Capital Market Financing

The capital market offers two access options

  • Banking intermediation
    • Issue of fixed-rate secured mortgage notes by the bank concerned, which then uses the accepted funds for fixed rate mortgage financing with the same repayment period
    • Mortgage-bank bonds
      • Two approved providers[cf. Mortgage Bond Law (PfG) 1 (SR 211.423.4)]
        • Mortgage-bank bond headquarters of the cantonal banks
        • Mortgage bank of Swiss mortgage institute
      • Long-term lending to banks, which use the funds for their mortgage business
      • Statutory lien for central collateral backing, primarily to bailiffs at the institute and secondarily the other assets of the institute members [Mortgage Bond Law 18 and 23]
  • Non-financial intermediation (re-monetisation)
    • Alternative to banking intermediation
    • Dependency
      • on refinancing and investment options
      • on intermediation costs
      • on market conditions
    • Securitization of mortgages
      • Bank pools its mortgages and sells them to third parties that that create a Special Purpose Vehicle (SPV)
      • Assignment (cession) of interest payment and repayment claims
      • Note: banking secrecy rules require approval of the mortgagor (continued support of the end-customer by the bank, as service agent)
      • Bonds purchaser has the lien to the assets (= Mortgage Backed Securities [MBS])
      • Advantages for the selling bank
        • Exemption from provision of equity capital, as a result of the sale of the default risks on the capital market
        • Receipt of liquid assets for new loans for even better market penetration and for new investments
        • If the assigned mortgages are good quality, more favourable conditions than for own issue
    • Sale of mortgage receivables from an individual borrower
    • Direct securitisation
    • Sale of fund units through a mortgage investment fund to another group of investors, to refinance the mortgages

Further Information

  • Types of real estate financing available on the capital market
    • Debt certificates (issues)
    • Mortgage portfolio (sale to an issuer)
  • Consider possible permit obligations

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