Supervisor of Banks Dr. Hedva Ber is pouring cold water on cooperation between the banks and investment institutions in the sales of mortgages. Sources inform "Globes" that Ber recently sent the banks a draft circular with rules for deals and cooperation in this sector. The main rule is that banks can sell only 6% of their mortgage portfolio. The banks' aggregate mortgage portfolio currently totals NIS 300 billion, meaning that the amount that can be sold to investment institutions is NIS 18 billion.
Over the past 18 months, the banks' cooperative deals amounted to an estimated NIS 8 billion, with more to come. Ber's restriction will make future cooperation more difficult, and is liable to bring it to a complete halt in the long term. Ber is allowing an increase in the volume of such cooperation to 10% of the portfolio, amounting to NIS 30 billion, but only in deals in which no selectivity of the mortgage loans is exercised. "Sale or syndication will be allowed in loan portfolios selected randomly from within a group of loans provided during a given period, provided that the quality of the loans sold does not constitute a criterion for their inclusion in or exclusion from the portfolio to be sold," the draft circular states. This instruction, however, clashes with the instruction by Capital Market Authority director Dorit Salinger restricting investment institutions in the purchase of mortgage portfolios to those in which the loan-to-value (LTV) ratio is less than 60%. This regulation is aimed at preventing exposure of investment institutions to higher-risk loans. As long as this restriction remains in place, Ber's instruction will not leave much room for cooperation in mortgages between the banks and investment institutions.
The restrictions are designed to apply mainly to Bank Leumi (TASE: LUMI), Bank Hapoalim (TASE: POLI), and Mizrahi Tefahot Bank (TASE:MZTF), which have conducted a number of deals selling mortgages to investment institutions. Most prominent in this category is Bank Leumi, which both sold some of its portfolio and is cooperating with Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) in providing new mortgages amounting to less than 60% of the property value. This cooperative agreement, which has been in effect for a nearly a year, is scheduled to end at the end of 2017. It is doubtful whether the bank will be able to conclude agreements under the new restrictions, since it is already close to the limit set by Ber.
Mizrah-Tefahot Bank, the largest player in the mortgage market, and Bank Hapoalim have made deals totaling over NIS 3 billion. These two banks can still sell several billion shekels of mortgages before reaching the limit. "It is a pity that the regulators are not in sync. On the one hand, the Ministry of Finance wants to address the housing problem, and there is also criticism of the rise in the mortgage rate, but when there is already a possible solution in the form of cooperation, the regulators are strangling it, because each of them is looking only at the institution it supervises," a source concluded.
Published by Globes [online], Israel Business News - www.globes-online.com - on February 19, 2017
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