Secondary Mortgage Corp to expand into new businesses

A reverse mortgage is a mechanism available to older or retired homeowners that enables them to convert part of the equity in their home into cash. Meanwhile, the Finance Ministry plans to propose a Land and Construction Act for Cabinet approval next month. The draft of law is currently in the revision process.
“We believe that the Land and Construction Act will be effective by midyear,” Deputy Finance Minister Wisut Srisuphan said on the sidelines of a seminar titled “Outlook Beyond: Mortgage Banks in Japan Forum 2015” conducted by the SMC yesterday.
He added that the ministry was considering legislative amendments to expand the role of the SMC. These could be proposed for the Cabinet’s approval this quarter.
Fiscal Policy Office director-general Krisada Chinavicharana said the amendments would be proposed to the finance minister by next month and passed on to the Cabinets approval by March.
SMC president Pornnipa Hachaiya-phum said the revised legislation would allow the corporation to get into mortgage insurance, which would bolster the confidence of commercial banks to approve home loans. Reverse mortgages would also help the country cope with its ageing society by opening opportunities for retired homeowners to use their equity to cover their living costs.
The proposed amendments would also pave the way for property firms to establish mortgage companies to offer loans to their customers backed by the SMC. This would make it easier for people to buy a home, she said.
A mortgage company originates mortgages for potential buyers and seeks funding from a client financial institution that provides the capital for the mortgage itself.
Pornnipa said this business model was learned from successful mortgage businesses in Japan, as shown by the Japan Housing Finance Agency (JHF) and the Mortgage Corporation of Japan.

Business model
“If the Cabinet and the National Legislative Assembly approve the amended legislation, we can set up the new businesses as soon as possible because we have a business model supported by the Asian Development Bank and JHF,” Pornnipa said.
As of the end of 2014, the SMC had total outstanding mortgages worth Bt17 billion. It plans to buy Bt10 billion worth of mortgages from the commercial banks this year, and expects to issue five-year debentures worth between Bt7 billion and Bt8 billion.
Pruksa Real Estate president and chief executive officer Thongma Vijitpongpun said on the sidelines of the seminar that the idea of mortgage companies was an interesting one. It could be a way for such people as freelance workers who do not have a monthly income to get a mortgage.