Secondary market plan for mortgages

The Kingdom is studying draft regulations that could see the creation of a real estate refinancing company similar to US firm Fannie Mae, according to proposals published by the central bank recently. The regulations are part of long-awaited government efforts to develop a housing mortgage sector in the Kingdom. The regulations proposed recently fleshed out the laws principally by saying the government may establish Saudi Real Estate Refinancing Corp. to develop a secondary market in home mortgages. The new corporation, with a minimum registered capital of SR 2 billion, would have to stay majority state-owned but real estate financing companies would be allowed to acquire stakes up to a combined total of 30 percent. The corporation might also offer shares to the public. It could provide the secondary mortgage market with access to both local and foreign financing instruments, the draft said. Local financial firm Arqaam Capital has said the introduction of a legal framework for mortgages will see the amount of lending to purchase housing in Saudi Arabia eventually double to 12 percent of GDP. “The problem was how do you get that person to repay if they cannot be kicked out of their house,“Nicholas Diacos of The Law Firm of Saleh Al-Hejailan, told Reuters. “In terms of making competitively priced financing in this market, it was a nightmare because the financiers were pricing the risk into their finance.” From Arabnews