Bank Maskan to Issue $3b in MBS

EghtesadOnline: A board member of Iran’s main housing mortgage bank says it will issue 100 trillion rials ($3.17 billion) worth of mortgage backed securities (MBS) in the fiscal year that ends in March 2017. The measure would be the second of its kind this year which saw $95 million worth of the securities sold in a short time.

News ID: ۷۳۷۲۸۳

01 October 2016

"As part of its macro planning, Bank Maskan will issue 100 trillion rials worth of MBS in the next phase, the execution of which is being negotiated with the Central Bank of Iran and the Securities and Exchange Organization of Iran," Mohsen Azizi said in a talk with IBENA.

News of the securities sale that is in line with the government's plans of issuing 400 trillion rials ($12.7 billion) worth of Islamic securities by the end of the current fiscal had been revealed earlier by unnamed sources in Bank Maskan. However, Azizi's talk with the news agency was the first official announcement.

He spoke of the first phase of the plan that consisted of MBS worth 3 trillion rials ($95 million) in late July to "identify the weaknesses, limitations, risks and challenges facing such modern instruments so that we can improve them in the next tranches."

"Bank Maskan issued these securities at an annual yield of 18.5%. I am certain that they can have a meaningful impact and will energize the housing market," he said. "The public enthusiasm was such that they were sold within minutes."

Saying that the MBS are commonly-used instruments throughout the world, the official pointed to their potential. "Their truly positive feature lies in the fact that they turn the non-cash assets of Bank Maskan – which are often long-term and with a time span of 10-12 years – into cash resources that can be reused to offer loans."

In turn, the cash flow will augment housing loan schemes and the stronger the turnover, the more it can move the market and create a momentum in the housing sector, according to Financial Tribune.

"We hope that with the completion and optimization of this model, we can expand and continue the process of issuing these securities so that we can introduce new financing tools for the housing market and improve it," Azizi said.

He pointed to a shortage of entities that could underwrite mortgages, saying implementation of general schemes and macro policies alone will not suffice in bringing the housing sector back to life.

Bank Maskan has the lowest non-performing loan ratio which is about 2%. It is worth mentioning that the originator of these securities is among the Iranian banks not affected by international sanctions.