ArmInfo. Securitization of mortgage loans will further reduce interest rates on mortgages. David Harutyunyan, Deputy Executive Director of ARARATBANK, expressed opinion in a conversation with the correspondent of ArmInfo, commenting on the recent debut in the Armenian capital market - securitization of mortgage loans of the First Mortgage Company, underwriter and market maker of which is ARARATBANK.
He explained that secured by mortgage loans bonds in comparison with unsecured from the point of view of the issuer are less a tool because of the minimum level of risk. Therefore, the decrease in expenses on attracted funds, namely, interest rates on deposits, according to D. Harutyunyan, will entail a decrease in lending rates, incl. on the mortgage.
He noted that in the framework of cooperation with FMC mortgage loans continue to remain on the balance sheet of the issuer, and from the point of view of investors serve as additional collateral. "The issuer itself decides where to put the raised funds. In our particular case, the First Mortgage Company will direct them to mortgage lending. Therefore, the impact of securitization on the mortgage market will be only positive," he said.
At the same time, D. Harutyunyan said that at the moment, ARARATBANK is negotiating with another company, and after the entry into force of the RA law "On Secured Mortgage Bonds", the parties will discuss the details of the bond issue. "I believe that this successful experience with the First Mortgage Company will serve as a motivation for other financial organizations," he stressed. According to the Central Bank of Armenia for Jan-Oct 2017, interest rates on mortgage AMD loans have been reduced from 12.9% to 11.6%, and on dollar ones - from 11.5% to 9.8%. In general, interest rates on loans (including mortgages and consumer loans) showed the following dynamics in this period: drams decreased from 16% to 13%, and dollar rates decreased from 11.8% to 10.2%.
The debut of securitization of mortgage bonds on the capital market of Armenia took place on December 12, 2017 and on the same day it was possible to place all the presented volume. Namely, FMC issued two tranches - dollar and AMD bonds in the amount of 100 million drams and $ 500 thousand provided with mortgage loans. The underwriter and the market-maker of these bonds is ARARATBANK.
According to Ranking of credit companies of Armenia as of Sept. 30, 2017, prepared by NA ArmInfo, the credit portfolio of UCC First Mortgage Company is 7.4 bln AMD or $ 15.4 mln with annual growth of 6.8%. UCC "First Mortgage Company" has been operating in the Armenian market since April 2004. Shareholders on 1 October 2017 are Nshan Atinizyan - 35%, Margrit Atinizyan - 35%, David Atanesyan - 30%.
In the financial history of Armenia, for the first time, securitization of assets was carried out at the end of 2015 from a specially created fund on the basis of asset-backed securities (ABS), secured by cash flows. The pool was organized by Universal Credit Companies of Armenia (UCO) - CARD Agro-credit, Garni Invest, Global Credit, Kamurj and Nor Horizon. The asset securitization program was initiated as a test by the FED (Finance for Economic Development) program, which works as a counterparty to USAID (US Agency for International Development). After the program was closed and USAID abandoned plans for institutional support for the development of the financial market of Armenia.