The Korea Mortgage Corp. (Komoco), a newly created quasi-sovereign mortgage corporation, has inked an agreement with the International Finance Corp. (IFC), the private lending arm of the World Bank, that will give the IFC a 15% share in the new venture.
Under the agreement, the IFC's stake worth about W15 billion ($12.6 million) will be purchased from Korea's Ministry of Construction and Transportation (MOCT) which currently owns 45% of Komoco.
An international investment bank will also be invited to provide technical assistance to Komoco in exchange for a 5% stake, said Kwun Kyung Won, head of Komoco's business preparation team in Seoul. The IFC will be responsible for selecting the bank and a decision will be made before year-end.
Backing from the IFC will help further Komoco's goal of fostering a liquid secondary mortgage market in Korea by being the first to issue mortgage-backed securities. The Korean government is Komoco's biggest shareholder; other shareholders are Kookmin Bank, Korea Exchange Bank and Housing and Commercial Bank, which have each invested W15 billion, and Samsung Life Insurance, which has provided W10 billion.
Komoco is keen on issuing mortgage-backed securities, and has said that it plans to launch its debut issue sometime early next year. Korean securitizations often have recourse back to the seller, making their execution period much shorter than traditional asset-backed deals.
However, development of mortgage-backed securitization in Korea remains stalled due to a grey area in the country's securitization law passed in September 1998, which implies that the consent of each obligor is required before the loan can be transferred to a special purpose company (ASRI 5/17/99, p.3). An amendment to the law must be passed before Komoco or other potential issuers can go ahead with issuing MBS, something expected to happen in mid-December, said Kwun.
Once the law is amended, Komoco's first MBS will likely be a won-denominated securitization backed by mortgages owned by the National Housing Fund (NHF) aimed at domestic investors, Kwun added. The NHF is the biggest seller of mortgages in Korea and is now overseen by MOCT.