Home | | Contact Us

Amendments to the Mortgage Finance

Amendments to the Mortgage Finance Law
The Mortgage Finance Law was initially issued in 2001[1] in order to regulate for the first time this activity independently from conventional banking business, and to open up a new financial market and provide the required legal framework thereto. Mortgage finance in this context means specifically borrowing by the investor (so described in the Law to indicate that an investment is being made in a real estate property) in order to acquire a real estate asset where the loan is secured by mortgage over that asset, and in accordance with a legal framework which allows for a speedy recovery of the asset in case of default in payment. Since its inception, the Law had provided for those with limited resources certain interventions to allow them to buy properties. This included land being allocated for free by the State for low-income housing, a subsidy to cover half of the cost of introducing infrastructure services, and the establishment of a Mortgage Finance Guarantee and Subsidy Fund which would support and guarantee low income borrowers. The application of these benefits evidently required a definition of "those with low incomes" in order to determine the beneficiaries from the subsidy provided by the State. However, instead of including this definition in the Law itself, it was referred to the Executive Regulations of the Law[2] in order to allow the executive authority the flexibility needed to deal with changing circumstances. And this is precisely what happened. Originally, the Executive Regulations stated that a person "with low income" is "anyone whose annual income does not exceed nine thousand Egyptian Pounds, or twelve thousand pounds if married or with children". This, however, was recently amended by a Cabinet of Ministers' Decree.[3] The new definition is that a person with low income is anyone who fulfills the following requirements:
  1. That he/she is not - nor his/her spouse or minor children - already the owner of a housing unit.
  1. That neither he/she nor his/her spouse is a beneficiary in any way of a housing benefit or subsidy provided by the State including by the Mortgage Finance Guarantee and Subsidy a Fund.
  1. That his/her annual income does not exceed the threshold determined by the Mortgage Finance Guarantee and Subsidy Fund.
Conclusion
The above means that the definition of "those with low incomes" has become much more defined so that it excludes those who may have already benefited to other subsidies by the State, which is consistent with the current trend of excluding from various subsidy programs those who are already beneficiaries, in addition to those who do not meet the eligibility criteria.   [1] Law No. 148/2001 on Mortgage Finance, Official Gazette, Issue No. 25 (bis), 24 June 2001. [2] Cabinet of Ministers' Decree No. 1/2001 enacting the Executive Regulations of the Mortgage Finance Law, Egyptian Gazette, Issue No. 282 (cont.), 9 December 2001. [3] Cabinet of Ministers' Decree No. 1/2015 amending certain provisions of the Executive Regulations of the Mortgage Finance Law, Official Gazette, Issue No. 8 (bis) (d), 23 February 2015.
The Mortgage Finance Law was initially issued in 2001[1] in order to regulate for the first time this activity independently from conventional banking business, and to open up a new financial market and provide the required legal framework thereto. Mortgage finance in this context means specifically borrowing by the investor (so described in the Law to indicate that an investment is being made in a real estate property) in order to acquire a real estate asset where the loan is secured by mortgage over that asset, and in accordance with a legal framework which allows for a speedy recovery of the asset in case of default in payment. Since its inception, the Law had provided for those with limited resources certain interventions to allow them to buy properties. This included land being allocated for free by the State for low-income housing, a subsidy to cover half of the cost of introducing infrastructure services, and the establishment of a Mortgage Finance Guarantee and Subsidy Fund which would support and guarantee low income borrowers. The application of these benefits evidently required a definition of "those with low incomes" in order to determine the beneficiaries from the subsidy provided by the State. However, instead of including this definition in the Law itself, it was referred to the Executive Regulations of the Law[2] in order to allow the executive authority the flexibility needed to deal with changing circumstances. And this is precisely what happened. Originally, the Executive Regulations stated that a person "with low income" is "anyone whose annual income does not exceed nine thousand Egyptian Pounds, or twelve thousand pounds if married or with children". This, however, was recently amended by a Cabinet of Ministers' Decree.[3] The new definition is that a person with low income is anyone who fulfills the following requirements:
  1. That he/she is not - nor his/her spouse or minor children - already the owner of a housing unit.
  1. That neither he/she nor his/her spouse is a beneficiary in any way of a housing benefit or subsidy provided by the State including by the Mortgage Finance Guarantee and Subsidy a Fund.
  1. That his/her annual income does not exceed the threshold determined by the Mortgage Finance Guarantee and Subsidy Fund.
Conclusion
The above means that the definition of "those with low incomes" has become much more defined so that it excludes those who may have already benefited to other subsidies by the State, which is consistent with the current trend of excluding from various subsidy programs those who are already beneficiaries, in addition to those who do not meet the eligibility criteria.   [1] Law No. 148/2001 on Mortgage Finance, Official Gazette, Issue No. 25 (bis), 24 June 2001. [2] Cabinet of Ministers' Decree No. 1/2001 enacting the Executive Regulations of the Mortgage Finance Law, Egyptian Gazette, Issue No. 282 (cont.), 9 December 2001. [3] Cabinet of Ministers' Decree No. 1/2015 amending certain provisions of the Executive Regulations of the Mortgage Finance Law, Official Gazette, Issue No. 8 (bis) (d), 23 February 2015.