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. Last Updated: 07/27/2016

City Mortgage Agency Issues $69M in Bonds

The city-owned Moscow Mortgage Agency stepped up its activity last week, issuing 2.2 billion rubles ($69 million) in bonds to fund its loan program and forming a partnership with DeltaCredit Bank.

The bond issue, underwritten by Troika Dialog and guaranteed by the Moscow city government, was for 10 years at a 10 percent interest rate indexed to the ruble-dollar exchange rate. The issue was fully subscribed.

"This project should attract a lot of interest. It's the first attempt to introduce this type of financial instrument on the market," said Pavel Gurin, head of investment banking at Raiffeisenbank Austria's Moscow office.

The city mortgage agency, known as MIA, has issued mortgages worth $14.9 million as of Nov. 1. MIA works through the Bank of Moscow, Orgbank, Russky Bankirsky Dom, Rossiisky Capital and now, DeltaCredit Bank.

DeltaCredit president Nikolai Chitov said at the Nov. 12 kick-off for the partnership with MIA that his bank would offer MIA-funded mortgages through DeltaCredit retail outlets.

"The partnership is a commercial one based on market rates," he said, adding that the partners were both created in 1998-99 and have developed in a parallel manner using internationally recognized practices.

MIA has provided DeltaCredit with a $20 million credit line. It is the first time the DeltaCredit Bank has received money from a local source.

DeltaCredit received $20 million in 1998 from the U.S.-Russia Investment Fund to start its mortgage program. The fund was set up by the U.S. Congress in 1995 with $440 million in capital to promote the development of a free-market economy in Russia.

In May, the European Bank for Reconstruction and Development and the World Bank lent $40 million to finance DeltaCredit's mortgage program, which has loaned more than $41 million to homeowners.

MIA's mortgages will be the first that DeltaCredit Bank has offered in rubles. They will be available for sums of $17,000 to $150,000 for up to 10 years at a 15 percent variable rate that will depend on the exchange rate with the dollar, Chitov said.

Borrowers must pay a deposit of at least 30 percent of the apartment they wish to buy and fulfill certain insurance requirements. The loans will be available in Moscow, but not in St. Petersburg or the Moscow region, where DeltaCredit also operates.

The ruble-denominated mortgages will be available to foreigners and to those who do not have Moscow registration.

MIA has also signed a deal with the federal Agency for Housing Mortgage Lending, which is not expected to become active until next year. The federal agency has signed agreements with 12 regional mortgage programs since July, when it introduced a unified standard under which it will refinance mortgages.