Russia Primary Mortgage Market Development Project

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Russia Primary Mortgage Market Development
Project
Russian Mortgage Securitization
September 10, 2007 NYC, NY
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Agenda

• IFC legislative initiatives
• Standard servicing data
• Prepayment modeling
• Value and usage of disclosure

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Market developments opinion

• Total portfolio about USD19B
• Top 6 lenders have 80 of portfolio outstanding
• 2 models universal bank v. distributed
  specialized element system
• Servicing becomes key
• Funding model cleanup
• Further consolidation possible
• RUR products dominating

4
Legal Environment

• 5 legislative amendments for primary and
  secondary mortgage loan market

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Legislative Initiatives

• 2005-2006 IFC work on standard mortgage
  certificate, now adopted by key players
• Taxation amendments adopted June 2007
• VAT and profits tax consequences of mortgage loan
  and certificate transactions
• Improve the mortgage certificate creation and
  liquidity
• borrower refinancing
• electronic filing
• reference certificate
• Securitization Bill review and amendments
• Strengthen access to capital markets

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Standard Servicing Data

• IFC and key transaction sponsors
• Uniform data points for loanborrowerpropertypa
  ymentdefault
• Standard servicing data format and notation
• Standard investor reporting format
• Standard analytical data points and conventions
• Logical data model and description
• Overall data tape fields and description
• Disclosure and exchange packets format

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Full vs. Partial Prepayment

• Partial prepayment specific to Russian market may
  be ignored in traditional models
• Full Prepayment
• Mortgage loans leave portfolio
• Average monthly payment decreases
• Weighted average remaining term is preserved
• Reasons refinancing, turnover, etc.
• Partial Prepayment (Curtailment)
• Mortgage loans remain in portfolio
• For each curtailed loan either (1) monthly
  payment is reduced or (2) remaining term is
  reduced
• In case (1) cash flow mathematics is the same as
  for full prepayment (mortgage loan is split into
  two components)
• In case (2), which prevails in Russian market,
  weighted average remaining term of the portfolio
  is reduced
• Further consider partial prepayment type that
  preserves monthly payment and reduces remaining
  term (case 2)
• Reasons high paying capacity, additional income,
  unwillingness to be in debt

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GPB-Mortgage and First Mortgage Agent of AHML
Portfolios

• 100 loan purpose - purchase, 98 property type -
  apartment
• Similar underwriting standards (lockout period
  etc.)
• Fixed rate level pay without reset RUR loans
• Significant regional diversification
• Curtailments reduce remaining term and preserve
  monthly payment
• Identical curtailment rate (5 CPR) close full
  prepayment rate by WAC

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Main Prepayment Factors
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Full Partial Prepayment by Date
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Full Partial Prepayment by Seasoning
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CODEWORD STRIDE

• ABS risk disclosure environment
• Guidance by Dr. Tanega of Westminster U, London
  UK
• Asset pool, transaction parties and structure
  description
• Comparative analysis of Reg AB, EU and Russian
  statute

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CODEWORD STRIDE

• Statutory amendments
• Prospectus, periodic disclosure
• Intrinsic asset value calculation
• Transaction and instrumental analysis
• Regulation-driven volatility reduction
• Global uniformity

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CODEWORD STRIDE

• Peer review process starting
• RFC contacts welcome
• Private website area for reviewers
• Draft public Nov 2007
• Regulator event Nov-Dec 2007

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Contacts
Andrey Milutin IFC Advisory Services Moscow,
Russia amilyutin_at_ifc.org 7 495 410 3660