What changed
RBI issued a consolidated version of the Mortgage Guarantee Company Guidelines, 2008, incorporating all amendments up to June 30, 2010. The circular reproduces the original notification dated February 15, 2008, as updated, to provide a single reference document for all current instructions.
What it means for you
For banks and lenders, this circular ensures clarity on the regulatory framework for mortgage guarantee companies, which provide guarantees on housing loans. It defines key terms like 'default', 'mortgage guarantee', and 'creditor institution', helping lenders understand their rights and the guarantee trigger events. The consolidation reduces confusion from multiple circulars, aiding compliance and operational consistency.
What you must do
- Review the updated guidelines to ensure your mortgage guarantee arrangements comply with the definitions and trigger event requirements.
- Update internal policies and contracts with mortgage guarantee companies to align with the consolidated framework.
- Train relevant staff on the definitions of 'default', 'housing loan', and 'creditor institution' as per the guidelines.
- Monitor RBI website for any future amendments to these guidelines.
Who it affects
Mortgage guarantee companies, Banks and housing finance companies (creditor institutions), Borrowers of housing loans
What is the purpose of this circular?
This circular consolidates the Mortgage Guarantee Company Guidelines, 2008, as amended up to June 30, 2010, into a single document for easy reference. It does not introduce new rules but provides the complete regulatory framework for mortgage guarantee companies.
Who is considered a 'creditor institution' under these guidelines?
A 'creditor institution' is defined as a bank or a housing finance company. This includes banking companies, corresponding new banks, State Bank of India, subsidiary banks, and cooperative banks as defined in the Banking Regulation Act, 1949.
What triggers a mortgage guarantee payout?
A mortgage guarantee is triggered by a 'default', which means non-payment on the due date of any principal debt or interest by a borrower to a creditor institution. The guarantee covers repayment of the outstanding housing loan and accrued interest up to the guaranteed amount.