Saudi Arabia to set up Fannie Mae-style mortgage firm

Saudi Arabia is working with the Boston Consulting Group to help establish a state-owned mortgage firm similar to the US’s Fannie Mae and Freddie Mac as it seeks to develop a secondary market for home loans, a Bloomberg report said, citing unnamed sources with knowledge of the plans.

The kingdom’s sovereign wealth fund, Public Investment Fund (PIF), is said to contribute most of the funding, which is estimated at SAR 10 billion.  The fund is currently looking for an executive to lead the new company, the sources added.

“This is a way for the government to play a supporting role in the development of the mortgage market,” said Murad Ansari, a Riyadh-based analyst at EFG-Hermes Holding SAE told the financial news provider. “It’s difficult for banks to take on long-duration liabilities, which are mortgages, when they are mostly funded by short-duration liquidity,” he said.

The news comes days after the Shura council, the country’s advisory body, approved a tax on undeveloped land with the aim of easing its affordable housing shortage.