PROJECT

Projects

Summary of Proposed Investment

Project Number

9828

Company Name

Mortgage Korea

Date SPI Disclosed

Dec 6, 1999

Country

Korea, Republic of

Industry

Financial Markets

Status

Completed

Sector

Secondary Mortgage Institutions

Department

Regional Industry - FIG Asia & Pac

Environmental Category

C - No Impact

Previous Events

Approved : Mar 30, 2000
Signed : Oct 31, 2000
Invested : Nov 14, 2000

Project Description

Summary Of Project Information (SPI)

Project NameKorea - KoMoCo

RegionAsia and Pacific
Sector
Project No009828
Projected Board DateJanuary 31, 2000
Company NameKorea Mortgage Corporation
Technical Partner and/or Major Shareholders

The major shareholders in Korea Mortgage Corporation are Korea Ministry of Construction and Transportation (45%); H&CB (Housing and Commercial Bank) (15%); Korea Exchange Bank (15%); Kookmin Bank (15%); and Samsung Life Insurance (10%).
A Foreign Technical Partner (FTP) is to be indentified.
After investments by the IFC and the FTP, the shareholding structure will be: Korea Ministry of Construction and Transportation (28.5%); H&CB (Housing and Commercial Bank) (14.25%); Korea Exchange Bank (14.25%); Kookmin Bank (14.25%); Samsung Life Insurance (9.5%); IFC (14.25%); and FTP (5%).

Project Cost Including proposed IFC investment

Korea Mortgage Corporation is capitalized at KRW100 billion. IFC''s investment will consist of (i) an equity investment of KRW 15 billion won (approx.$12.5 million); and (ii) a credit enhancement commitment of up to US$80 million equivalent to support a placement of Mortgage Backed Bonds (MBB) and Mortgage Backed Securities (MBS) with long-term maturity to insurance companies and institutional investors in Korea

Location of project and Description of site

Korea Mortgage Corporation is headquartered in Seoul, Korea.

Description of Company and Purpose of Project

The project is to establish a secondary mortgage market company, called Korea Mortgage Corporation (KoMoCo). This project could have a major impact not only in developing and deepening Korea''s housing finance sector, but also in creating and developing a new asset class, Mortgage Backed Bonds (MBB) and Mortgage Backed Securities (MBS), in the less developed Korean fixed income market. MBB and MBS do not currently exist in Korea, but the market will develop following enactment of the Mortgage Backed Securitization Company Act, to be approved by the Korea Parliament in December 1999.

The opportunity to establish KoMoCo results from:
· Liberalization by the Korean Government of mortgage lending.
· Legislation allowing the issuance of MBB''s and MBS''s - the last piece of legislation is a Mortgage-Backed Securitization Company Act to be enacted by the Parliament in December 1999.
· The substantial inefficiencies that exist in Korea''s housing mortgage market.
· The Korean government''s strong commitments to implement fundamental structural reform of financial markets by fostering greater competition throughout the financial sector and encouraging development of fixed-income capital markets as an alternative to bank credit.

The project will:

· Diversify the country''s home mortgage lending institutions'' sources of funding through issuance of MBSs.
· Provide new products (ie. MBB & MBS) for local currency long-term investors and savings institutions.
· Improve financial sector liquidity through securitization of mortgage portfolios.
· Improve the affordability of housing and lower the cost of mortgage loans by making longer-term funding available, and by enhancing the liquidity of mortgage assets.
· Promote competition in a primary mortgage market which has been dominated by H&CB for the last three decades as to help develop the primary mortgage market in Korea by improving the efficiency of loan origination and standardization of loan files, loan file documents and mortgage loan quality.
· Improve the quality and efficiency of mortgage loan servicing.
     
Environmental Category and Issues

Based on the available information, this is a category C project according to IFC''s environmental and social review procedure. No further environmental review is therefore required.


Date SPI sent to InfoShop December 6, 1999

“This Summary of Project Information is prepared and distributed to the public in advance of consideration of the proposed transaction by the Corporation’s Board of Directors. It is provided for the purpose of enhancing the transparency of IFC’s activities and should not be construed as presuming the outcome of IFC Board consideration.”

For Additional Information contact: Corporate Relations Unit -
telephone: (202) 473-7711
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