OREANDA-NEWS. December 1, 2009. At its meeting on November 19, Vnesheconombank’s Supervisory Board discussed an issue of the Bank’s participation in expanding mortgage housing lending. The meeting’s participants stressed that it was necessary to work out additional measures for making housing more affordable for people and for increasing the amount of inexpensive housing construction in 2010. A key factor in achieving this objective is to reduce final interest rates on mortgage credits for people to a level of 10-11%. This may be done through finding long-term and relatively inexpensive financial resources including the use of the state’s support.

In this respect, a decision was made to step up the Bank’s participation in this line of business, specifically, by way of implementing the program of investing funds in the Mortgage Housing Lending Agency’s bonds by Vnesheconombank, and mortgage-backed bonds by using the Bank’s own funds and pension savings funds.

Recently, the Government has approved a new strategy of investing pension savings funds managed by the Bank for Development (Vnesheconombank). In accordance with the approved extended investment declaration, Vnesheconombank as a state pension savings funds management company was given the right to purchase the Mortgage Housing Lending Agency’s bonds and mortgage-backed bonds from November 2009, given their appropriate ratings and guarantees. And in the 1-st quarter of 2010, the State Management Company’s extended portfolio is to increase through receiving new funds from the Russian Pension Fund. This would allow the Bank to purchase the Mortgage Housing Lending Agency’s bonds and mortgage-backed bonds in the maximum amount of up to 160 billion rubles.

Moreover, in order to secure the full placement of the Mortgage Housing Lending Agency’s bonds and mortgage-backed bonds, Vnesheconombank considered it expedient to use a part of its own funds to this end. Here we mean a sum of up to 50 billion rubles. Furthermore, the Mortgage Housing Lending Agency and Vnesheconombank are to implement a project aimed at promoting the construction of economy-class housing. Under this project, the Bank for Development is to open a credit line worth 40 billion rubles. These funds will be used to finance developers responsible for implementing affordable housing construction projects with the use of mortgage housing lending mechanism.

As a result, about 250 billion rubles are to be accumulated to support measures for boosting demand for affordable housing in 2010.

It was also stated at the meeting that the use of pension savings funds as an instrument for financing mortgage housing lending is fully in line with world practice and that by financing mortgage credits Vnesheconombank is performing its key function as a bank for development.

The said measures are to be performed by Vnesheconombank in close contact with another state development institution – the Mortgage Housing Lending Agency. The Agency will act on the one hand as a refinancing institution by raising the Bank for Development’s financial resources through selling the Bank its bonds with state guarantees and mortgage-backed bonds at preferential rates. On the other hand, the Agency would provide expert and technical support both for the Bank for Development in assessing mortgage-backed bonds and for the mortgage market participants in issuing such bonds. The Agency is also prepared to extend guarantees for mortgage-backed bonds purchased by Vnesheconombank.

At present, the Agency is already refinancing mortgage credits at rates that are 4-5% lower than mid-market ones. In 2010, such credits are scheduled to be refinanced for a total amount of up to 60 billion rubles. By raising additional resources from the Bank for Development the Agency will be able to increase the refinancing amount and lower interest rates on mortgage credits.