What changed
RBI issued a consolidated version of the Mortgage Guarantee Company (Reserve Bank) Guidelines, 2008, incorporating all amendments up to June 30, 2013. This circular does not introduce new requirements but serves as a single reference document for existing instructions.
What it means for you
Banks and housing finance companies dealing with mortgage guarantee companies must ensure compliance with the consolidated 2008 guidelines. The definitions and operational framework remain unchanged, so no immediate operational adjustments are needed. However, lenders should verify that their mortgage guarantee partners adhere to these updated guidelines.
What you must do
- Review the consolidated guidelines to ensure your mortgage guarantee company partners are compliant.
- Update internal compliance manuals to reference the latest consolidated circular dated July 1, 2013.
- Train credit and risk teams on the definitions of 'default', 'trigger event', and 'guarantee' as per the guidelines.
- Confirm that all mortgage guarantee agreements with banks or HFCs align with the 2008 framework.
Who it affects
Mortgage guarantee companies registered with RBI, Banks offering housing loans, Housing finance companies (HFCs), NBFCs engaged in mortgage guarantee business
Does this circular introduce any new compliance requirements?
No, this circular only consolidates the existing 2008 guidelines as amended up to June 30, 2013. No new requirements are added.
What is the definition of 'mortgage guarantee' under these guidelines?
Mortgage guarantee is defined as a guarantee provided by a mortgage guarantee company for repayment of an outstanding housing loan and accrued interest up to the guaranteed amount to a creditor institution upon a trigger event.
Who are considered 'creditor institutions' under these guidelines?
Creditor institutions include banks (as defined in the guidelines) and housing finance companies (HFCs) as per the National Housing Bank Act, 1987.