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Volume of bonds under MBS Factory programme to reach RUB 100 bn in 2017

Volume of bonds under MBS Factory programme to reach RUB 100 bn in 2017

In 2017, the volume of AHML’s one-tranche mortgage-backed securities under its MBS Factory programme will exceed RUB 100 bn. It was announced by Irina Balkarova, Managing Director at AHML, at the Cbonds conference «Mortgage-Backed Securities and Securitisation in Russia». In addition to the deals that AHML closed with Sberbank and Housing Finance Bank in 1H 2017, the Agency plans to close a RUB 50 bn fixed coupon market transaction with VTB Bank in Q4 2017.

AHML forecasts that over one million families will use mortgages to improve their housing conditions in 2017, with origination volume expected at around RUB 1.8 tn. Next year, the volume of new mortgages will increase by 20–30%, while the interest rate will stabilise at 9%. Given the expansion of the mortgage market, AHML sees a need for refinancing mortgage loans by issuing mortgage-backed securities. According to Irina Balkarova, AHML has been happy with MBS Factory’s market penetration and will further its cooperation with the Bank of Russia to improve the regulatory environment for the mechanism.

It is paramount to create new securitisation mechanisms that provide long-term funding sources for mortgage lending. Issuance of one-tranche mortgage-backed securities with credit risk guarantees is a common global practice that has proven effective. In Russia, only around 10% of the mortgage portfolio is funded with mortgage-backed bonds. The new MBS Factory mechanism enables more effective use of mortgage lenders’ capital, as well as much more cost- and time-efficient issuance of mortgage-backed securities, which will bolster the long-term development of the Russian mortgage market.

Next year, AHML will continue working with originators (both public and private banks), while placing special focus on infrastructure development. To that end, AHML plans to introduce an Electronic Mortgage System that will allow it to issue more mortgage-backed securities through MBS Factory in a more standardised and structured manner, making them more attractive for investors.