Birla Home Finance securitises loans at Rs 9.27 crores

Birla Home Finance Ltd. (BHFL), a joint venture between Chambal Fertilisers and Chemicals Ltd. and BHW Holding AG (BHW), Germany's leading mortgage house has securitised its retail home loans at a premium of Rs.9.27 crores.

This first residential mortgage backed securitisation (RMBS) transaction of BHFL was completed by National Housing Bank (NHB) recently.This issue is the tenth RMBS issue of NHB, with the apex housing finance institution having securitised home loans of housing finance> companies and banks to the tune of Rs.669 crores so far. The issue was rated LAAA(So) by ICRA. UTI Securities Ltd. were engaged as the sole arrangers to the issue. BHFL will also act as the Servicer to the investors, BHFL officials said.

It may be recalled that NHB introduced the first RMBS transaction in India in August 2000. The number of RMBS transactions are steadily increasing in the capital market and are expected to contribute significantly to the development of the secondary mortgage market in the country.

While the RMBS issues in India primarily involved housing loans originated by housing finance companies (HFCs) and financial institutions in the private sector, NHB completed the first RMBS transaction of Andhra Bank last month signalling the entry of public sector commercial banks in the market.

The RMBS issue of BHFL involves pool of individual housing loans amounting to Rs. 34.38 crores offered to investors at a premium of Rs.9.27 crores.

The premium pricing structure involves two classes of Pass Through Certificates (PTCs) configured in a senior-subordinated manner. The senior certificates valued at Rs.30.70 crores have been issued at a premium of Rs.9.27 crores while the subordinated certificates have been subscribed by BHFL. The individual housing loans have been cherry-picked in accordance with NHB's stringent selection criteria in order to ensure high levels of omfort to the investors. The identified housing loans have been originated by BHFL in the states of Gujarat, Karnataka, Tamil Nadu and Maharashtra where the respective State Governments have issued notifications remitting stamp duties in respect of instruments of securitisation.

The securitisation process involves assignment of the housing loans by BHFL in favour of NHB and NHB constituting a Special Purpose Vehicle (SPV) in the form of a Trust for holding the housing loans. In its corporate capacity as also in the capacity of sole Trustee of the SPV Trust, NHB will issue the two classes of PTCs. Class B PTCs which are held by BHFL are subordinated to the cashflows of Class A PTCs and shall act as a credit enhancement for Class A PTC holders. The door to door maturity of the pool of loans that have been securitised is 129 months, which signifies the trend of RMBS papers with longer term structure.