Mortgage finance is governed in Egypt by Law No. 140 which was issued in August, 2001 (the Law). According to the Law, mortgage finance is interpreted as a method for financing the purchase, construction, restoration and/or development of houses, administrative units, service foundations and any buildings designated for practicing trade. The EFSA is assigned to supervise mortgage finance activities in which the following main market players are involved:

• Mortgage finance companies.

• The Egyptian Mortgage Refinance Company (EMRC).

• Securitization authorities.

• Mortgage finance intermediaries.

• Mortgage finance appraisers.

• Mortgage finance agents

• Auditors

• The credit bureaus and insurance companies, which act as parties complementing the mortgage finance process.

EFSA Role in Mortgage Finance

EFSA is authorized to supervise the mortgage finance affairs, set the controls ensuring market efficiency, follow up, control and development, and undertake all the measures that maintain the rights of all market dealers. The EFSA is specifically assigned to:

• Make the general policies required for directing mortgage finance activities,

• Grant licenses to the mortgage finance companies for practicing activities.

• Decide upon all applications submitted by companies regarding mergers, suspension of activities and/or total or partial liquidation of assets.

• Keep and maintain schedules and registries for listing real estate appraisers, mortgage finance intermediaries and real estate agents, granting them licenses, supervising their activities; and for listing the related auditors.

• Set the Financial Reporting Standards (FRS) for companies.

• Control and supervise the companies and impose administrative penalties on violators.

• Undertake anti-money laundering procedures.

• Protect investors and dealers operating in the mortgage finance market.

Mortgage Finance for Low-Income Families

For the purpose of easily providing affordable housing to low-income families, a mortgage finance subsidy and guarantee fund was established by virtue of Presidential Decree No. 4 for 2003; and is now under the EFSA control. The term "low-income" refers to any person whose total monthly income does not exceed LE 17500 and to any family whose total monthly income is no more than LE 2,500. The fund is assigned to finance residential units at a maximum level of finance of LE 95,000 per unit.

The Egyptian Mortgage Refinance Company (EMRC)

EMRC was established in June 2006, with a capital of 212 Million Egyptian Pound and with the objective of providing long-term finance to the mortgage finance companies and the banks operating in this field of service. Finance is collateralized by the real estate portfolios of companies and banks and is granted according to specific rules and controls. In this respect, EMRC resolved to issue bonds duly collateralized by real estate loan portfolios, which help enhance the bond market and provide long-term finance resources.

Developing the Mortgage Finance Activity

Since July 2004, the Government policies has been aiming to develop and reform the financial sector, organize markets, develop the markets' organizational and legislative structure, support the regulatory frameworks, enhance the capital structure of financial institutions, protecting dealers' rights. The reform program for non-banking financial services sector consisted of two main phases; the first phase for (2005-2008) and the second phase for (2009-2012). The first phase has been aiming to establish the financial institutions, ensure their integrity and develop pertinent strict controls ensuring due efficiency, stability and liquidity of the financial sector. With respect to the mortgage finance market, this phase has also been aiming to raise the market efficiency level by adopting the following targets:

First: Development of the Legislative Framework Regulating Mortgage Finance

• Amending the Executive Regulations of Mortgage Finance Law No. 148 for 2001, which was issued by virtue of Premier's Decree No 465/2005; these regulations provided various facilities to market dealers, particularly in respect of the means for proving the investor's revenue and specifying the investors entitled to benefit from the "mortgage finance subsidy and guarantee fund", and in regard to the approval standards pertinent to the mortgage finance intermediaries and appraisers.

• Adding a new chapter to the Executive Regulations of Capital Market Law No 95 for 1992, allowing for conducting securitization activities so as to activate the secondary market.

• Amending a number of provisions of CBE Law No. 88 for 2003, to regulate the scope of exchanging information and data pertinent to clients' debts and credit facilities. Such amendment covers the mortgage finance and financial leasing companies, and allows for incorporation of companies rendering credit reporting and credit rating services.

Second: Development of the Institutional Framework and Regulatory Controls to Protect Market Dealers' Rights and Enhance Transparency

• Developing the regulations and controls whereby licenses are granted to companies for practicing mortgage finance and to the competent mortgage finance experts, such as intermediaries, agents and appraisers.

• Developing the standard forms of mortgage finance terms and agreements, to facilitate securitization dealings.

• Setting the general rules and controls that regulate market dealings in accordance with the highest international practices and pursuant to the recommendations given by Basel-2 Conference.

• Unifying all the procedures used for calculating the schedules of debt amortization and finance installments.

• Issuing mortgage refinance controls and setting the regulatory framework required for the Real Estate Investment Trusts (REITs)

• Issuing controls regarding the acquisition of shares in the licensed mortgage finance companies.

• Developing regulatory controls over mortgage finance companies, with respect to anti-money laundering and anti-terrorism funding.

• Facilitating the real estate foreclosure procedures and reducing the period of time required to do so.

• Issuing regulatory controls with respect to granting mortgage finance in foreign currencies.

• Providing insurance coverage against the risks of death and paralysis, as required for enhancing the mortgage finance market.

Third: Development of Real Estate Registration System (Registry of Deeds) and Removing the Pertinent Obstacles

• Reducing the real estate registration charges to be LE 2000 at maximum, by virtue of Minister of Justice Decree No. 5424 for 2006.

• Facilitating the real estate registration procedures applied to the new urban communities. In this respect, a protocol was signed with the New Urban Communities Authority, allowing for transformation of the "allocation letters" into "recordable legal documents" and permitting partial registration of projects. .

• Exempting the mortgage finance contracts from the proportional stamp tax.

Fourth Development of the Secondary Market

• Incorporation of the EMRC in June 2006, with the objective of providing long-term finance to the mortgage finance companies and the banks operating in this field of service. EMRC grants finance duly collateralized by real estate portfolios, thus reducing the credit risks and the interest rates imposed on the loans granted to clients. This is in addition to initiating securitization dealings.

Fifth: Providing More Housing Opportunities by Expanding the Mortgage Finance Beneficiaries Base

• Enhancing the role of mortgage finance subsidy and guarantee fund, and developing the pertinent mechanisms.

• Expanding the beneficiaries' base of fund subsidies by raising the maximum limit of monthly income of subsidy-entitled clients to LE 1750 per month for singles and LE 2500 per month for families, by virtue of Premier's Decree No 1846 for 2008.

• Raising the value of fund's subsidy to LE 15,000 in stead of LE 10,000, and further raising the maximum price of subsidized residential unit to LE 95,000.

• Cooperating with the Private Sector to provide residential units to low-income families. In this respect, various housing projects were established by the Private Sector and subsidized by the fund.

Sixth: Spreading and Raising Awareness of Mortgage Finance

• Launching various wide-scale awareness campaigns on the TV, radio and news papers.

• Developing an investor guide with the aim of protecting investors and informing them of their rights and obligations.

• Participating in various exhibitions and conferences to describe and introduce the mortgage finance activity to the public.

• Issuing various printed materials and guidelines to raise peoples' awareness of the importance and the procedures or mortgage finance, including an EFSA Mortgage Finance Services Guideline and a leaflet describing the role of the mortgage finance subsidy and guarantee fund.

• Holding various training course for real estate appraisers, in cooperation with a group of authorized trainers.

• Holding the annual Euromoney Conference for Investment and Mortgage Finance which is considered the first specialized conference in this field of services.