The long-awaited MBS issue from the India's National Housing Bank (NHB) is in the final straight and may even make it to market before the end of March.
The deal which will be the country's first MBS is being arranged by domestic firms SBI Capital Markets and ICICI Securities, announced NHB chairman and managing director P.P. Vora. It will be worth up to Rs700 million ($16 million)
The issue will be backed by mortgages originated by the Housing Development Finance Corp. (HDFC), one of many local-level home finance companies partly funded by the NHB, which was set up in 1988 to promote housing finance.
NHB will act as the special purpose company trustee and transfer agent for the deal, while HDFC will function as the custodian and servicer, said Vora. The bank aims to obtain a triple-A rating from Crisil, a domestic agency.
Subsequent MBS issues will be backed by assets acquired from other housing finance companies throughout India, he added. NHB has been working on the deal since taking advice from the U.S. secondary mortgage institution, Fannie Mae, in early 1998 (ASRI 6/15.1998 p. 1)
In contrast, another long-delayed securitization by the Housing & Urban Development Corp. (Hudco) still waits patiently in the pipeline.
Hudco, a state-owned agency that originates loans for urban development, still aims to set up an ongoing program to securitize receivables from bridges, roads, water and other infrastructure projects, said sources. Recently Hudco set the size of the first issue at Rs5 billion ($114.8 million), which it said would be followed by more issues.
However, "the board of directors has yet to finalize any decisions [about an arranger] so far, though they've been making statements about this for some time now," commented one ratings analyst, with great understatement. However, that has not stopped 18 international and domestic banks from submitting bids to arrange the deal (ASRI 12/13/99 p.6).
Separately, a working group convened by the central bank, the Reserve Bank of India, has recommended in a report that the government create umbrella legislation covering all aspects of securitization. Recommendations included the need for prudential guidelines for banks and other ABS issuers, reduction of stamp duty for all transactions and favorable tax treatment of SPCs.
Finally, India's cabinet has approved a proposal that will empower the NHB to regulate housing finance companies and speed up the foreclosure process. The amendments to the NHB Act are expected to boost the residential mortgage securitization market, provide security to lenders and reduce the bad loans of housing finance companies.