JORDAN MORTGAGE REFINANCE COMPANY

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•  JORDAN MORTGAGE REFINANCE COMPANY
• IBRAHIM DAHER MANAGING DIRECTOR 
• Presentation for the Global Conference on
• Housing Finance In Emerging Markets,
• organized by The World Bank Washington D.C
  U.S.A
• March 15 17,2006
• - e-mail jmrc_at_go.com.jo
• - website www.jmrc.com.jo

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Jordan Mortgage Refinance Company

• Table Of Contents
•  
• An Overview of Housing Finance in Jordan .
• Establishment of JMRC.
• Operations Mechanism of JMRC.
• Benefits to Borrowers and Investors.
• Achievements of JMRC

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JORDAN MORTGAGE REFINANCE COMPANY

• Table Of Contents
• - Obstacles Faced JMRC.
• - Assessment of JMRC Impact on Housing Finance
• Future work plan.
• Appendixes-
• - General information about Jordan.
• - Assets /liabilities Management policy.
• - Credit Policy credit ceilings.
• - Investment policy.

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JORDAN MORTGAGE REFINANCE COMPANY

• AN OVERVIEW OF HOUSING FINANCE IN JORDAN
• - Before 1996 there was a wide gap between
  housing supply and demand for low-cost housing.
• - In 1996 the Government adopted a housing
  strategy in
• cooperation with the World Bank to
  restructure housing
• sector. The aim was-
• To enhance role of private sector in housing
  for low-
• income households.

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JORDAN MORTGAGE REFINANCE COMPANY

• AN OVERVIEW
• To mobilize increased mortgage financing by
  banking
• system.
• - An agreement was signed between the Government
  and the World Bank to implement Housing Finance
  and Urban Sector Reform Project.
• Loan from the World Bank (US 19 million) to
  establish a
• secondary mortgage facility (JMRC).

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JORDAN MORTGAGE REFINANCE COMPANY

• AN OVERVIEW
• Sources of Housing finance are as follows-
• Informal finance from individuals savings, sale
  of personal belongings, assistance from relatives
  etc
• Formal finance from banks and other private and
  public financial institutions.

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JORDAN MORTGAGE REFINANCE COMPANY

• AN OVERVIEW
• Prior to 1997 Formal Housing finance was
  dominated by -
• The Housing Bank (HB) which provided (50-60)
  of formal housing finance. HB was offered
  incentives to grant long term loans and to
  subsidize the interest rate.

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JORDAN MORTGAGE REFINANCE COMPANY

• AN OVERVIEW
• Jordan Islamic Bank (JIB), which provided
  (17-21) of
• formal housing finance.
• Public and private housing funds (e.g. military
  funds,
• teachers funds, private pension funds etc)

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JORDAN MORTGAGE REFINANCE COMPANY

• Establishment of JMRC
• Incorporation
• JMRC was incorporated in June 1996 as a public
  shareholding company.
• (Its worth mentioning that the World Bank had an
  important role in JMRC establishment and still
  has a consultancy and supporting role in its
  operations).
• JMRC is considered to be the first step towards
  a
• secondary mortgage market in Jordan.

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JORDAN MORTGAGE REFINANCE COMPANY

• OBJECTIVES
• - JMRC Aims to-
• Support Governments strategy to improve
  efficiency of housing finance.
• Make mortgage lending more attractive to lenders,
  reduce liquidity risk and access longer term
  funds for housing at a lower effective costs,
  through refinancing mortgage loans originated by
  banks.
• Promote the capital market, through issuing
  medium and long-term bonds.

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JORDAN MORTGAGE REFINANCE COMPANY

• Sources of Funds
• JMRC Sources of Funds are -
• - Paid- up capital of JD 5 million (US 7.04
  million).
• A subordinated loan in JD equivalent to US (19)
  million from the Government, originally obtained
  from the World Bank.
• - Funds raised through issuing bonds in the
  local capital market.

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JORDAN MORTGAGE REFINANCE COMPANY

• The shareholders of JMRC are-
• - Governmental institutions-
• - Central Bank of Jordan 18.
• - Social Security Corporation (SSC) 10.
• - Housing Urban Development Corporation
• (HUDC) 10.
• - Private sector institutions (62). 12 local
  banks and 1 financial company.
• - Board of Directors chaired by the Governor of
  CBJ.

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JORDAN MORTGAGE REFINANCE COMPANY

• Operations Mechanism of JMRC.
• IN Lending
• - Financial institution applies for refinancing
  mortgage loans.
• - JMRC refinances 83 of the outstanding balances
  of mortgage loans .
• - JMRC prices its loans based on its cost of
  funds with a margin (around 1) .

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JORDAN MORTGAGE REFINANCE COMPANY

• Operations Mechanism of JMRC.
• - Financial institution transfers its right on
  pledged collateral to the favor of JMRC.
• - Principal amount of the loan is usually repaid
  at maturity date, and interest paid quarterly or
  semi annually.
• - Financial institution bears all risks.

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JORDAN MORTGAGE REFINANCE COMPANY

• IN Funding
• JMRC issues corporate bonds on the local capital
  market
• through-
• Public subscription.
• Private Subscription.
• - By Auction.
• - By Agreement.
• - JMRCs bonds are unsecured by any specific
  assets.

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JORDAN MORTGAGE REFINANCE COMPANY

• Benefits To Borrowers And Investors.
• JMRCs loans are usually cheaper than other
  sources of funds.
• JMRCs loans improve capital adequacy ratios
• (risk- weighted 20)
• - JMRCs loans are exempted from provision of
  good loans (2).

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JORDAN MORTGAGE REFINANCE COMPANY

• Benefits To Borrowers And Investors.
• - JMRCs loans improve assets- liabilities
  management.
• JMRCs loans help to hedge against interest rate
  risk.

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JORDAN MORTGAGE REFINANCE COMPANY

• Benefits To Borrowers And Investors.
• JMRCs bonds are considered as liquid assets.
• JMRCs bonds are risk-weighted at (20) for the
  purpose of calculating the capital adequacy
  ratios of banks.

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JORDAN MORTGAGE REFINANCE COMPANY

• Achievements of JMRC 1996 - 2005.
• Complete and update the infrastructure needed to
  operate-
• - legal documentation.
• - manuals.
• - IT environment.
• - Qualified staff.
• - Marketing strategy.

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JORDAN MORTGAGE REFINANCE COMPANY
On the lending side-
Loans extended 1998 - 2005
Total JD 153 million US 215 million
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JORDAN MORTGAGE REFINANCE COMPANY
ACHIEVEMENTS OF JMRC
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JORDAN MORTGAGE REFINANCE COMPANY
ACHIEVEMENTS OF JMRC On the Funding Side
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JORDAN MORTGAGE REFINANCE COMPANY
JMRCs Assets 1997 - 2005
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JORDAN MORTGAGE REFINANCE COMPANY
ACHIEVEMENTS OF JMRC
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JORDAN MORTGAGE REFINANCE COMPANY

• Major Obstacles Faced JMRC.
• Previous.
• Before 2000 lenders were unable to lend housing
  loans for long terms, because the interest should
  not exceed by law- the principal. This has been
  solved by the amendments of banks law.
• - The transfer fee of the mortgage deed. JMRC
  was exempted to pay such fee.

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JORDAN MORTGAGE REFINANCE COMPANY

• Major Obstacles Faced JMRC.
• Present.
• The bond market is not yet so active.
• - Access of liquidity in the banking sector.
• - The absence of legal aspects for securitization
  (it is now under process).

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JORDAN MORTGAGE REFINANCE COMPANY

• Assessment of JMRC Impact on Housing Finance.
• - JMRC lending reduces interest rate risk,
  mismatching risk.
• - JMRC plays a vital role in encouraging banks
  to enter the mortgage market.
• - Banks compete to offer good terms on housing
  loans
• (e.g. interest rate, down-payment requirements
  , tenor..)

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JORDAN MORTGAGE REFINANCE COMPANY

• Assessment of JMRC Impact on Housing Finance.
• - JMRC lending increases term of housing loans
  which improve the borrowers affordability and
  increases availability of loans to low and
  middle income families.
• - Availability of mortgage loans has promoted
  residential construction industry, and improved
  middle and low cost housing.
• - JMRC plays an important role to standardize
  origination of mortgage loans.

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JORDAN MORTGAGE REFINANCE COMPANY

• Future work plan
• - Purchase mortgage loans and issue mortgage-
  backed bonds (securitization)
• - Adopt a mechanism to refinance or purchase
  mortgage loans extended by Islamic banks.
• - Encourage establishment of a mortgage
  information system and credit agencies .

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JORDAN MORTGAGE REFINANCE COMPANY

• Future work plan
•  
• - Encourage establishment of non-banking
  financial
• institutions specialized in mortgage
  origination .
• - Encourage establishment of mortgage insurance
  companies.

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JORDAN MORTGAGE REFINANCE COMPANY

• Future work plan
• -Encourage banks to offer fixed rate mortgage
  loans.
• -Issue longer-term bonds (over 5 years).

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• Appendixes

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JORDAN MORTGAGE REFINANCE COMPANY

• General information About Jordan.
• Ruling Regime Parliamentary With hereditary
• monarchy  
• Population 5.32 million
• Area 89.3 thousand sq. Km.
•  
• Economic System Market oriented economy.
•  
• Macroeconomic Indicators 2004 (equivalent to
  US)
• Nominal GDP US 11.5 billion
• Real GDP growth 7.7
• GDP per capita US 2164
• Inflation 3.48

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JORDAN MORTGAGE REFINANCE COMPANY

• General information About Jordan.
• Net Public Debt US 10.1 billion
• - Domestic Debt US 2.58 billion
• - External Debt US 7.54 billion
• Currency Jordan Dinar, which equals
  US 1.41, and is
• fully
  convertible.
• Domestic credit Extended by banks JD 9.59
  billion
• (US 13.52
  billion) as at end of
• October 2005.
  

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JORDAN MORTGAGE REFINANCE COMPANY

• General information About Jordan.
• Number of banks14 commercial banks, 2 Islamic
  banks,8
• foreign banks.
• Resources
• -Several natural resources phosphate and potash
  are the most
• important ones.
• -Abundant skilled human resources.
• -Several historical / tourism sights.
• - Agriculture.

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JORDAN MORTGAGE REFINANCE COMPANY

• JMRC implements its operations according
• to policies and manuals
•  
• Assets / liabilities management (ALM) policy
  which aims to-
• - Preserve real value of JMRCs assets.
• - Realize optimum return on assets.
• - Match between duration of assets and
  liabilities
• - Minimize interest rate risk, liquidity risk
  and credit risk.

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JORDAN MORTGAGE REFINANCE COMPANY

• ALM policy includes - 
• - Credit policy and credit ceilings.
• - Investment policy.

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JORDAN MORTGAGE REFINANCE COMPANY

• Credit policy includes
• Eligibility criteria for a financial
  institution-
• - The institution is privately owned, regulated
  by CBJ, financially strong, satisfies CBJs
  capital adequacy requirements and other banking
  regulations.
• - The institutions financial statements were
  revised and
• approved by independent auditors.

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JORDAN MORTGAGE REFINANCE COMPANY

• Eligibility criteria for a mortgage loan-
• - First class mortgage deeds.
• (LTV) does not exceed 80.
• Provided for residential use.
• - No installment due.

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JORDAN MORTGAGE REFINANCE COMPANY

• Credit Ceilings 
• JMRC determines -once every year a credit
  ceiling to each bank on the basis of its
  financial statements, taking the following
  financial indicators into account -
• - Return on assets (ROA).
• - Volume of assets.
• - Liquidity ratio.
• - Utilization ratio.
• - Capital adequacy ratio.

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JORDAN MORTGAGE REFINANCE COMPANY

• Investment Policy
• JMRC invests in the following JD instruments -
• Treasury bills, Treasury bonds issued by the
  Government, and Corporate bonds guaranteed by the
  Government.
• Time deposits and certificates of deposits issued
  by banks.

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JORDAN MORTGAGE REFINANCE COMPANY

• Investment Policy
• Corporate bonds issued by public shareholding
  companies.
• Investment portfolio.