The Central bank of Kenya has recently published the draft regulations governing the establishment of Mortgage Refinance Companies (MRCs). The document is expected to guide the establishment and operations of the Kenya Mortgage Refinancing Company, a government body designed to extend financing to mortgage lenders targeting affordable housing.

Cited as the Central Bank of Kenya (Mortgage Refinance Companies) Regulations, 2019, the regulations outline among other things, the business of a mortgage refinance company. According to the regulations, MRCs will take part in four main activities; refinancing or purchasing of eligible mortgage loans, investment in guaranteed debt securities, extending finance to primary mortgage lenders for financing of eligible mortgages, issuing of financial instruments, and other activities as may be prescribed by CBK from time to time.

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According to CBK, MRCs will refinance Primary Mortgage Lenders (PMLs) such as commercial banks, microfinance banks and Saccos using funds from the capital markets so as to provide affordable mortgages to eligible members of the public.

As with other banks, CBK will be responsible for licensing the MRCs if they meet the laid down requirements. The CBK may also suspend or revoke the license of an MRC under certain circumstances. The regulations also outline the operations of MRCs with regard to corporate governance, liquidity management, risk management and internal controls among other key areas.

With the regulations, CBK will provide the legal framework for the licensing and regulation of the Kenya Mortgage Refinance Company which is expected to play a big role in the financing arrangements of the affordable housing scheme. CBK has given members of the public up to February 28th to give comments on the draft regulations .

The document can be downloaded here.