines of credit, EMRC will consider a number of factors, including
EMRC's practical funding constraints, statutory and regulatory restrictions, and
its responsibility to preserve its financial integrity and long-term viability as
a prudent and profitable institution.
- EMRC may determine not to extend new credit to a member
that is insolvent on a tangible capital basis. In its sole discretion, EMRC may
renew maturing advances to such a member. EMRC may require the repayment of these
maturing advances in an expeditious manner.
For EMRC's purposes, tangible capital includes capital defined in accordance with
generally accepted accounting principles less goodwill and other intangible assets.
In order to protect the quality of its portfolio and shareholders' investment in
EMRC, advances of funds, and other extensions of credit or credit services (collectively,
"advances") are provided only on a secured basis against qualified collateral and
with full recourse to the members.
EMRC's Agreement for Advances, Collateral Pledge, and Security Agreement establishes
a blanket lien to secure all advances made to the member by EMRC.
Members are required to maintain at all times an amount of qualified collateral
that satisfies the collateral-maintenance level established by EMRC. (See
Appendix A
and
Appendix B.)
All borrowing members must submit to EMRC, on at least an annual basis, an audit
opinion that confirms the member is maintaining sufficient amounts of qualified
collateral in accordance with this policy.
The opinion may be provided by the member's external auditor provided that the collateral
verification process is conducted in accordance with collateral review procedures
specified and approved by EMRC.
Qualified Collateral is limited to collateral that is listed in
Appendix A.
All Members are required to execute a Representations and Warranties document with
respect to any mortgage loans pledged as collateral to EMRC. This document requires
the Member to certify to knowledge of the foregoing policies, and compliance with
those policies. In the event that any loan in a collateral pool is (i) found not
to comply in all material respects with applicable laws, or (ii) not accepted as
Qualified Collateral as defined herein, the Member agrees to immediately remove
said loan and replace it with Qualified Collateral of equivalent value. The Member
agrees to indemnify and hold EMRC harmless for any and all claims of any kind relating
to the pledged loans.
EMRC will take such steps as it deems necessary to protect its security position
as to outstanding advances. These steps may include, but are not limited to, requiring
the delivery of additional collateral, whether or not such additional collateral
would be eligible to originate an advance.
Unless otherwise specified by EMRC to a member in writing, the collateral-maintenance
level for a member is the aggregate amount of qualified collateral that has a value
at least equal to 120% of the aggregate amount of the member's outstanding advances
from EMRC.
In computing a member's collateral-maintenance level, the types of property and
the valuations that EMRC will generally accept are contained in
Appendix A.
Because of the potential contingent liability of affiliated institutions within
a holding company structure, EMRC will closely review the financial condition of
a member's parent holding company and/or affiliated institutions.
Members:
- Are required to segregate, label as "Collateral for
the Egyptian Mortgage Refinance Company," and provide a listing to EMRC identifying
specific qualified collateral sufficient to satisfy the collateral-maintenance level.
Such listing must be updated at least semi-annually, or more often as EMRC may require.
- May not use, commingle, encumber, or dispose of collateral
that has been segregated, labeled, and listed without the express written consent
of EMRC.
- Agree to permit EMRC personnel to make periodic on-site
verification of collateral pledged. An audit will be carried covering a sample of
the portfolio representing at least 5 percent of the mortgage loans assigned and
will be selected randomly. Auditors must review all conditions set by company, including
those on eligibility, accuracy, and adherence to the reported information on defective
and prepaid loans. Any anomaly is subject to replacement. In case of problems, EMRC
could require a second, more intensive auditing. The member may be required to provide
additional compensatory collateral on the whole portfolio of this member if the
more intensive audit reveals anomalies.
- Provide EMRC with full legal recourse .
Members, which in EMRC's sole discretion, show a worsening of their financial status,
are subject to certain restrictions. Any restrictions determined to apply to these
members will be communicated by letter and through discussion with the member’s
senior management, and will remain in effect until the member is notified of a change
in status. EMRC may limit the terms for new advances and renewals of advances.
If the value of a member's collateral declines below 120% of advances because of
loan amortization, or loan payoffs, EMRC may, at its discretion, require the member
to substitute qualified collateral that is acceptable to EMRC to offset the decline
in the value of the collateral held by EMRC.
EMRC may require, in its sole discretion, further steps by a member in order to
perfect EMRC's security interest in collateral provided by the member.
All fees and costs incurred by EMRC in connection with its collateral requirements
will be charged to the member as per attached contract.
Back to Lending Guidelines
|