Mortgage finance has been proven highly efficient as one of the most
promising economic activities in the Egyptian market. Since the date of
commencement of mortgage finance activities and establishment of the
Mortgage Finance Authority (MFA) in 2001, MFA sought to develop and
create a highly efficient and properly organized mortgage finance market
strictly governed by integrated rules and legislation and effectively
participating in the development of the Egyptian economy, protecting
the rights of inventors and other market participants, restricting
market risks, maintaining market integrity and applying the principles
of equity and transparency.
According to Law No. 10/2009, the Egyptian Financial Supervisory
Authority (EFSA) was established on July 1st, 2009 to replace the
non-banking supervisory authorities, including the MFA.
Given the growing development and the increasingly diversified
activities of the mortgage finance market, EFSA seeks to improve its
performance and enhance its regulatory capacity and supervisory
efficiency in accordance with the highest international standards and
practices. EFSA, for this purpose, develops its legislation, rules and
internal procedures, thus effectively and efficiently performing its
supervisory role. As mortgage finance is a nascent activity in the
Egyptian economy, EFSA is constantly keen to spread awareness of
mortgage finance culture.
In support of EFSA’s role in raising investment awareness of mortgage
finance, we hereby provide this guideline which sheds light on a number
of errors that may be made by mortgage finance investors and describes
the means for avoiding these errors to maintain investments in this
Common Errors in the Dealing with Mortgage
First Error: Investor may not be accurate in selecting the
mortgage finance company (the company)
Resulting Risk: Investor may be subject to fraud by these
companies and his funds may then be at risk. EFSA may not be able to
interfere if such companies are not licensed by the EFSA to practice
Correct Action: Investor should be aware of the companies
licensed by the EFSA to practice mortgage finance, published here in
Second Error: Investor may not carefully read the tripartite
mortgage finance contract (the contract) before signature.
Resulting Risk: Investor may not be aware of all his/her rights
and obligations, which would result in conflicts between the investor
and the financier.
Correct Action: The contract clauses must be read carefully, for
the investor to guarantee full awareness of his/her rights and
obligations vis-à-vis the company, and to confirm that the contract is
the form contract approved by the EFSA.
Third Error: Investor may not specify the installments and other
obligations payable by him/her during the term of finance.
Resulting Risk: Investor may be subject to other various
obligations overburdening him/her, and would lead to legal increase of
the real estate’s cost.
Correct Action: Investor must confirm that all agreed upon
obligations are stated in the contract prior to signature. Moreover,
amounts must be recorded in figures and letters.
Fourth Error: Investor may sign documents, other than the
tripartite finance contract, without careful review; (powers of
attorney, bills in blank….)
Resulting Risk: Investor may be subject to risks of carrying out
transactions on his/her account without his/her knowledge, and may
further use such non-carefully reviewed documents against the investor.
Correct Action: Investor must read all documents carefully prior
to signature, and must not sign any document in blank.
Fifth Error: Investor may fulfill all the company’s requirements
and conditions so as to obtain the needed finance, without confirming
the validity of these conditions or understanding the purpose for
inserting such conditions in the contract; which conditions are called
Resulting Risk: Investor may be subject to overburdening
obligations that cannot be fulfilled thereafter, although such
obligations are not legally required to be assumed by the investor
according to the Mortgage Finance Law. Nevertheless, the investor
unnecessarily approved such contractual obligations by signing the
Correct Action: Investor must not approve any condition set by
the company without confirming that such condition does not prejudice
the investor’s own interest, (including but not limited to the
guarantees, the papers required to be signed, the documents needed, the
interest rate required…etc), after obtaining the finance. In this
respect, investor may confirm the validity of the required obligations
though the EFSA.
Sixth Error: The contract may not include the basic data of the
investor, such as his/her correspondence address and/or means of
Resulting Risk: The company may have difficulties in contacting
the investor, serve him/her notices, or advise him/her of any changes to
the finance costs, the address of the financier or the data required to
be monthly notified by the company to the investor.
Correct Action: The company must confirm validity of all personal
data given by the investor, and to accentuate that investor must inform
the company of any changes that may occur to such data.
Seventh Error: The investor’s deposit of fund in the company’s
safe, without obtaining valid documents proving receipt.
Resulting Risk: The company may not acknowledge receiving such
funds, unless an official receipt, describing the paid amount in figures
and letters and signed by the competent official, is submitted.
Correct Action: Investor must not deposit any funds without
obtaining an official document from the company, proving deposit.
Eighth Error: The investor may not obtain a copy of the contract.
Resulting Risk: The investor may not be able to follow up his/her
rights and obligations according to the terms of the contract, such as
the current installment's value and the changes that may occur during
the term of finance. The company may also add other terms and conditions
after signing the contract.
Correct Action: Investor must insist on obtaining a copy of the
contract after being dated and fully signed.
Ninth Error: Investor may not be aware of his/her obligations, in
case of accelerated payment.
Resulting Risk: Investor may pay amounts much larger than expected.
Correct Action: Investor must be aware of all obligations and
principles on which accelerated payment is made. Such obligations must
also be contained in the tripartite finance contract.
Tenth Error: Investor may not be quite sure of the company's name
or account to which fund transfer is made.
Resulting Risk: Funds may be mistakenly deposited in a wrong
account, which requires the investor to pay again.
Eleventh Error: The investor may not be sure of the companies
assigned to collect funds.
Resulting Risk: Some entities may fraudulently claim that are the
companies assigned for collection of funds, which results in a loss
sustained by the investor. Investor, as a result of fraud, shall be
required to pay the installment values once again or be subject legal
actions for payment failure.
Correct Action: Investor must contact the company to ascertain
the collection company's name and verify the collector's I/D.
Common Errors in Dealing with Mortgage Finance
First Error: Investor may accurately select a mortgage
intermediary (mortgage broker)
Resulting Risk: The intermediary may not play its role, and the
investor may be subject to fraud and deception that result in loss of
his/her funds paid as commissions to the intermediary.
Correct Action: Investor must review the EFSA list of
intermediaries on the EFSA website, and select one of them. It is to be
noted that the mortgage intermediary's services are paid by the
financier, not the investor.
Second Error: Investor may fully rely on the intermediary with
respect to submission of finance documents to the company.
Resulting Risk: The intermediary may fail or neglect to prepare
a full set of the investor's documents, which results in a delay in the
procedures for obtaining the mortgage finance value, and the investor
may be required to restart the procedures from the beginning.
Correct Action: Investor must follow up and confirm that the
intermediary has prepared all required documents on your behalf and that
the documents are valid and correct and not subject to any fraud or
Third Error: Investor may pay charges to the mortgage
Resulting Risk: Unnecessarily additional encumbrances are assumed
by the investor
Correct Action: Investor is not required to pay the
intermediary's charges which are already settled by the company. In case
the intermediary's charges are claimed to be paid by the investor, the
investor must file a complaint to the EFSA.
Fourth Error: Investor may assign the intermediary to find a
Resulting Risk: Investor may be subject to additional charges.
Correct Action: The mortgage intermediary's charges for preparing
the files must be separate from the intermediary's charges for finding a
residential unit. The investor pays charges to the intermediary in its
capacity as realtor, while the company pays charges to the intermediary
in its capacity as mortgage broker.
Common Errors in Dealing with Appraisers
First Error: The mortgage finance company may collect
overestimated appraiser charges from the investor.
Resulting Risk: Investor shall assume encumbrances more than
Correct Action: Investor should either review the
EFSA-determined appraiser charges published on the EFSA website, or
inquire about these charges at the EFSA premises.
Second Error: The appraiser may directly deal and collect its
charges form the investor.
Resulting Risk: Investor shall pay the appraiser charges twice,
as the financer systemically collects these charges and add same to the
installments owed by the investor even if these charges are directly
paid by the investor to the appraiser.
Correct Action: No amounts should be paid without the financer's
knowledge. Moreover, the financer and the EFSA must be notified of the
appraiser's violation; the direct collection of charges.
Third Error: Although the investor may not be convinced of the
appraiser's opinion, he/she may be forced by the company to accept the
Resulting Risk: Investor shall assume the value of finance as
well as the difference in value arising out of the disapproved
Correct Action: Investor shall submit an application to the EFSA
to select two appraisers to for reevaluation. Investor shall pay for