Mortgage backed security (MBS) is a type of asset-backed security backed by mortgages of residential houses as their collateral. This is while these securities can be secured by automobile mortgages (auto-backed securities), mortgages of constructed houses, accounts receivables, credit cards debt (mortgages), etc. In other countries mortgage backed securities are backed by any type of assets (except for the US where these securities are special due to their prevalence and the large portion of fixed Income market allocated to them). The simplest kind of securities secured by mortgage is asset backed securities secured by mortgages. The market for this financial instrument has been expanded ten times and its transactions have presently reached the amount of 1.5 trillion dollars. The guarantor of back-up of MBS is the circulation of cash derived from guaranteed mortgages. These securities are actually backed by purchasing real estates and properties acquired through mortgages. For instance, when owners of properties pay a monthly amount for their mortgage, these installments through an appropriate and previously determined method are paid to a third party that has purchased the MBS securities.
In Iran mortgage backed securities are issued in two different categories, namely mortgage- backed government bonds and lease-based Sukuk (Sukuk Al Ijara). Regulations concerning these instruments are separately compiled in the Securities and Exchange Organization. One of the most important factors in developing these types of instruments for financing banks has been the determination of risk in each of these instruments. Throughout the world, ranking of these securities is performed by credit rating agencies; however, in Iran lack of these financial institutions makes it impossible to evaluate them. An alternative solution is using the evaluation systems by banks clients in order to obtain important information with respect to the possibility of default risk by the clients. Non existence of such systems in most of the country’s banks makes it impossible to evaluate the actual price as well as the risk of these securities. Recently, the Central Bank of Iran has announced its agreement to issue the amount of 3 thousand billion IRR of mortgage-backed securities backed by house loan facilities by the Maskan Bank. According to Iran’s Economic news, in a meeting by the special committee of Coordination Headquarters for Economic Affairs, members of the Committee emphasized on the employment of house loan securities and the performance of secondary transactions in the securities and Exchange Market in order to accelerate a boom in the housing and capital markets.
According to the same report, in this committee Deputy Minister of Roads and Urban Development, President of Securities and Exchange Organization, and the CEO of Maskan Bank were also participated and they agreed to make it possible to generalize the issuance of certificates of Housing Loan Priority to other banks after acquiring the required license from the Central Bank. Moreover, the opportunity for leasing companies in the housing domain, in condition that these companies do not use bank resources and after acquiring the necessary permit from the Central Bank, was discussed and agreed upon in the meeting.
This report indicates that, following the previous decisions and policies adopted and announced by the Money and Credit Council, implementing new and complementary measures and policies in the housing domain are vital, and in this regard instruments for issuing house loan securities from the beginning of the present year have come to attention and will soon become operational.