ISLAMABAD: The Finance Ministry eyes in secured and consistent provision of long term funding to primary mortgage market with the establishment of Mortgage Refinance Company (MRC).
Mortgage Refinance is a refinanced loan with lower interest rate which combined with the new lower payments of longer term remaining on loan. A borrower is required to calculate the total cost of a new loan compared to the existing loan.
“Finance Ministry has allocated an amount of Rs. 1 billion for establishment of Mortgage Refinance Company in the Budget of current fiscal year 2014-15 with a view that company will serve as a secured source of long-term funding at attractive rates while ensuring sound lending habits amongst Primary Mortgage Lenders (PMLs)” a well placed source at Finance Ministry told this scribe here on Saturday.
Finance Ministry has kept numerous benefits and objectives in view while taking decision on the establishment of Mortgage Refinance Company to improve the affordability of mortgages and extend the number of potential borrowers and result in the expansion of the primary mortgage market and thus home ownership in the country.
Incorporation process of Mortgage Refinance Company with Securities and Exchange Commission of Pakistan (SECP) will be completed in near future. Moreover, a legal firm has been hired to finalise the draft of Memorandum and Articles of Associations of the Company.
Deputy Governor State Bank of Pakistan Saeed Ahmad will be its first chairman till the new board is formed and selects its chairman under due process. The company’s head office will be located in Karachi.
The equity will be contributed by the government of Pakistan, National Bank of Pakistan, Askari Bank, Habib Bank Limited, United Bank Limited, Bank Alfalah, House Building Finance Corporation Limited, Bank Al- Habib, Allied Bank Limited, and contributions are expected from International Finance Corporation and Asian Development Bank
In September last year, the State Bank of Pakistan (SBP) under the guidelines of Finance Ministry initiated process for the establishment of said company. The SBP has been making efforts to ensure effective implementation of these recommendations, and as a result.
Although laws for land registration and transfer, the process is cumbersome at times, because of number of institutions involved. The reforms in the property titling and land administrative procedures, including improvements of the legal provisions, standardization of processes, and computerization of all relevant revenue records will help enhance financing from the formal sector, said the report.
According to Finance Ministry, majority of builders and developers are working as sole proprietorships or in partnerships with limited capital and informal corporate governance structures, which gives rise to illegal construction, unreliable building permits, and legally unprotected advance purchase of units.
Moreover, the unstructured and unsupervised nature of business of real estate brokers/agencies, which could serve as natural arrangers for provision of financial services, is also a significant constraint to provision of housing and housing finance. Consequently, it is difficult for financial institutions to verify the character, capital and capacity of potential clients.
The new company must provide all forms of technical advice, consultancy support and assistance to banks and financial institutions in conventional and Islamic housing finance and products along with developing and promoting international best practices for housing finance in the country
