CBE sets new controls for mortgage finance initiative for low-income individuals

Hossam Mounir
5 Min Read

The Central Bank of Egypt (CBE) has issued new measures and controls for the mortgage finance initiative launched in February 2014 and its following amendments. The initiative has been limited to only individuals with low incomes.

In a statement, the bank stressed that the initiative will continue to provide financing to the low-income clients after its recent decision in January to make it limited to the low-income based on the new rules and measures.

The new measures include providing mortgage finance to clients who meet the CBE conditions through the banks’ resources at interest rates of 5 – 7% for the low-income segments for a maximum period of 20 years without providing treasury bills as a guarantee.

CBE noted that banks will be compensated for the price difference of interests based on the main operation’s price at the CBE.

The new controls also stipulated that the interest rates applied on mortgage financing shall not be changed after its provision and during the entire period of the loan.

The new measures added a condition that the CBE must be informed about the value of compensation within the first week of each month starting from the month that follows providing the loan.

The CBE has stressed the importance of banks taking the necessary measures for providing the mortgage financing to any low-income individual in the light of their credit policies, taking into consideration all credit controls issued by the CBE.

The CBE explained that banks must receive applications from low-income individuals through the Social Housing Fund, as this initiative will be applied on all the available units through the fund only.

The new procedures have stipulated conditions for the clients benefiting from the initiative, they must have the Egyptian nationality and they are entitled to benefit from the initiative only once, regardless of any mortgages that have been or will be obtained by the client outside the framework of the initiative.

The CBE has also stipulated that the maximum monthly income of customers and the maximum unit price shall be determined by the Board of Directors of the Social Housing Fund.

The new measures have allowed each bank to carry out the necessary credit studies according to its policy, obtain required credit approvals, and ensure all the conditions and guarantees that enable banks to complete the mortgage measures for clients were met, taking into consideration that the inquiry about clients shall be conducted through the Egyptian Credit Bureau (I-Score) to ensure that clients have not previously obtained a funding within the initiative’s framework.

The new procedures also stipulate that clients’ data shall be recorded on the e-registration system of the CBE’s initiative to ensure that clients have only purchased one unit through the subsidised mortgage system, so that all banks would have the right to refrain from dealing with the client within the initiative’s framework once he has obtained a financing approval from one bank.

As for families, the measures stipulated that the clients’ marital status must be updated simultaneously. Documents that prove a change in the marital status must be provided to the bank that provides the loan.

According to the new procedures, if the client wishes to sell the unit or accelerate payment, the value of subsidy provided on the unit, starting from the date of granting the unit until the date of selling or accelerated payment, shall be refunded

The banks shall also be entitled to apply a 2% delay fee on the final value of the loan to be paid in instalments.

The new measures have excluded the injured and the families of police or army martyrs from the maximum income condition.

The measures have also included the possibility of using the assessment prepared by the Ministry of Housing or the New Urban Communities Authority, real estate assessors registered on the CBE’s list of house of expertise assessors, or assessors that have been dealt with in the past, as a way to reduce the cost of real estate assessment.

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