Mortgage market to get boost
The Russia’s government is planning to boost the charter capital of the country’s mortgage agency by more than $2 Billion. It wants the agency to use the cash to buy credits from banks and stimulate mortgage lending.
Russian banks are expected to grant 23% fewer mortgages this year than they did in 2007. Some banks have toughened borrowing conditions, and others have stopped giving mortgages entirely, as the supply of cheap money has virtually dried up.
Banks refinance mortgages by selling bonds to the Mortgage Lending Agency, and in an attempt to stimulate more mortgages the government has allocated $2.3 Billion to the agency’s charter capital. Deputy Head, Andrey Semenyuk, says the money will buy more mortgages.
“Now the agency checks every mortgage individually when buying from banks. We want to start buying mortgages packed in mortgage-backed bonds or other securities guaranteed by credit. We expect that it will help to increase the volumes of mortgages bought by the agency.”
With almost no demand for Russian mortgage bonds abroad, the agency hopes to sell them to the central bank and other banks at home. Experts say Russia’s mortgage-back securities are solid as very few borrowers default in the country. Besides this, the Central bank is considering accepting the agency’s securities as a guarantee for credits. Andrey Borodin, President of the Bank of Moscow, says this could guarantee the success of the move.
“The risks of such securities are predictable. Besides if the central bank includes the papers in its Lombard’s list I’m sure the issue of such securities will be a success.”
So far the agency refinances only one in ten mortgages issued in Russia. With the help of the state’s money it plans to spend an additional $800 million on refinancing by the end of the year.