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]
- Two approved providers[cf. Mortgage Bond Law (PfG) 1 (SR 211.423.4)]
- 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