الهيئة العامة للرقابة المالية

• The Authority has reduced advance payment required by customers to 10% of unit’s price as a condition for transferring the portfolio.
• The amendments aim to enhance the financial soundness of mortgage finance companies and boost activity growth
• The Authority is committed to refine the regulations for mortgage finance to better serve the needs of industry practitioners and overcome the practical obstacles they encounter

FRA Board of Directors issued decree No. 306 of 2024 on amending the rules and standards set for mortgage finance activity. This decree allows mortgage finance companies to partially purchase developers’ portfolios. Additionally, the decree reduces the required advance payment to 10% of the unit price, down from 20%.

The amendments authorize mortgage finance companies licensed by FRA to partially purchase developers portfolios. These amendments are intended to facilitate sector growth and enhance the financial stability of market participants.

It follows an in-depth review by the FRA of the practical challenges faced by companies operating under its oversight. It highlighted the need to maintain a balance between the maturity of assets and liabilities on mortgage finance companies’ balance sheets. Real estate developers’ long-term sales policies, which can extend up to 10 years, have often conflicted with the typical seven-year credit facilities provided by banks to financing companies. The new rules aim to resolve these issues and address the market demand for higher financing limits – up to 90% to purchase real estate financial portfolios, aligning with practices set for retail customer financing.

The said decree mandates that the transferor must provide all relevant documents to the buyer (financier) regarding the portfolio sale. This includes, but is not limited to, investor files, original contracts and debt instruments. The buyer also has the right to request and obtain any other documents deemed necessary for the transaction.

Additionally, the transferee may purchase part of the debt, but cannot sell the remaining part to anyone else until the entire portfolio is paid. This is aimed at maintaining a balance between the maturities of assets and liabilities in the financial statements of mortgage  finance companies, given the inherent mismatch between the long-term nature of real estate development projects (often spanning up to 10 years) and the shorter-term credit facilities typically extended to finance companies by banking institutions (usually 7 years).

The said decree mandates that mortgage finance companies must rigorously assess an investor’s ability to repay loan installments. This assessment may involve reviewing the investor’s income data. It shall commence from the date of the first installment due as per the agreed-upon payment schedule.

Furthermore, the decree stipulates that the investor must typically make a minimum down payment of 20% of the unit price. However, this requirement may be relaxed to 10% provided that the investor has a consistent payment history since obtaining financing and a credit report from I-Score indicating his creditworthiness.

Moreover, mortgage finance companies must adhere to the specific ratios for residential and non-residential mortgage financing. This is in line with the Authority’s objective to stimulate growth in the mortgage market by attracting a larger customer base, expanding the scope of services to new segments and achieving financial inclusion goals. The maximum financing ratio for residential purposes, as permitted by the regulatory framework, is set at 90%.