 In Jordan, the mortgage finance market was relatively small a decade ago. A government-supported housing bank was the main provider, supplying a modest number of loans at below-market rates—but at high government cost. The government wanted to reduce the budgetary burden, while improving the availability and affordability of housing finance. However, commercial banks were reluctant to enter the mortgage business for two reasons: the housing bank still retained competitive advantages from its government support, and they lacked ways to deal with the risks of longerterm mortgage lending.
To address this challenge, the government partnered with the World Bank to create the Jordan Mortgage Refinance Company (JMRC) in 1996 to support long-term housing lending by commercial banks, and also to tap the resources of the private capital market to help support the housing sector. JMRC began offering medium-term loans to commercial banks to refinance their mortgage lending—thereby helping to reduce the banks’ liquidity risks. It raises financing for this activity by issuing bonds.
JMRC has played a major catalytic role in the expansion of the mortgage market. Today, there are about 10 commercial mortgage lenders competing in the market.
Transformations
| Jordan is experiencing a crucial transformation in the way its citizens invest—making home ownership more accessible to middle-and lower-income households |
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Dr. Zuhair Khalifeh, JMRC Managing Director, says the company has helped the loan process become less daunting for consumers. “It is becoming more standardized and transparent now, and the terms are much better for the borrower. Jordanians are becoming less fearful of the process.” A loan process that used to take three months is now completed in less than three weeks.
Most impressively, maturities have more than doubled in the last four years, and now range between 12 and 15 years, with some lenders offering up to 20 years to repay a loan. Banks also require smaller down payments, as low as 20 percent.
Since its creation, JMRC has refinanced more than $100 million of mortgage loans, and reforms have stimulated a boom: during the past two years, new-home construction has increased by 20 percent. As a result, Jordan is experiencing a crucial transformation in the way its citizens invest—making home ownership more accessible to middle-and lower-income households.
Updated: November 2003
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