Economy, Business And Markets

MBS a solution to stressed housing market

MBS a solution to stressed housing market MBS a solution to stressed housing market

A market expert suggested mortgage-backed securities as an effective financial tool to raise fund for the housing market, in a move to help it overcome current recession and become regulated in consequence.

Hossein Khazali, CEO of Keshavarzi Bank Brokerage, said: “The main problem, which the housing market is struggling with over the past couple of years, is the lack of liquidity, making the supply side face serious difficulties,” IRNA quoted him as saying on Tuesday.  

He said mortgage-backed securities are in line with sharia, noting that with regard to previous global experience in using such securities and tight supervision over their issuance through an appropriate risk-return management, the securities can help better finance Iran’s housing market.

MBS is a type of asset-backed security that is secured by a mortgage or collection of mortgages. The mortgages are sold to a group of individuals (a government agency or investment bank) that securitizes or packages the loans together into a security that investors can buy.

“When you invest in the securities, you are essentially lending money to a home buyer or business,” he said. “It offers a solution to a smaller regional bank to lend mortgages to its customers without having to worry about whether customers have proper collaterals. Instead, the bank acts as a middleman between the homebuyer and the investment markets.”

He said Bank Maskan, the only specialized bank in charge of providing home loans, can take advantage of the securities to finance construction projects, noting that mortgage-backed securities are low risk as they are backed by physical assets, a feature that improves the attraction of such securities to the investors.

“MBS can also be tradable in the Iran Fara Bourse or over-the-counter exchange market, based on specific maturity dates and initial values,” he added.