India Ltd

India Mortgage Guarantee Corporation - IMGC

India Mortgage Guarantee Corporation Private Limited (IMGC) is the first Mortgage Guarantee company in India created with a vision to make early ownership a possibility for wider people through guarantee support. The company is a joint venture of Genworth Financial, National Housing Bank, International Finance Corporation (IFC) and Asian Development Bank (ADB). Mortgage Guarantee (MG) is a credit default guarantee taken by mortgage lenders against borrower's payment defaults. The guarantee becomes payable when a specified loan becomes delinquent and non-performing, and the lender fails to recoup its outstanding principal and interest. MG can be given out at two different stages of the loan cycle and is categorized as the Flow & Bulk product accordingly. New Home Loan Origination: (Flow) Lenders use guarantee product predominantly for first-time home borrowers with no credit background. A large part of them are in the middle- and low-income group; who often do not have adequate savings for down payment. MG improves their affordability through either loan tenor extension or improved debt to income levels. Some lenders were hitherto averse to lending to those employed with small and micro enterprises. Certain geographies were underserved owing to distance from urban limits. Guarantees are actively used by lenders to facilitate borrowings by these segments. Existing Loan Portfolio: (Bulk) Securitization of loan portfolios is an established practice to increase liquidity or grow inorganically. Potential sellers (especially smaller NBFCs) often find it difficult to find buyers for their portfolio owing to higher perceived risk. A guarantee can act as a safety net by providing first loss cover on these loan pools and also act as a substitute for a cash collateral. Value proposition to Lender: — Liquidity: Cash flow benefit when a loan becomes NPA — P&L Benefit: First loss borne by Guarantor (risk transfer) — Product set expansion — Capital Relief