Features of Collateralized Mortgage Line of  Repayment—Through assignment of receivables Risk Factors and Mitigants Credit from underlying mortgage repayment which will Credit Risk  Profiles of Borrowers/Sponsors—Commercial be credited to the Trust. In the event of default Arising when the actual mortgage default rate bank, non-bank financial institutions, and or when the cash flows from the underlying goes beyond the expected level. specialized mortgage origination companies. assets do not cover the entire debt obligations to  External credit enhancement: corporate  Currency—US Dollar or select local currencies. IFC, IFC still has full recourse to the borrowers guarantee, insurance.  Security—Mortgage assets pledged as and its guarantor(s).  Internal credit enhancement: Over-collater- collateral meet pre-defined eligibility criteria.  Standard Fees—Commitment fee of 0.5% per alization, debt service account.  Key Documentation—Loan agreement, Trust annum on the undisbursed principal amount of Legal risk Agreement, Security Agreement, Servicer the line and one-time up-front fee of 1.0% of the Arising from the ineffectiveness of enforce- Definition of Collateralized Mortgage Agreement. principal amount of the line. ability of lien title in the event that default Line of Credit occurs at a significant scale. Collateralized Mortgage Line of Credit (CML)  Legal opinion from local counsel. is a commitment by IFC to lend funds against a Servicer Risk pledge of mortgage assets held as collateral for How Collateralized Mortgage Line of Credit Works? Arising from the inability of servicer to IFC’s obligation. Typically, the line is The structure described below is a generic one, and it may be modified under different context. perform its obligation. structured as a revolving line allowing  Pre-identify a back-up servicer. multiplier effect for mortgage origination. This Currency Mismatch Risk product is usually used by primary mortgage A A Mortgage IFC BorrowersBorrowers Origination market originators and can be viable if Arising from the fact that mortgage loans are typically dominated in US dollar, while the securitization is not yet available. C mortgage borrowers typically earn in local B Preconditions for Collateralized Security Vehicle currency. Mortgage Line of Credit D  Over-collateralization  Sufficient mortgage demand to generate a E pool of mortgage assets with critical mass Impact of Collateralized Mortgage on Custodian/ Securitization Capital Emerging Markets and pre-defined diversity. Trustee Vehicle Market   Bankruptcy-remote security vehicle, such as Increase mortgage origination volume by a general Trust to support pledge of giving financial intermediaries access to mid mortgage lien as security held by the A IFC provides the CML to an eligible borrower to D A reputable financial institution is selected as a and long term funds which may be difficult designed structure. originate mortgage loans based upon pre-defined criteria. trustee. to secure otherwise;   Existence of an effective lien registration B Borrower pledges a pool of mortgage assets to IFC as E After appropriate level of seasoning, assets trans- Encourage the growth of lending activities in system to assure IFC's interest in the collateral of the line of credit. ferred to securitization vehicle to be placed as a underserved low-income sector.  collateral as a lender is recorded timely and C The mortgage assets are held in a bankruptcy-remote mortgage backed security (MBS) in the capital market. Facilitate the standardization of underwriting, This serves as a repayment to the IFC, and can be accurately. security vehicle which is established for the purpose documentation and servicing of mortgage re-borrowed by the borrower. IFC will continue to have  Support of pledge of mortgage lien as of establishing security for the line of credit; As business, thus helping to build up a platform full recourse to the Borrower in the event that cash security held by a special purpose vehicle. permitted by law, all rights (including, but not limited for future securitization transactions; flows from the underlying assets in such Trust do not   Legal system to facilitate foreclosure and to, collection rights) relating to such underlying Contribute to improving the legal and mortgages would be held in such for the benefit of IFC. cover the debt obligation to IFC. eviction in the event of default by individual regulatory environment for housing finance. sub-borrowers of the underlying mortgages. FC, a member of the World Bank Group, Potential Scenarios of Collateralized Mortgage Line of Credit is the largest multilateral source of loan Assuming a US$50 million of Collateralized Mortgage Line of Credit with a maturity of 7 years. Iand equity financing for private sector projects in the developing world. IFC’s Year 0 Availability Period 557Repayment Period 7 mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. AmountAmount ML NotionalML Notional CC 18th Month 30th Month 42nd Month Contact Information Housing Finance Group DRAWDOWN * Paydown through securitization within Global Financial Markets Department DRAWDOWN availability period may be re-borrowed. International Finance Corporation SECURITIZATION & PAYDOWN* 2121 Pennsylvania Avenue, NW SECURITIZATION & PAYDOWN* Washington, DC 20433 T: 202.473.4516 Web site: www.ifc.org/housing Examples of IFC’s Collateralized Mortgage Lines of Credit Asia  Bangladesh—DBH Europe and Central Asia  Romania—Romania  Russia—DeltaCredit Bank Latin America and the Caribbean  Argentina—Banco Hipotecario  El Salvador—Hipotecaria-Elsa  Mexico—Su Casita, HipNal, and Credito y Casa  Panama—La Hipotecaria  Peru—Interbank-Peru