International Finance Corporation (IFC) is planning on establishing the first mortgage guarantee corporation in India, in partnership with National Housing Bank (NHB), Asian Development Bank (ADB) and Genworth Financial International Holdings. The IFC would potentially invest $17.4M over 4 to 5 years to build up a 19% stake. The proposed company will provide “credit risk coverage to residential mortgage lenders in the event of a borrower’s default” thereby extending access to mortgage financing and home ownership.
IFC, NHB & ADB had planned to form mortgage guarantee company in 2008 which got stalled due to global financial crises.
International Finance Corporation (IFC) is looking to set up India’s first mortgage guarantee corporation in India, in partnership with National Housing Bank (NHB), Asian Development Bank (ADB) and Genworth Financial International Holdings. NHB, a subsidiary of Indian central bank RBI and Genworth, a diversified US financial services company, will be the main sponsors of the project.
The private sector investment arm of the World Bank Group plans to invest up to Rs 80 crore ($ 17.4 million) over the next 4-5 years to buy up to 19 per cent equity stake in the proposed firm India Mortgage Guarantee Company (IMGC).
The proposed mortgage guarantee corporation that will be headquartered in Delhi NCR, will provide credit risk coverage to residential mortgage lenders in the event of a borrower’s default.
Incidentally, IFC had previously planned to set up this IMGC three years ago. It had announced plans to invest $18.3 million (Rs 80 crore back then) in IMGC that was to have a total corpus of around $250 million, with other investors being NHB, United Guaranty Corporation (United Guarantee) of the US, and ADB.
At that time NHB was to hold 43 per cent stake, UGC was to own 41 per cent while IFC and ADB were to pick 8 per cent stake each.
So while it has retained its Indian partners, the foreign partner has been replaced. Instead of United Guaranty Corp, now it will be Genworth, a diversified US financial services company involved in providing life insurance, wealth management, lifestyle protection and mortgage insurance products.
IFC has been one of the most prolific investors in India with almost a new deal proposal a week since January this year.
Although IFC has not invested in mortgage guarantee companies globally so far, it is looking to leverage its investment experience in the housing finance sector and in general financial institution building. In the future, IFC may also support IMGC through a program of counter-guarantees that would enable IMGC to expand its ability to support the mortgage guarantee sector in a financially effective manner.
Last year in a similar deal IFC teamed up with NHB and the Rajasthan state government in a public-private partnership to establish a new housing finance company in the state of Rajasthan that will provide home loans to low-income households.