State lender to take over bank mortgages

A construction site
A construction site. FILE PHOTO | NMG 

Secondary lender Kenya Mortgage Refinance Company (KMRC) is set to complete its review of housing loans held by banks this week, paving the way for transfer of middle-income groups to its fold.

Interim chief executive officer Johnstone Oltetia said a consultant hired to review existing mortgage portfolios is on course to submit a report by end of August.

“The consultant will provide numbers and money value of all eligible accounts for planning purposes,” Mr Oltetia told the Business Daily by phone.

The KMRC, one of the institutions formed by the State to spearhead affordable housing drive, is supposed to offer wholesale lending to a list of primary mortgage financiers, for onward lending to customers at below market rates.

Apart from new loans, KMRC says it will refinance existing mortgages that meet the eligibility criteria, enabling primary lenders to revise charges downwards. The lenders must also provide collateral in the form of government securities, cash or mortgages.


To qualify for refinancing, banks must have awarded loans to customers who earn no more than Sh150,000 per month, and the mortgage size is up to an upper limit of Sh4 million for cities and Sh3 million for other areas.

KMRC plans to price its loans at margins of between 50 and 100 basis points to enable on-lending to mortgage financiers in Kenya shillings at concessional rates.

“Restructuring and repricing of the new loan will be an elaborate process involving both the borrower and the primary lender. The KMRC will not dictate the final charges of refinanced loans but we expect them to fall below market rates,” said Mr Oltetia.

The primary lenders include KCB which holds 21 percent of its shares. Others set to roll out affordable mortgage products are seven commercial banks, 11 deposit taking Saccos and a micro financial institution.

The World Bank and the African Development Bank extended credit lines of Sh25 billion and Sh10 billion respectively to build the wholesale lending pool.

Mr Oltetia reckoned that the tough conditions set by the two international financiers has prolonged the capacity building period. He said KMRC’s board has approved the lending policies and procedures. The regulations guiding KMRC’s operations were published in the Kenya Gazette last week, paving way for issuance of an operation licence.