Securitization will go down in history

A draft law has been submitted to the State Duma, which will make it possible to simplify and reduce the cost of issuing mortgage bonds. Experts believe that the market will grow in 2023 due to preferential mortgages and the emergence of new instruments, such as bonds secured by mortgages under equity agreements. At the same time, new players are expected in the mortgage securitization market in 2023, with a number of which Dom.RF is already negotiating.

At the end of last week, the government submitted a bill to the Duma, according to which the Dom.RF development institution is proposed to be included among the sources of credit histories. The explanatory note to the document specifies that this will allow Dom.RF to improve the assessment of the quality of mortgage housing loans to be included in the mortgage coverage of bonds, and will also have an impact on improving the quality of portfolios in securing such bonds.

According to Elena Muzykina, director of the Securitization division of Dom.RF, the corporation participated in the drafting of the bill. “Our initiative is aimed at creating conditions for faster and better verification of loans that are planned to be included in pools for issuing mortgage bonds,” she said. According to Ms. Muzykina, this will make it possible to remove part of operating expenses from both the corporation and banks, which means that it will make the issuance of bonds easier and less costly for banks.

“We expect that all banks that issued last year will continue to carry out securitization transactions,” says Elena Muzykina. According to her, we are also talking about the emergence of new players, negotiations are already underway with some, and it is planned that four or five issues will be placed in the first half of the year.

Pavel Kashitsyn, Director of the Structured Finance Ratings Department at Expert RA, notes that the draft law is intended to solve two problems. The first is to legislate the ability of Dom.RF to be a source of information about credit histories and transfer data to the CBI in the event of redemption of loans to its balance sheet. The second is to give Dom.RF the opportunity, at the stage of negotiations with the originating banks, to analyze the credit histories of borrowers from the portfolio that is supposed to be securitized. This, according to Pavel Kashitsyn, will allow Dom.RF to conduct a deeper credit analysis of borrowers and be less conservative in its estimates.

The expert believes that the main drivers of the mortgage securitization market will be electronic mortgages and loans issued under state preferential programs, which allow, as part of securitization, to issue mortgage-backed securities with a floating rate pegged to the key rate of the Central Bank. Analyst of Ingosstrakh-Investments Management Company Artem Autlev expects that in 2023 the volume of mortgage securitization will exceed the figures of 2022.

VTB told Kommersant that they plan to issue mortgage bonds for 100 billion rubles in the second half of the year. “Also this year, we expect to increase the volume of issues of papers secured by consumer loans as part of the issuance program for 100 billion rubles, registered in 2022,” Kommersant was told at the bank.

The total volume of mortgage-backed securities issued in 2022 amounted to RUB 400 billion. (see Kommersant dated December 26, 2022). At the same time, according to Elena Muzykina, at the moment, about 7% of the total portfolio of mortgage loans are securitized through mortgage-backed bonds guaranteed by Dom.RF.

“We expect that the share will increase by the end of 2023, it is difficult to say now whether the growth will be significant, since it depends on many factors, including the pace of issuance of mortgage loans, the ratio of mortgage loan rates and market rates at the time of the bond issue” – says Mrs. Muzykina. At the same time, according to her, in 2023 the first issues of bonds secured by mortgages under equity participation agreements will appear on the securitization market – Dom.RF expects their issue in the second half of the year.

Maxim Buylov