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Restoration of Mortgage Loaning By Mortgage Fund of Azerbaijan Baku city - 2009
Restoration of Mortgage Loaning By
Mortgage Fund of Azerbaijan
Baku city - 2009
Years Allocated resources2005 6
2006 20
2007 20
2008 22
2009 14
Total 82
Million AZN
Resources allocated from State budget
Dynamics of loan allocation
Indicators Average
Loan amount 37 750 AZN
Interest rage 6,12 %
Loan period 20 years
Monthly annuity 276 AZN
Area of purchasing DA 68 m2
Value of purchasing DA 51 649 AZN
Age limit for borrower 35 years old
Number of Credits - 1981Anticipatory payment – annual 1% There are not default cases
Average indicators on allocated mortgage loans
Conditions Existence
Maximum amount 50 000
Maximum period 25 years
Maximal interest rate 8%
Initial payment 15%
Correlation of annuity to income 70%
Correlation of loan to mortgage 85%
Insurance Property and live
Last date of loan repayment Age limit of pensionMen- 62 years old
Women -57 years old
Conditions on allocation of mortgage loans
Rules on allocation of mortgage loans through resources of Azerbaijan Mortgage Fund under Central Bank of Azerbaijan Republic
Rules on allocation of social mortgage loans in Azerbaijan Republic
Standard Requirement to allocation of mortgage loans by authorized loan organizations which refinancing by Azerbaijan Mortgage Fund under Central Bank of Azerbaijan Republic
Temporary Rules on refinancing of mortgage loans allocated by authorized loan organization through Azerbaijan Mortgage Fund under Central Bank of Azerbaijan Republic
6
Standard Documents regulating Mortgage loaning
Additions and changes to Standard Requirements
Amendment to Main Agreement
Increasing of Fund’s quotation rate
Reviewing the list on Market participators
Identification of limits on Authorized loan organizations
Restoration of initial refinancing mechanism
Collecting daily information from banks
Restoration of mortgage loaning
• Conditioning of under-writing
• Mortgage object should be only mortgage object
• Obligation of life insurance
• Existence of special division in banks
• Technical corrections
Additions and changes to Standard Requirements
Some requirements regarding borrowers have been conditioned by keeping in force existing conditions, recommendations have been changed to requirements :
1. Considering of borrower’s family expenses and other obligations
Purpose – to increase requirements to borrower’s payment ability
2. Requirement on consideration of borrower’s loan history in underwriting
3. Implementing of initial evaluation and underwriting only by ALOs (definition of mortgage agent is extracted)Payments on salary - 154
Monthly family expenses - 4*84=336 Other obligations - min 30 Obligations on mortgage loan - 386
Salary - 906
Total obligations / Official incomes ≤ 100%
906
100%
• Precising the meaning of near relative (Article 2.12)
• Increasing the list of required documents (marriage certificate, documents related to family members)
• Corrections to Loan and mortgage contracts (mortgage object, life insurance, corrections regarding delivery of amount to seller and etc.)
Technical corrections
Getting the non-recurrent order for non-accept omission from banks
Indisputable omissioning of relevant amount from correspondent account of bank if bank doesn’t buy back rights on mortgage loan
Additions to Main Agreement
Quotation rate Before Existence
Standard Mortgage loans 2% 4%
Social Mortgage loans 1% 1%
Quotation rate
Quotation rate of AMF = 4%
4%Margin
Margins of ALO ≤ 4%
≤ 8%
4% Quotation
Structure of Interest rate
Confirmation the new list of authorized loan organizations Considered factors:
Active participation in loaningExistence of special division and specialized stuff in bankQuality of documentationService to loans Observance of prudential requirements of loan organization
Selection of authorized loan organizations and evaluators, and
approval of Rules on activity assessment and repeated accreditation
Repeated reviewing the list of market participators
1. “National Bank of Azerbaijan” OJSC2. “AtaBank” OJSC3. “Azerrailwaybank” OJSC4. “Azerigasbank” OJSC5. “Standard Bank” CJSC6.“Bank of Republic” OJSC7.“Bank of Eurasia” OJSC 8. “Bank of Azerbaijan” OJSC9.“Ganjabank” OJSC10.“Capital Bank” OJSC11.“Mughanbank” OJSC
12.“Pahsabank” OJSC
13. “Unibank” OJSC
14.“Technicabank” OJSC
15.“Turanbank” OJSC
16.“Khalg” Bank OJSC
17.“Zaminbank” OJSC
Authorized loan organizations
Defining the requirements for companies
Regulating relations with fund on the basis of contract
Applying quarterly reporting system
Assessment of annual activity
Confirming with Fund forms of evaluation reviews and insurance contracts
Rules on selection of authorized insurance companies and evaluators
Selecting: Existence of constant office and experts no less than 3 Experience on evaluating of real estate (1 year work experience and
cooperation with more than 3 loan organizations) Existence of relevant certificate reflecting professionalism level
Evaluation: Correspondence of evaluating report form to agreed form Assigning the price of mortgage object in accordance to real market prices Other factors showing professional, transparent and objective activity of
independent evaluator Dynamic activity of company in market (more than 10 evaluation on loans
allocated through AMF) Violation the requirements of cooperation agreements and etc.
Main factors on selecting independent evaluating companies and evaluating of activity
1. Azerexpertiza2. Azintellekt servis3. Bilender4. IVC-International Evaluating Center5. Koneko6. Marketing Business Analysis7. MAK Consultancy Baku Ltd8. REC Invest9. VES Consultancy
Independent Evaluators
Existence of sum capital on the level defined in legislation. Company’s indicators on collected insurance payments Organization of work with customs Implementing insurance payments in insurance cases. Financial Results. Other factors.
Main factors of insurance company’s activity assessment
1. Azerinsurance2. Azinsurance3. Alfainsurance4. Atainsurance5. Ateshgah6. Baku Insurance7. Bashak-Trust Company8. International Insurance9. MBask10. Pasha insurance11. Standard Insurance12. Khalg Insurance
Insurance Companies
Initially defining the limit for each authorized loan organization * Main reasons: Indefinite volume of required mortgage loans Management of Fund’s liquidity
Limits can be changed (increased-decreased) during loaning process.
* Rules on allocation of mortgage loans – “3.3. AMF can define limits to volumes of mortgage loans which will be getting from each bank”.
Defining the limits on loan organizations
Lim
it 1
000
000
Lim
it 1
000
000
FR
1 000 000F
R 1 000 000
AuthorizedAuthorizedLoan OrganizationLoan Organization
1 000 000 Allocated
Loans
1 000 000 Allocated
Loans
Limits of AMF
Required documents Quaternary for getting loan;Evaluation act of mortgage object;Loan contract; Document proofing payment of amount to seller
Repayment of initial financing amount
Getting the non-recurrent order for non-accept omission from banks Indisputable omissioning of relevant amount by by Central Bank from correspondent account of bank if bank doesn’t buy back rights on mortgage loan
Interest rate on initial refinancing – 8%Period – 120 days
Restoration of Initial refinancing mechanism
It is necessary to collect following information on daily basis from authorized loan organizations for liquidity management of fund and for prevention arising of displeasures regarding mortgage loans between society:
Entered appeals
Agreements given by banks
Loans allocated by banks
Collecting daily information from bank
During initial evaluation:• Registration (Amendment-2) of applications.• Analyze of borrower’s (joint borrower’s) average monthly income and
expenses, especially expense on keeping each family members shouldn’t be less than the defined dwelling minimum on country.
• Loan coefficient L/M (LTV) ≤85%, KO/G (PTİ) ≤70% Delivery of amount to seller correctly and in time. To receive correct and in time annuity payments from borrower and to
provide their transfer to AMF. Implementing monitoring of mortgage object with the condition of no
less than one time in a year In time signing and prolongation of insurance contracts, especially to
change beneficiary person..
Factors to be noticed
To give priority to purchasing of flats in new constructed buildings for the purpose of supporting construction sector;
Engagement of specially created structural division or relevantly trained specialists with mortgage loans in bank
To increase dynamic of banks and allocate mortgage loans in possible much volume;
More diligent investigation of borrower’s payment ability To register borrower’s appeal in basis of shifting and investigate
attentively To prevent completely abusive cases of loans
Requirements regarding market participators
Tel (99412) 5982008 Fax: (99412) 5981177
Mortgage Fund under Central Bank of Azerbaijan Republic
Gratitudes
