1. 10/14/2015 1 FINANCIER | FACILITATOR | INNOVATOR

2. Table of Content 1.Background 2.Linking Mortgage Insurance.., Output to the Outcome 3.Mortgage Insurance defined 4.Policy Objectives of Mortgage Insurance, 5.Critical Success Factors 6.Way forward 7.Questions

3. Background Both the Minister of Human Settlements, and the Minister of Finance have correctly emphasized the need for the government to work together with the private sector to find appropriate financing support measures, so that more people can access home loans, in order to address a key gap in the housing market where middle income people cannot access sufficient finance to afford homes. Access to affordable housing and housing credit has been a major challenge facing the housing market in South Africa. On the 11 February 2010, in the State Of Nation Address, President Jacob Zuma announced that a R1bn Guarantee Fund will be set up in order to incentive the private banking and housing sector to develop new products to meet the housing demand. This fund will accommodate the affordable market, i.e. Individuals who do not qualify for government subsidies due to their higher income levels, but who earn too little to qualify for a normal mortgage loans.

4. Linking outputs to Outcomes OUTCOME Create sustainable human settlements and improve quality of household life Priority Programme 5 Target and ObjectiveOutputs Facilitate increased supply of affordable housing finance Establishment of a guarantee scheme to accommodate people whose salaries are too high to get government subsidies, but who earn too little to qualify for a bank home loan 1.Develop and Implement Mortgage Insurance backed by a R1bn Government Guarantee Finance Linked Individual Subsidy Programme (FLISP), should be responsive to affordability challenges faced by the target market 2.Streamline FLISP administration processes 3.Reduce qualifying Income Bands 4.Increase the Subsidy quantum Lenders should access Long Term Fixed Interest Rate Capital. 5.Orchestrate availability of Long Term Fixed Interest Capital

5. Mortgage Insurance defined DEFINITION OF MORTGAGE INSURANCE Mortgage Insurance facilitate access to affordable housing finance, by offering protection against default risk to the lenders, thereby stimulating market confidence in the human settlement finance market and affecting a whole market mechanism in all housing market players’ response to the increase demand for homeownership INTERNATIONAL PERSPECTIVE Increasingly, a number of emerging and developed housing finance markets, have developed and implemented Mortgage Insurance as a mechanism to improve ACCESS to AFFORDABLE housing finance by a large number of households who can service a housing loan across different income bands.

6. 1.“accommodate people whose salaries are too high to get government subsidies, but who earn too little to qualify for a bank home loan “ a.Facilitate access to housing finance by the households in the affordable house markets b.Reduce monthly installments (progressively) c.Create opportunities for households to buy a homes much sooner 2.Ensure better risk management of high-ratio lending 3.Enhance housing finance system 4.Increase efficiency of the secondary markets, and attract institutional investors in the human settlements finance market 5.Create housing related construction jobs towards 2014 and beyond Policy Objectives of the Mortgage Insurance, backed by government R1bn Guarantee

7. Develop a coordinated regulatory framework – South Africa Reserve Bank – Recognize mortgage insurance – Financial Services Board – Mono-line and risk capital rulings Strategic business development – Target strategic bank partners – Link to housing project development projects – Active business-to-business relation building Demonstrate value of mortgage insurance to South African market – Results with strategic bank partners – Link to liquidity funding / securitization Critical Success Factors

8. Activities AugustSeptemberOctoberNovember 0613202703101724010815222905121926 Consultation with  National Treasury  Banks  SARB  FSB High level consultation plan for the output: Implement the Mortgage Insurance

9. QUESTIONS