CJSC Managing Company GFT CAPITAL and the Commercial Bank OBRAZOVANIE carried out the first transaction on securitization of mortgage loans by issuing MPCs* for the amount of 1 bln 250 thousand roubles in Russia. The Bank OBRAZOVANIE is acting as an originator, CJSC Managing Company GFT CAPITAL is regulating mortgage collateral, CJSC Computershare Registrator is responsible for the maintenance of the register of MPCs’ holders, and OJSC Gazprombank is acting as a specialised depositary. Liniya Prava Law Firm provided legal support of the debut issue of the first mortgage participation certificates on the Russian market.

Earlier, on July 19, 2012, the Federal Financial Markets Service of Russia registered the rules of fiduciary management of the mortgage pool related to mortgage participation certificates "ISU- 1" (MPC-1) under the direction of CJSC Managing Company GFT CAPITAL (Moscow).

Michael Antsiferov, Vice-President of CJSC Gazfintrast, said: "We are very pleased that after huge efforts concerning the preparation of the legal framework for MPC issue, the issue took place in practice. We can already note a great interest in this instrument. Undoubtedly, we can see that the future development of the new product in Russia will require committing a number of steps: placing MPCs at the Moscow Stock Exchange, bringing them on the Lombard List of the Bank of Russia, carrying out of insurance and rating assignment that, in general, will increase investors' confidence in the product. We would like to express special gratitude to OJSC AHML for comprehensive support in initiating and developing MPCs.”

Alexander Mirakov, General Director of the Bank OBRAZOVANIE, said: "Our bank's name includes the word "innovative" and we try to justify it. Being a pioneer in the issuance of a new financial instrument can also be considered as being "innovative". Getting another tool for mortgage refinancing will allow us, i.e. to a bank that is actively developing the mortgage lending program, to allocate "long" and relatively cheap funds that, in turn, will contribute to the active development of mortgage lending and lower interest rates on loans."

Dmitriy Glazounov, Managing Partner of Liniya Prava, said "We are glad that a new financial instrument has appeared in Russia. Given the smaller number of procedures required for the issue of MPCs as compared to mortgage-backed securities, we expect the high demand for MPCs on the market, most of all by private investors, insurance companies and pension funds interested in mortgage- backed securities. However, governmental support and further development of the Russian legislation in this area are necessary for the instrument to operate in full. Liniya Prava is ready to contribute to this in future, too."

Summary

In 2003, the Federal Law of the Russian Federation of November 11, № 152-FZ "On Mortgage-Backed Securities" was adopted, which intended to introduce new types of securities into circulation: mortgage bonds and mortgage participation certificates. While the former were used in practice right from the start, the development of the concept of mortgage participation certificates was retarded by the lack of a complete legislative framework regulating the process of issuing and circulation of mortgage participation certificates. Liniya Prava Law Firm was engaged by OJSC AHML to solve this problem. The firm developed necessary modifications to the regulatory framework which later were adopted by the FFMS of Russia.