(Bloomberg) -- Saudi Arabia has launched its first residential mortgage backed securities in a move designed to boost liquidity and encourage more bank lending to drive the kingdom's economic transformation program.
The Saudi Real Estate Refinance Co., the state-run equivalent of Fannie Mae and Freddie Mac in the US, recently executed on its first RMBS transaction after getting a regulatory nod to package and sell the securities domestically, according to a statement. SRC didn't offer specifics on the size or structure of the deal or detail who was involved.
An active RMBS market may encourage Saudi banks to offload mortgages to SRC, creating more breathing room for additional lending to drive economic activity.
Saudi banks may transfer as much as $48 billion in legacy mortgages to SRC by 2030, unlocking liquidity and enabling almost $23 billion of securitization for investors, according to analysis by Bloomberg Intelligence's Edmond Christou and Basel Al Waqayan.
SRC, which is owned by the Saudi sovereign wealth fund, didn't respond to a request for more information.
In the last year, SRC has signed agreements with asset managers BlackRock Inc. and King Street Capital Management to drive the real estate financing market, and with Saudi Arabia's $320 billion pension fund manager Hassana Investment Co. to issue RMBS.
The kingdom has kickstarted its RMBS market as it looks to fill financing gaps and bring in cash to support de facto ruler Crown Prince Mohammed bin Salman's diversification drive that includes everything from boosting home ownership to becoming an AI hub and building a ski resort on a remote desert mountain.
The need for local funding is becoming more pressing as the government runs widening budget deficits and banks face slower lending growth at a time when more credit and investments are needed to back some of the country's domestic ambitions.
SRC was created in 2017, with a goal of packaging and selling local bank loans to domestic and international investors. It has signed deals with Saudi National Bank and Bank Albilad to acquire real estate portfolio assets in recent months.
"The market opportunity is substantial in our view as Saudi banks currently hold a mortgage portfolio valued at approximately $180 billion, representing 23% of total loans at the end of 2024," S&P Global said in a report on Monday.
More stories like this are available on bloomberg.com
