Saudi Arabia’s first mortgage-refinancing firm has started approaching banks to buy their mortgage portfolios as the state tries to boost lending for homes, Bloomberg reports.
In 2015, Bloomberg and Reuters reported on Saudi Arabia’s plans to work with the Boston Consulting Group to help start a state-owned mortgage firm similar to the U.S.’s Fannie Mae and Freddie Mac as it seeks to develop a secondary market for home loans.
The 2015 report said the Kingdom’s Public Investment Fund (PIF) is providing most of the approximately 10 billion riyals ($2.67 billion) of the institution’s capital, three people told Bloomberg. However, the Kingdom’s housing minister, Majed al-Hogail said the company “will have 5 billion riyals ($1.3 billion) of its own capital and will work with the government’s Real Estate Development Fund (REDF) to invest another 5 billion riyals buying mortgage portfolios.”
“We expect to start buying the portfolios from the banks in late May or mid-June,” al-Hogail said. “Hopefully by the end of the year, we will securitizing this portfolio.”
According to Bloomberg, The remortgage company is waiting for central bank approval for some products before it can formally launch its operations, the minister said. It will buy portfolios “based on strategic criteria” to power the market’s growth, Al-Hogail said.
Few national challenges for Saudi Arabia are more important than tackling its housing shortage. In an interview on Tuesday, Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said that more than a million housing units will be offered to Saudi citizens at affordable prices.
