A consultant will be tasked with conducting a survey on the current terms for mortgages, with an aim of developing a mortgage-backed securities market where banks will pool home loans of similar characteristics.
“The initial processes will essentially be doing the survey to check what the current market practices are in relation to the origination of mortgages in all financial institutions. we will then find out the best practices,” KMRC chief executive Johnson Oltetia said
Banks will sell home loans to investors through brokers and the investors will earn by monthly mortgage repayments from home buyers.
Earlier on, mortgage-backed securities (MBS) enabled long-term investors to lend money to home buyers and get returns through monthly repayments on interest and principal sums.
This behavior can be echoed by loose lending standards and defaults in the US that led to the downfall of the housing market which resulted in the 2008/09 global financial market crisis.
Further KMRC has revealed that the treasury owned 25.3 percent with the private lenders controlling the remaining stake
“The discussion we are focusing on with the banks is that we want a whole industrywide standardization practice. so we are not only looking at standardization of mortgage origination practices for the banks that are currently participating in KMRC because that will not be sufficient,” added Oltetia.
KMRC was granted a license to conduct a mortgage refinance business in Kenya on September 3, 2020. The company is designed to push mortgages down-market to underserved segments of the market through single-digit and longer-tenured facilities.
According to the Central Bank of Kenya, the average mortgage size is Ksh.8.6 million, the average interest rate charged is 10.9 percent and the average repayment period is 11.2 years.