The Hindu Business Line : Sundaram Home expects disbursements to rise 15%

With this, the company's outstanding loan portfolio could pierce the Rs 825-crore mark, from Rs 618 crore at the end of last year, Sundaram Home's Managing Director, Mr Nitin Palany, told Business Line.

Sundaram Home has not been an active player in the securitisation market. Last year, it sold off loans worth about Rs 50 crore. However, the company is keenly looking at opportunities to downsell loans.

The National Housing Bank recently came out with a scheme under which it would back mortgage-backed securities (MBS) issued by housing finance companies — for a fee, of course. Sundaram Home intends to make use of this facility.

Under the scheme, if a housing finance company has mortgage-backed securities, that are say `AA' rated, the NHB will give its guarantee for the securities. This would obviate the need for the finance company to put in capital for `credit enhancement'. Usually, for `credit enhancement' the finance companies themselves subscribe to, say, 15 per cent, of the mortgage-backed securities. For example, if a company issues securities worth Rs 50 crore, it would subscribe to Rs 7.5 crore of them, to provide a level of comfort to the subscribers of the other Rs 42.5 crore MBS. Another way to `credit enhancement' is to set aside a sum of money, which will make good any defaults in the MBS. Either way, credit enhancement locks up funds of the finance company. But a guarantee by NHB substitutes for the capital shore-up. Mr Palany said a decision on how much of loans would be sold was yet to be taken.

Meanwhile, it is learnt that the NHB's proposed joint venture company, Mortage Credit Guarantee Company, is close to being set up. "Some clearances are required. We are expediting the proposal," Mr R.V. Verma, Executive Director, NHB, told Business Line.

It is to be set up with a capital of $7.2 million (Rs 30 crore), in collaboration with Canada Mortgage and Housing Corporation, United Guarantee, a wholly owned subsidiary of AIG, International Finance Corporation and Asian Development Bank.

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