A Step In The Right Direction In Regard To Mortgage In Egypt

EMRC is a mortgage liquidity facility whose primary purpose is to provide long-term funds to its 24 member firms, which in turn will employ those funds to extend additional loans of up to 20 years to homeowners. Those member firms have established home mortgage units to accommodate the growing demand for housing finance.

The primary objective for a liquidity facility is to provide long-term financing at a cheaper source than what the primary mortgage lenders could do when operating on there own. The cheapest source of capital is through demand deposits, this is when banks and non-banking financial institutions take deposits from customers and pay interest on those deposits. These demand deposit accounts are commonly known as, checking, savings. Other sources of capital are term-deposits and are commonly known as certificates of deposit and money market accounts.

These demand deposits can be withdrawn by the owner at anytime without warning, therefore, despite the cheap source as a revenue vessel for banks to conduct intermediate activities in other operations within the bank, they are unreliable sources for long term capital lending. This short-term capital makes it difficult for banks to lend for long periods, such as what you might find in mortgage financing. This short fall in long-term capital is remedied through mortgage liquidity facilities, such as EMRC.

EMRC will provide the capital necessary for mortgage lenders to conduct intermediary activities between the mortgage customer and the seller.

The means by which MLFs raise this capital is through corporate debt issuance in the primary markets, by issuing bonds with pre-described covenant, conditions and restrictions. This long term maturity debt will be used to lend to member firms at a rate slightly above the cost of issuance. By lending these funds to member firms it will serve to remedy the maturity mismatching that arises between their assets and liabilities. Another purpose this activity will serve is, by providing cheaper and longer term maturities the economical capital should lead to lower interest rates for the mortgage customers which in turn will create the affordability for more customers to seek mortgage loans. This activity is but a first step in the right direction for home buyers seeking mortgages and future credit functions.

A 2006/2007 consensus figures released by the Mortgage Finance Authority shows a real estate sector contribution to GDP of 8.6%, these figures do not separate the residential unit contribution, however, between 1996 and 2006 the number of real estate units in the country has reached 11.5 million for a total of 27.5 million units, of which 60% or 16.5 million are residential properties.

As a result of this growing demand and the consequent shortage in supply, housing prices have soared, thus making home purchases increasingly difficult for the low to middle income families.

Additional figures released earlier in the year shows that with a current population of 75 million, and a 2% annual growth rate there will be a housing unit demand of about 360,000 units per year. The Government of Egypt has begun National Housing Projects such as, "The President Mubarak Housing Program" to combat this shortage.
This NHP is expected to build some 500,000 residential units over the next six years with special focus on the low to middle class families.

In addition to the NHPs', the Government of Egypt has begun a Guarantee and Subsidy Fund. This allows for eligible low income borrowers to receive a subsidy in the form of cash grants of 15% of the value of the property to a maximum of EGP 10,000. One of the eligibility requirements stipulates the monthly mortgage installment combined with other monthly credit obligations can not exceed 25% of the borrowers' disposable monthly income. More specific details for this GSF can be obtained through local banks and mortgage lenders.

Several of the Mortgage Finance Companies have begun working directly with developers to provide payment options while providing homes that meet expectations in terms of living standards.

The Government of Egypt has been working diligently behind the scene to make social housing a priority to its people. The passage of the Mortgage Finance Law 148 in 2001, is geared towards encouraging housing of low and middle-income groups, allows banks to offer subsidized loans for the purchase of houses as well as administrative and commercial units and renovations to existing ones.

In January 2006, the Board of the Central Bank of Egypt approved the rules and regulations for the establishment of the first credit bureau to operate in Egypt.
The Government of Egypt has modified there initial property registration requirements in an effort to encourage home owners to register there existing properties.

Robert Chambers