1. MORTGAGE MARKET DEVELOPMENT IN MONGOLIA ISSUES AND CHALLENGES
MONGOLIAN MORTGAGE CORPORATION
Regional
Symposium
on Pro-Poor
Housing Finance
in Asia and Pacific,
MORTGAGE MARKET DEVELOPMENT IN MONGOLIA ISSUES AND CHALLENGES
Ts.Enkhbayar
CEO
New Delhi, India

2. Content Housing finance system development process
Mortgage market overview
Status of conditions on mortgage market development
MIK performance , issues and challenges

3. Housing finance system development overview
Before 1990s Top down system
Top down system
Financed by 100% state
Waiting list
Free housing delivery
Transitional period
Housing supply stopped
Housing law (1997)
State Housing policy
HFS needs
Enabling environment
Housing privatization
ADB project 3090
Some initiatives by private sector
2000s preparatory stage
Private investment started
Housing demand and supply study (ADB)
HFSP by ADB started
Kick off
Mortgage loans started in 5 banks
Loan portfolio 205 bln tug
Loan standards, documentation, database
MIK established 2006
HFC established 2007
Housing supply increased
Housing demand
2008 …. Development
Setting up mortgage legal environment
Proper PMM infrastructure
capital market development
Capacity building, Institutional strengthening
Warehousing
Liquidity facility
Issuance MIK bond
Phased development approach

4. Housing Areas: Serviced apartment area Ger area Planning –proper ,
70%- population
59%- UB
80-90% provincial towns
Serviced apartment area
Ger area
Planning –proper ,
Water supply – central system
Sewage – central system
Heating – central system
Electricity – central system
Social infrastructure –sufficient
Apartment ownership –yes
Housing finance – mortgage loans, savings
Planning – not proper
Water supply – kiosks (potable)
Sewage – pit latrine
Heating – stove using coal and wood
Electricity – yes
Social infrastructure – not sufficient
Land ownership –yes
Housing finance – savings, assistance from relatives and friends, loans

5. Market Core Indicators
Mortgage market overview
Market Core Indicators
2003
2004
2005
2006
2007
2008
2009
Total Debt Outstanding /mln.MNT/
8,2 19 31
74,3
164,6
217
226
Total Debt Outstanding / Changes/ : 0%
132%
62%
141%
122%
8.3%
8.5%
Debt Outstanding/Borrower /mln MNT/ :
7,2
6,6
6,5
8,3
10,0 13
13.6
Number of Mortgage Borrowers
1,057
2,892
4,774
8,984
16,444
16 590
16 628
Market W.A.I.R /Ann , %/:
12.0%
14.5%
14.7%
17.8%
16%
18.7%
17.2%
Original W.A. LTV % :
83%
70%
75.%
76.%
68%
78%

6. Shareholders Main Goal
Promotion and development of primary and secondary mortgage markets by raising medium to long term funds on domestic and foreign capital market through a series of capital market tools to create and ensure s smooth functioning of long-term financing system to promote affordable home ownership and urban development for Mongolia’s people.
MIК
Bank of Mongolia
Anod
Capital
Capitron
Golomt
Khaan
Mongol Post
TDB
UBC bank
Хас
Zoos
Established
Background The Mongolian Mortgage Corporation (MIK) is established on September of 2006, when Bank of Mongolia (BoM) and ten comercial banks signed a joint Founding Agreement to work together towards to establishment of a private sector controlled Secondary tier Mortgage Institution.

7. Mortgage market activity
Borrower
Mortgage Bonds
Lender
Commercial Bank
loans
Secondary Mortgage Market Institution
INVESTOR (International, Domestic )
Loan
Funding
Funding ₮
2 major role
i) market development driver I
i) Pioneering SMM
PRIMARY MORTGAGE MARKET
(Large amount, qualified, guaranteed ,Mortgage loan that attract investors)
Borrower - Lender
SECONDARY MORTGAGE MARKET
( Raise fund through making a portfolio on similar housing mortgage loans to sell it to the third party)
Lender- Agency- Investor

8. MONGOLIAN MORTGAGE CORPORATION
Shareholders
Board Members
Financial Committee
Operational Committee
Risk Committee
Legal & Audit Committee
CEO
Asset management and Securitization Division
(Asset management officer, Securitization officer)
Finance and Investment Division
(Senior finance officer, Accountant, Assistant Accountant)
Risk Management Division
(Risk management officer)
Internal operation Division
(IT, Layer, Cooperation officer, Administration & HR officer)

9. Reason why we established MIK
Increase the affordability of the housing loan
Stable structure for long term financing
Increase in housing mortgage market
Need for capital market development
Liquidity facility

10. МIK OPERATION 16% - PWR 84% - PWOR
Dec 2009 swapped MIK bond with mortgage pool

11. DEVELOPMENT PHASES
Diversification
Development period
Start up period (setting up solid foundation for mortgage market development)

12. Phased Development Approach
Start up period
Legal and policy environment related with mortgage market development will be in place
Financial infrastructure related with mortgage market will be in place. dominant player
By purchasing qualified mortgage pools and issuing MIK bonds MIK would become financially capable and highly professional mortgage financing institution

13. Issues to be done for developing efficient mortgage market development
Legal environment
Mortgage law
Mortgage security SPV
Pool registration Tax matter MIK legal status
Primary mortgage market infrastructure
Standardization of mortgage loans
Property appraisal
Mortgage database system
Mortgage insurance
Credit bureau
Capital market development Rating
Income verification system
Market environment
Political stability
Economic stability
Balance on Supply and demand
Creating domestic potential investor
Affordability
Capacity development
Institutional capacity
Coordination and linkages of market players
Quality of collateral
Efficiency of Urban planning, land development, construction quality
Effective operation and maintenance

14. MIK Progress Sep 2006 MIK established June 2007
MOU signed with KfW, MOF, BOM
Nov. 2007
First mortgage pool purchased
June 2008
MIK set up internal operational procedures
Oct. 2008
Mortgage standardization procedure approved
May 2009
Mortgage toolkit with IFC TA project
June 2009
Mortgage law approved
July 2009
Agreement with MOF-KfW
August 2009
FRC shelf registration MIK Bond
Sep. 2009
UNESCAP-UNHABITAT- NHB workshop
Oct.2009
first OTC transaction and procedure
Oct 2009
First MIK bond issued and sold
Dec 2009
KfW TA started
Jan 2010
MIK IT infrastructure
March 2010
Micro housing finance study project , IFC
April 2010
ABS law has discussed by Parliament
Domestic investor-insurance companies involved
Mortgage guarantee program initiated with FMO

15. learning Play dual role
Driven force of setting up Mortgage market development as well as capital market
(laws, regulations, policy framework, financial infrastructure, capacity building, workshops, RTD, lobbying, etc)
Acting as secondary mortgage institution
Purchasing pools from banks, warehousing m issuing bonds and selling investors etc
Institutional strengthening and capacity building

16. ISSUES AND CHALLENGES
Implementation of laws and regulations recently approved
Economic stability
Different Understanding of mortgage issues
Standardized and documented origination and servicing
Low affordability rate
Local rating agency
Inappropriate Professional appraisal
Title and Lien registration, enforcement
Balance sheet treatment with recourse based loan pools and bonds
Bankruptcy remote vehicles
Tax and accounting guidelines
IT infrastructure AM
Credit scoring
Mortgage insurance
Mortgage guarantee program

17. What is next? Improve accessibility housing loans to LIHs
Housing micro finance study,
Guarantee program with international orgs.
ABS , SS laws and related regulations, by laws
Issue bonds to domestic and international market
Expanding cooperation
Network meeting in Mongolia APHFU
Intensive development of mining industry –coal mining, copper mining, gold etc and

18. THANK YOU Mongolian Mortgage Corporation LLC /MIK/
MIK Building , United Nations street-38
Chingeltei district-4, 15160
Ulaabaatar, Mongolia
Tel: (976)
Fax (976)