CTH Mortgage Warehousing Line
The objective of the project is to Support CTH to (i) promote RMBS issuances in the Ecuadorean market; and (ii) increase the availability of mortgage financing for low to middle income segments of the population.
The transaction consists of a warehousing line of up to US$15 million, with an availability period of up to 4.5 years and a tenor of up to 15 years. CTH will use the proceeds of the line to originate, purchase and accumulate residential mortgages for their securitization in the capital markets. The proceeds from each RMBS Will be used to repaid IDB Invest’s financing and will be once again available for subsequent disbursements. The project expects to Support US$45 million in RMBS. CTH will target low and middle-income segments of the population.
1. Overview of Scope of IDB Invest E & S Review
IDB invest evaluated CTH’s capacity to manage E&S risks for its mortgage portfolio to be financed by IDB Invest.
2. Environmental and Social Categorization and Rationale
The transaction is categorized FI-3 based on IDB Invest’s Sustainability Policy given the low risk of the underlying transactions of the current and future CTH’s portfolio and the relative small size <US$250,000.
3. Environmental and Social Risks and Impacts
The main E & S risks of this projects are associated with the location of dwellings. The potential risks associated with its main lending activities include i.e. pollution, natural disasters, non-compliance with national law and construction requirements, use of inadequate materials, etc.
CTH has the capacity to identify and manage the E&S risks of the portfolio. The assessment of E&S risks is in charge of the Origination Manager, and is part of each transaction, they back up their analysis with appraisers’ valuations and reviews with expertise in E&S risks. To improve the evaluation process, elements for industrial safety and fire will be included in the ficha ambiental. CTH has included in their manual and procedures all elements related to E&S risk evaluation. However, no system has been implemented.
4. Mitigation measures
CTH must ensure that all mortgages granted comply with IDB Invest’s list of excluded activities, applicable local E&S and IDB Invest’s Sustainability Policy. CTH’s personal in charge of E&S risk evaluation will attend the IDB Invest’s Environmental and Social Risk Management training workshop for financial intermediaries online training course on Environmental and Social Risk Management. Additionally, the implementation of an Environmental and Social Management Risk System (ESRS) will be required. The ESRM will include specific procedures to assess compliance with local law, licenses, permits and List of Excluded Activities.