Press Release
Wednesday, April 18, 2007
OPIC PROVIDES $200 MILLION FOR MORTGAGE SECURITIZATION FACILITY IN RUSSIA
WASHINGTON, D.C. – The Overseas Private Investment Corporation (OPIC) announced today that it will provide $200 million in financing for a mortgage credit facility in Russia that could potentially support more than $1 billion in securitized mortgages, and as such represents a significant step toward the establishment of a secondary mortgage market in the country, said OPIC President and CEO Robert Mosbacher, Jr.
Greenwich Financial Services (GFS), LLC, a Connecticut-based investment bank, will use the OPIC investment guaranty to establish a revolving mortgage warehouse credit facility that will fund the purchase of home loans from mortgage originators and aggregate the purchased mortgages for securitization and sale into the international capital markets – a process that creates mortgage-backed securities (MBS).
The project represents the first continuous multi-seller mortgage facility in the Russian Federation and the first conduit directly linked to offshore securitizations for the Federation. GFS has created the Russian American Mortgage Company, LLC (RAM) as a U.S.-based entity to manage the facility. RAM will work closely with Russian mortgage originators, international investors and OPIC to develop a deep and liquid secondary market for MBSs.
Mortgage warehouse facilities are common in the United States and represent nearly one-third of all origination volume in the country, reaching nearly $1 trillion in 2005 alone. In Russia, however, it is difficult for banks to originate the necessary critical mass of mortgages required to benefit from a securitization. Working with OPIC, RAM will address these shortcomings by developing origination standards and common issuance practices, thereby assuring transparency and efficiency in the Russian mortgage market.
“Developing a secondary mortgage market in Russia, which in turn depends on standardized mortgage origination requirements, strengthened market information and regional banking, is the greatest challenge facing Russia’s housing sector. This OPIC sponsored project represents important progress toward meeting that challenge,” said OPIC President and CEO Robert Mosbacher, Jr. “We expect this project to generate a ripple effect that will carry through the Russian economy and reduce the cost of home ownership. Furthermore, it is expected that OPIC’s involvement will increase the flow of private capital and expertise to this vital sector of the Russian economy. OPIC is pleased to support a project with so many developmental benefits.”
The project is the second in the last eight months involving Greenwich Financial Services, which specializes in advising issuers, structuring and placing securitized assets in the U.S. and abroad. In 2005 GFS completed the first asset backed securitization in Russia and recently pioneered the first public securitization of mortgage certificates in Russia. This opened a new avenue of funding for Russian mortgage lenders and will ultimately result in more affordable borrowing terms for homeowners. Last September, OPIC announced that GFS had used a $6 million OPIC loan to support the transaction.
“This mortgage facility will enable financial institutions to bring the liquidity and efficiency of the international capital markets to the private housing sector in Russia,” said William Frey, president of GFS. “Due to recent changes in Russian government policies and laws, RAM will be able to apply the financial technologies developed in the U.S. to facilitate home ownership in the underserved Russian market.”
GFS is a privately held Broker Dealer founded in 1995 as a securitization specialist that has done large numbers of innovative securitizations in the US and abroad. GFS has acted as financial advisor to Ginnie Mae regarding securitization and new product creation and development. Seniors members of GFS have been continuously involved in the US mortgage market since its inception in the early 1980s.
OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. Because OPIC charges market-based fees for its products, it operates on a self-sustaining basis at no net cost to taxpayers.
OPIC’s political risk insurance and financing help U.S. businesses of all sizes invest in more than 150 emerging markets and developing nations worldwide. Over the agency’s 35-year history, OPIC has supported $164 billion worth of investments that have helped developing countries to generate more than 732,000 host-country jobs and $13 billion in host-government revenues. OPIC projects have also generated $69 billion in U.S. exports and supported more than 264,000 American jobs.