By Accommodation Times News Service
Contd from 1st part…
NHB Foray’s into the field of securitization
INITIATIVES OF THE GOVERNMENT OF INDIA
Support to Mortgage Backed Securitization has been a major policy initiative of the Government as manifested in its National Housing and Habitat Policy announced in 1998. The policy has enjoined upon National Housing Bank (NHB) to play a lead role in starting mortgage backed securitization and development of a secondary mortgage market in the country. A major milestone in creating a framework for such transactions has been the amendment of the National Housing Bank Act, 1987 by the Government of India. The National Housing Bank (Amendment) Act, 2000 has come into force from June 12, 2000, which, inter alia, provides for creating Special Purpose Vehicle (SPV) Trust by NHB for taking up such transactions and issuing MBS in various forms.
|BLING PROVISIONS OF THE NHB ACT
Enabling Provisions in NHB Act for Mortgage Backed Securitization and Secondary Market Development:
In terms of Section 14 (ea) of the said Act, NHB has been specifically authorized to purchase, sell, or otherwise deal in any loans or advances secured by mortgage or charge on the immovable property relating to Scheduled Banks or Housing Finance Institutions (HFIs);
Section 14 (eb) of the NHB Act allows NHB to create one or more Trusts and transfer loans or advances together with or without securities therefore to such Trust(s) for consideration;
As per Section 14 (ec), NHB is authorized to set aside loans or advances, and issue or sell Mortgage Backed Securities (MBS) based on such loans or advances so set aside, in the form of debt obligations, Trust Certificates of beneficial interest or other instruments whatever name called, and to act as Trustee for the holders of such securities.
Section 18A of the NHB Act facilitates the transfer of MBS issued by National Housing Bank to securitize the loans granted by Scheduled Banks and HFIs, without Compulsory Registration, both at the time of issue of securities by NHB and at the time of their transfer by the investors.
Further, in order to instill confidence among the investors in the securities issued by NHB, the Bank acting as a trustee or otherwise in the transaction relating to securitization of loans has been authorized to recover the dues as arrears of land revenue in terms of Section 18B of the NHB Act.
To provide for introduction of a speedier recovery mechanism a new chapter (VA) has been added to the NHB Act. This chapter provides for appointment of recovery officers of approved institutions and procedures for the recovery of housing loan dues from defaulting borrowers. This chapter also proposes for establishment of appellate tribunal to hear appeals against the orders of recovery officers.
The dues of defaulting borrowers of Scheduled Banks are also included for the purpose of recovery process under Chapter VA of the NHB Act. Besides, in terms of Section 36C of the NHB Act, Scheduled Banks have been defined as approved institutions, which imply that officers of scheduled banks would also be eligible for being appointed as recovery officers.