Thai Mortgage Security Agency Aims to Expand Range of Instruments.

Byline: Wichit Chantanusornsiri

Jul. 8--The Secondary Mortgage Corporation (SMC), a state agency set up to support mortgage securitisation, is looking to develop new instruments to allow long-term fixed rate loans as well as the purchase of consumer loans, according to chairman Pongpanu Svetarunvra.

He said the SMC needed to expand its mandate and range of instruments to help support development of the property market and government policy to give low-income groups greater opportunities to purchase homes.

SMC president Siriwat Phromburi said it was planning to propose the purchase of long-term fixed-rate mortgages, which would encourage lending institutions to further develop their own products.

Under securitisation, the SMC purchases long-term assets such as mortgages from local financial institutions. Funds are raised from bond issues to finance the purchases. Cash flow from assets in the form of interest and principal payments are in turn used to service the bond issues.

He said institutions raising long-term fixed rate funds could turnaround and lend at longer fixed rate terms.

Loans with terms as long as 30 years could be made at fixed rates, with institutions rolling over their funding periodically. Currently the longest fixed-rate mortgages available generally ranges from three to five years, with terms floating based on market rates afterward.