A team from the Banking & Finance and Capital Markets practices at Egorov Puginsky Afanasiev & Partners has provided legal support for a project called the Mortgage Securities Factory, a new tool used by Russia's Agency for Housing Mortgage Lending (AHML) to refinance mortgages.
With EPAM's support, the first bond placement under AHML’s Mortgage Securities Factory program for single-tranche mortgage-secured bonds took place on December 28, 2016. The first bank to securitize mortgage-backed loans using the new tool was the Housing Finance Bank.
EPAM's lawyers assisted in the preparation and approval of the necessary changes to the Federal “On the Securities Market” and “On Mortgage Securities” laws, as well as Issue Standards. Sample documentation for future transactions was drafted, and support was provided for a pilot transaction.
According to EPAM, "the 'factory' transaction model provides for bonds to be issued, backed by mortgages, from the balance sheet of a mortgage agent. The mortgage agent is a subsidiary of AHML. Bonds are issued in a single tranche, with provisions made for variable rates, and are covered by an AHML payment guarantee. In addition, AHML is obligated to repurchase defaulting mortgages in the interest of bond holders." The firm reports that, "these bonds will be of special interest to investors who are credit organizations due to the possibility of applying a preferential 20% coefficient of risk, resulting in a reduced burden on capital."
"The Housing Finance Bank, a specialized mortgage bank and a leader on the mortgage securitization market, is proud to announce that it is acting as both originator and servicer in the first transaction to be carried out by the Mortgage Securities Factory," said Ruslan Iseev, Chairman of the Board of the Housing Finance Bank. "We consider AHML’s Mortgage Securities Factory to be a new focus area in developing financing on the mortgage market, and with time, single-tranche transactions will come to occupy a dominant share of the market. We would like to thank the teams at AHML and at Egorov Puginsky Afanasiev & Partners for their highly professional approach to this project."
“We were delighted to participate in a project of this scale," commented EPAM Partner Dmitry Glazounov, who led the firm's team on the deal. "It was a great honor for us to work together with AHML to develop the mortgage market." Glazounov was supported by Senior Associate Oleg Ushakov and Associates Maria Kondratskaya, Gilyana Haraeva, Vladimir Goglachev, Alexander Filchukov, and Nadezhda Morgunova.