HFCs To Cover Mortgages

Housing finance companies (HFCs) have begun exploring mortgage guarantee products as they would like to cover their loans or set off those loans that are vulnerable to volatility in cash flows, said India Mortgage Guarantee Corporation (IMGC) chief executive Mahesh Misra. Many of the lenders avoid buying the product as they believe the loan loss has been much lower than premium in a market that is characterised by low default rates with borrowers having sentimental attachment to their properties. Mortgage guarantee pricing takes into account expected and unexpected losses. The former is calculated based on historical data and loss assumptions. Unexpected losses typically occur due to natural disasters and/ or strong economic shocks. Guarantee products step in to facilitate unhindered credit offtake by absorbing first loss.