Russians get home mortgage system modeled on Fannie Mae

By Kenneth V. Smith

WASHINGTON The Russian government has released the first half of an $80 million allocation to establish a secondary mortgage facility similar to Fannie Mae, the United States' largest source of home mortgage funds.

Fannie Mae and the Urban Institute, a private, nonprofit policy and research organization, have been working with the Russian government and about 30 Russian banks for several years under a U.S. AID contract to create a mortgage lending system in the Russian Federation.

The new agency will stimulate private bank lending for residential construction and home purchase as part of a concerted government effort to address the country's significant housing shortage. Although the new agency is formally a joint stock company, it initially will rely solely on government capital. The agency will purchase qualifying mortgages and sell mortgage- backed securities. These securities will carry a government guarantee but no tax advantages.

"Creation of the agency represents the culmination of years of an unusually productive partnership among U.S. AID-sponsored Urban Institute housing experts, the Russian Ministries of Construction and Finance, and about 30 Russian commercial banks to create a mortgage lending system in Russia," said Ray Struyk, the Urban Institute's project director in Moscow.

The agency is a critical element in the Russian housing sector reform program, under which responsibility for residential construction and housing acquisition shifts from the state to the private home buyer, supported by a modern housing finance system.

The initiative was announced by Grigory V. Litvinov, a member of Russia's Board of Management Agency for Mortgage Lending, at a meeting this week of American bankers and housing finance experts, U.S. AID officials, and members of a Russian housing and banking delegation held at the Washington, D.C. headquarters of Fannie Mae.

"The agency will help solve two problems plaguing the emerging housing market," said Litvinov. "It will reduce the liquidity and interest rate risk problems faced by Russian banks making mortgage loans; and it will bring order to the industry by setting standards for the loans it purchases."

The Russian delegation is in the U.S. to negotiate the contents and schedule of a $1 million U.S. AID- funded technical assistance package that will help launch the agency. Fannie Mae will take the lead in providing this assistance with help from housing finance experts at the Urban Institute and its Russian counterpart, the Institute for Urban Economics. Assistance will continue through the first full cycle of purchasing mortgages and selling securities.

Struyk said that when the collaborative effort began in 1992, there was no legal basis for and no experience in mortgage lending in Russia. The legal basis for the Russian secondary mortgage agency was established in a series of presidential decrees and government resolutions. The agency's registration is underway and operations are expected to begin in about a year.

Selling real estate in the global village

With more foreign buyers and sellers entering U.S. real estate markets, the need for realty agents schooled in dealing with international customers is fostering new interest in specialized courses on global real estate transactions.

Realtors from throughout California, for example, met recently in Los Angeles for National Association of Realtor courses that lead to the Certified International Property Specialist, or CIPS, designation. The trade group's International Section administers the CIPS curriculum, which covers real estate principles and practices in Asia/Pacific, the Americas and Europe.

"Realtors throughout California are offering services to more multicultural customers and working with more international business referrals in Asia, Mexico, and other nations. This business reflects the globalization of our economy," says Carmella Ma, a CIPS instructor from Los Angeles.

Takashi Misawa, a CIPS instructor from Beverly Hills, agrees that California is leading the way toward a more multicultural marketplace. "Global real estate practitioners work with both residential and commercial clients, whether they are New Americans or Japanese investors looking to sell U.S. holdings," she said. "In our state's real estate market, immigrants and Pacific Rim investors play a powerful role. Realtors are beginning to recognize this reality and are responding to it through educational courses and professional networking."

There are currently 335 Realtors with the CIPS designation from Africa, Canada, Colombia, France, Germany, Greece, Hong Kong, Indonesia, Japan, Mexico, the Netherlands, Pakistan, Singapore, Taiwan, Thailand, the United States, Venezuela and Vietnam. Nearly 1,000 Realtors are currently pursuing the designation, but have not yet completed the requirements, according to NAR.

The practice of international real estate is gaining momentum, says Ari Feldman, a Mexico City-based CIPS instructor. "Realtors are showing more interest in learning about global capital flows and cultural differences that affect a property transaction," he said. "The global economy is starting to hit home, and to serve a specialized clientele, the CIPS classes provide real estate professionals with an entry to the international property marketplace."

Of 735,000 Realtors in the U.S., nearly 1,400 are currently members of NAR's International Section. NAR's International Section provides networking services to its members worldwide, while maintaining cooperative agreements with 35 real estate associations in 31 nations.