Mortgage insurer is a stillborn with no guidelines, regulator

Plans to set up India Mortgage Insurance Company (IMIC) has hit a roadblock with the government yet to frame guidelines and decide on a regulator for such companies in India.

P K Gupta, chairman, National Housing Bank, said, the government needs to decide who will regulate the mortgage insurance companies - the Insurance Regulatory Development Authority or the Reserve Bank of India or yet another independent body.

"The formation of the mortgage insurance companies will hang fire as long as guidelines are non-existent. This was because other companies might intend to enter into the segment once the India Mortgage Insurance Company is floated. Hence guidelines and a regulator was necessary before the company is formed," he said.

The National Housing Bank (NHB) had taken up the task of floating IMIC along with the International Finance Corporation (IFC), the World Bank's investment arm.

Later, the Canadian Mortgage Housing Corporation (CMHC) was roped in as a third equity partner for IMIC, which would have been the first outfit to provide such cover for housing finance activities in the country.

NHB was also looking at the option of roping in other equity partners for the company and had appointed IFC to act as a facilitator and play the lead role in attracting equity investors for the mortgage insurance company that would provide mortgage credit guarantee on housing loans.

"The proposed company would provide guarantee to housing finance companies that would cover the risk of default by mortgage borrowers. This was done with a view to induce housing finance companies to expand the size and scope of their lending operations," said sources close to the development.

"Other factors such as business issues relating to the proposed company are also still to be discussed and determined," said an IFC official .