RAEF is in the process of establishing Ro-Fin Mortgage Loan Company (Ro-Fin, or the company), a green-field entity, as a specialized housing finance company to originate and service primary mortgages to Romanian households. Ro-Fin will be capitalized with equity and long-term debt at $36 million (ROL 1,200 billion equivalent) making it the first significant private mortgage company in Romania. The strong capitalization would enable the company to mobilize ample funds internally and externally at attractive rates and offer affordable residential mortgages in Romania. The proceeds from IFC’s long-term loan will be on-lent as long-term residential mortgages and home refurbishing sub-loans that are very scarce products in the Romanian market. The company will be chaired by an experienced, senior mortgage banker. Development Impact: Mortgages are virtually nonexistent in Romania. An important developmental impact of this project is to provide critically needed long-term funding to families that wish to own their home. The tenor of IFC's loan would enable Ro-Fin to provide long-term, and thus, more affordable mortgage credits. With the increased affordability, more individuals could access funding to purchase new or renovate existing homes, thus addressing the poor condition housing in Romania. Further, through extensive linkage effects, the housing industry will contribute to the development of SMEs that supply labor and materials for the construction and improvement of homes; a major contributor to economic growth in Romania. It is further envisaged that the project would have a powerful demonstration effect in stimulating other market players to augment their underwriting standards, laying the foundation for a sound and thriving secondary market for issuing mortgage-backed securities. IFC Role: IFC will play a major role in ensuring that the underlying mortgages are structured using best practice underwriting and mortgage servicing standards. Documentation and mortgage requirements for sub-loans will be based on standardized underwriting criteria to facilitate securitization. The objective of this project will be to spur the growth of the primary residential mortgage market, with a view to developing the secondary market through securitization and the creation of an active refinancing entity. IFC will be tapping know-how from its Housing Finance Unit in the Global Financial Markets Group to provide value added, "informal technical assistance" to this project. The client is welcoming IFC's housing finance expertise in the framework of project structuring.