The Kenya Mortgage Refinance Company (KMRC) is set to begin operations pending approval by the Central Bank of Kenya. The firm has raised funds worth KES 37.27 billion ready for deployment mostly towards the affordable housing agenda.
Acting CEO Johnstone Oltetia in his statement in the company’s annual report said the organization’s strong balance sheet will support its business goals and maximize financial performance.
He said KMRC’s focus will be on affordable housing pointing that 80% of the World Bank credit line it received is earmarked for affordable housing which is a loan of up to KES. 4million in Nairobi metropolitan area (Nairobi, Kiambu, Machakos & Kajiado) and up to KES. 3 million elsewhere. The difference, 20% will be available for upper-middle-income housing.
On the other hand, 40% of AfDB funds will be used to refinance mortgages of up to KES. 5million and 60% will go into refinancing mortgages of up to KES 8million.
He said that, for purposes of affordable housing, the borrower’s income threshold is KES. 150,000 per month.
A portfolio review of 20 participating institutions conducted in 2019, identified a potential aggregate housing loan portfolio of KES 50.3 billion that could be potentially refinanced by the Kenya Mortgage Refinance Company.
“In the short term, KMRC is well-positioned to support emergency interventions aimed at stabilizing the housing market post-Covid-19 pandemic,” says the statement.
He said this in view of the expected reduction in household incomes in the near-term which will most likely limit households’ ability to service their existing mortgages and reduce demand for new housing.
KMRC will also support the housing developers by linking them with the participating mortgage lenders in order to effectively link supply and demand. When developers have clear visibility of off-take, they will be more encouraged to commit to affordable housing developments.
He said KMRC will start operations by offering to refinance housing loans with recourse meaning there would be an obligation for a borrower to replace a defective mortgage collateral with one that is performing.
To lower the risk exposure to KMRC, participating financial institutions will generate mortgages in the usual way and then submit their portfolio of mortgages to KMRC for financing.
The statement also said that the Kenya Mortgage Refinance Company may refinance existing mortgage loans in the short term with primary mortgage lenders required to provide alternative collateral such as government securities or cash, as they work on submitting a portfolio of mortgages after one year.
“It is envisioned that in the medium term, only perfected mortgages will be refinanced as KMRC leads the industry in the standardization of mortgage finance products,” he added.