SMC seeks expanded role as mortgage insurance provider

SMC president Pornnipa Hachaiyaphum yesterday said the corporation should have the authority to be a housing-loan guarantor, in much the same way as the Thai Credit Guarantee Corporation has when it comes to guaranteeing loans to small and medium-sized enterprises.

The proposed decree amendment has been submitted for consideration to the FPO, before being forwarded to the finance minister and the Cabinet.

She said that with the rejection rate for housing-loan applications having risen because of the economic slowdown, mortgage insurance could enable some consumers with currently low prospects of raising housing finance to get home loans from commercial banks.

Moreover, having a mortgage guarantor would help the country’s banks to expand their lending portfolio during a period of economic uncertainty, she added.

The Asian Development Bank supports such an expanded role because the SMC already acts overseas in both the secondary market and mortgage insurance, Pornnipa said.

The SMC has also requested that the FPO allow the agency to issue another financial instrument apart from solely mortgage-backed securities (MBS), in order to increase the choices available to investors.

“We hope to issue covered bonds as a funding source as well MBS, if the FPO agrees,” she said.

Previously, the SMC requested that the FPO increase its capital from Bt1 billion to Bt3 billion, which would help increase confidence among commercial banks and investors in its MBS.

The additional capital will help the SMC to purchase a housing-loan portfolio from commercial banks.

At present, the agency has a home-loan portfolio under management of Bt18 billion. This year, it targets purchasing an additional portfolio of Bt10 billion, of which Bt5 billion will be from Kasikornbank.

KBank has been SMC’s No 1 loan provider for the past five years, with a total of nearly Bt15 billion in lending approved.

The bank also provides financial advisory services for securitisation to the SMC, which will issue MBS worth between Bt7 billion and Bt7.5 billion this November.

Pornnipa said the tenor of the issuance would extend to seven years, from the five-year MBS issued previously, because the instrument should be long-term in line with the terms of housing loans.

Meanwhile, the economic slowdown has had an impact on SMC borrowers’ instalment-repayment ability, with non-performing loans having surged to 3.2 per cent from 2.4 per cent as of the end of last year, she explained. Some borrowers have asked for their monthly instalments to be reduced, while others who used to repay debt every month have delayed their payments, she said.

In future, the SMC plans to ask banks that sell portfolios to the agency to collect the debt on those loans, a service for which it would pay a fee, she added.