By Mohamed Darwish The Egyptian Mortgage Refinance Company (EMRC) has performed operations worth LE 60 million in the first half of the current year, and has made a net profit of LE 4.5 million in the first quarter of 2012. Managing Director of EMRC, Iman Ismail, announced that the loan portfolio of the company reached LE 500 million by the end of June, and that the company has completed mortgage refinance operations worth LE 60 million in the first half of 2012, of a LE 100 million finance target. She added that the company performed mortgage refinance transactions worth 50% of the target sum, lending just LE 100 million to mortgage finance companies out of a target of LE 200 million. She anticipates that the company will exceed its target average for 2012, after the return of relative political and economic stability in the wake of the presidential elections, particularly in light of the fact that, due to the revolution, the mortgage finance market had come to a standstill in the first half of 2011. She went on to say that the company's profits in the first quarter of 2012 were LE 4.5 million, LE 1 million up from the profits of the first quarter of 2011, which totaled LE 3.5 million. The company is aiming for a total net profit of LE 16 million in 2012, an increase of LE 1.6 million from the LE 14.4 million net made by the company in 2011. She stressed that the company has imposed several austerity measures – such as decreasing salaries and canceling subscriptions to a number of newspapers – in order to lower internal expenses. The Managing Director added that the total capital of the company amounts to LE 421 million. Negotiations are currently underway to increase this capital by bringing in new shareholders, Al-Ahly Mortgage Finance Company and Sakan for Mortgage Finance, which are expected to contribute LE 2 million and LE 1 million respectively. The company is also considering the acquisition of a mortgage finance portfolio worth EGP 120 million, distributed among Taamir Mortgage Finance Company (LE 20 million,) the Egyptian Company for Mortgage Finance (LE 50 million,) and the Housing and Development Bank (LE 50 million.) The EMRC raised the interest rates for loans by 0.5%,to 11.75% for loans under 5 years, 11.5% for loans that are between 5-15 years, and 10.75% for loans that are over 15 years, not exceeding 20 years. Defaults in repayment, she added, were less than 3% in 2011, and this is expected to stay constant in 2012. The company lends banks and companies in exchange for the portfolio and is not responsible for the cases of defaults in payment, as the loans are substituted in these cases. She also announced that the EMRC has performed mortgage refinance operations totaling LE 481 million since the company was founded in 2008, and the percentage of low-income loans reached 59%, a total of LE 284 million. The number of clients whose mortgages have been refinanced has reached 14,632 – including 12,451 low-income clients – a percentage of 85% of the total number of clients. The company has only received one loan since it began, from the World Bank via the government, worth LE 214 million to be repayed over 20 years. Repayment will begin in the second half of this year. She expects the mortgage finance industry to regain its momentum this year, especially as the indicators of the Egyptian Financial Supervisory Authority have shown an increase in mortgage financing to companies in the first quarter of this year, a total of LE 2.1 billion compared with LE 1.7 billion in the first quarter of 2011, in addition to an increase in financing to banks, from LE 2.4 billion in the first quarter of 2011 to LE 2.6 billion in the first quarter of 2012. Ismail has revealed that mortgage finance companies are facing great difficulties with placing shares on the stock market due to the decrease in the rate of return on capital to 6%. She spoke also of their need for long-term investors, as well as their inability to get loan securitization on the mortgage loan portfolio. She indicated that the companies are trying to replace this procedure by presenting bonds to individuals by 2014, and the placement of these bonds must be connected to a climate of political and economic stability. She revealed that the EMRC is aiming to depend on the Mortgage Finance Fund (MFF) to increase its activity over the next two years through lending to the banks and companies that will finance the units of the Fund, especially as Mai Abdel Hamid, Director of the MFF, is the Deputy Head of the Board of Directors of the company. She demanded an end to the crisis in the approval of amendments to Law No. 148 pertaining to the regulation of mortgage finance. The Egyptian Mortgage Association completed the placement of amendments with the aid of 27 legal consultants from banks and firms, but the dissolution of parliament has delayed the discussion of these amendments. She says the new law must tackle Islamic forms of mortgage finance because those offering those forms without a legal basis run into a lot of difficulties, such as those encountered by Tayseer and Amlak companies. She stressed the necessity of increasing the percentage deducted from the client's income to 40% as well as ensuring the transparency of mortgage finance companies – financial companies, she said, must disclose their finances in order to increase client confidence in the mortgage finance market. Ismail presented her vision for resolving the real estate crisis in Egypt, stressing the necessity of including buildings described as illegal within the units that can be dealt with in the mortgage finance framework. She clarified that these unplanned settlements represent 40% of the construction in Egypt and are inhabited by 20 million people. A building will sometimes reach 12 floors in a street 6 meters wide, and it is impossible to demolish it or evict people from it. She explained that units in these buildings are sold or leased with the new lease law. Citizens have no problem in renting or purchasing them with the mortgage finance system, but it is the law which stands in the way, claiming these buildings to be illegal. She mentioned that the new cities face difficulties in getting legal permits for real estate, even after the construction is complete. She said that these problems force the mortgage finance industry to exclude 50% of the real estate market from its targeted activity.
