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Mortgage finance is an important engine of economic growth and a direct and indirect driving force for many other industries and activities (approximately 100 industries and systems). Mortgage finance is one of the stable systems that are widely applicable all over the world. This necessitated the issue of Mortgage Finance Law promulgated by Decree no. 148 of 2001. This law played a vital role in developing mortgage finance and was applied by the Mortgage Finance Authority. According to Law no. 10 of 2009, the Financial Regulatory Authority (FRA) was established to replace the non-banking supervisory authorities, including the Mortgage Finance Authority.

FRA Duties
In terms of mortgage finance, FRA is assigned to supervise mortgage finance activities, set controls ensuring market efficiency, follow up and develop mortgage finance activities, and undertake the procedures and arrangements that stabilise the market and preserve rights of stakeholders.
FRA’s key duties including:
• Develop general policies required for directing mortgage finance activities and apply them pursuant to the provisions of the Mortgage Finance Law.
• License mortgage finance companies to practice activities, as well as following up and supervising these companies.
• Decide upon any applications for merger, suspension of activities, and/or total or partial wind-up of assets, which may be submitted by mortgage finance companies.
• Prepare and maintain lists and registries in which the names of appraisers, mortgage intermediaries, real estate agents, and auditors are registered, along with supervising their activities.

FRA is keen to apply a perspective in alignment with latest updates on the local and international levels in an effort to help FRA play a pivotal role in developing mortgage finance and creating highly efficient and well-organized market. For this purpose, FRA applies properly sound rules and robust supervisory standards that ensure preserving rights of market participants, restricting market risks, maintaining market integrity, and applying equity and transparency principles.

As for mortgage finance, FRA supervises the companies operating in the mortgage finance market; whereby it is assigned to issue the licences and approvals legally required by these companies, review financial statements, impose penalties on violators and inspect these companies to protect rights of investors operating in the mortgage finance market.

FRA’s role in supervising Mortgage Finance Companies
First: Issuance of Licences and Approvals
As a supervisory authority, FRA is responsible for granting licences and approvals required for practicing mortgage finance. It also directs all mortgage finance companies to apply the provisions of Law no. 148 of 2001, its Executive Regulations, and pertinent FRA Board Resolutions. The FRA-licensed mortgage finance company is required to be in the form of an Egyptian joint stock company with issued capital of not less the legally prescribed minimum value required to practice activities.

To support the Authority’s supervisory and regulatory role, FRA’s Board issued a number of resolutions, as follows:
• FRA shall be notified of all amendments to the articles of incorporation and articles of association of the mortgage finance company, as well as all amendments to the data previously provided by the company when a registration request was submitted.
• The minimum limit of duties of the auditors assigned to review and approve the mortgage company’s balance sheets.
• Mortgage finance companies shall not be permitted to assign two auditors, from one accounting office, to review the company’s accounts. Moreover, the auditor is not permitted to review two companies’ accounts at the same time.
• The supervisory authorities shall be requested to verify the financial status of the mortgage finance company’s top management and main shareholders.
• Personal meetings shall be held at FRA premises with the mortgage finance company’s board chairman, managing director, chief executive officer, and credit manager.
• The FRA-listed mortgage finance company shall notify FRA of any changes to its leadership on whose basis the company obtained its FRA licence. In case of violation, FRA shall undertake penalty procedures against the company, which may result in suspension of activities.

Second: Setting Financial Standards of Mortgage Finance Companies
The Executive Regulation determines the financial standards that should be applied to mortgage finance companies, including:
1. The method for appraising the company’s assets.
2. Minimum rights of shareholders in proportion to the company’s assets, liabilities, and portfolio.
3. The minimum limit of current assets in proportion to the current liabilities.
4. The rules ensuring sound functioning of the company’s business and guaranteeing rights of creditors and clients.

Third: Control and Supervision
Supervision over the companies operating in the mortgage finance market is one of the main duties assigned to FRA, pursuant to Law no. 148 of 2001 and its Executive Regulation. The supervision process helps FRA verify the scope of compliance of mortgage finance market stakeholders with all laws and rules that govern and regulate mortgage finance.
In this context, FRA plays a vital role in organising the mortgage finance market and ensuring required legal protection to investors by exercising non-stop supervision over all mortgage finance stakeholders. To this end, FRA undertakes a number of supervisory procedures including a follow up and supervision over the companies’ performance by either reviewing and analysing data or conducting on-site inspection, whereby FRA competent inspectors review clients’ files at the mortgage finance company’s premises and prepare reports revealing the results of their inspection.
From the outset, FRA is assigned to raise awareness of the mortgage finance companies. Therefore, it convenes a raft of symposiums and meetings with the companies’ officials in an effort to restrict the violations committed by these companies and reduce the consequential risks that positively affect the mortgage finance market. It firstly conducted various periodic inspections over the files of mortgage finance companies and comprehensively reviewed the then conducted mortgage finance transactions, but did not impose any penalties in support of FRA’s continuous awareness strategy.

• Anti-Money Laundering
FRA established an anti-money laundering and anti-terrorism financing unit. This unit is assigned to supervise due compliance by mortgage finance companies with the anti-money laundering and anti-terrorism financing controls. It further participates in drafting the pertinent internal controls of mortgage finance companies and carries out periodic inspections to verify the enforcement of these controls by the companies. It is worth mentioning that FRA issued new anti-money laundering and combating terrorism financing controls for mortgage finance companies. The newly issued controls took into account latest international rules regarding anti-money laundering and anti-terrorism financing, and widely support the currently applied practices of mortgage finance, anti-money laundering and anti-terrorism financing. This aims to keep pace with international changes in this respect and to confirm accurate compliance by the companies operating in Egypt’s mortgage finance market.

These controls are capped by the proper compliance with the clients’ identity and legal status verification rules duly issued by the Anti-money Laundering and Anti-terrorism Financing Unit pursuant to Clause (13) of Article (3) of the Executive Regulation of the Anti-Money Laundering Law issued by the Prime Minister’s Decree no. 951 of 2003. These rules are to be applied by each company and included in the company’s internal regulations regarding verification of the identity and legal status of clients, whether natural or juridical persons, as well as the actual beneficiaries. Under these controls, companies are required to apply the rules for appointing an anti-money laundering and terrorism funding manager as well as determining his authorities and duties, which should be in alignment with the currently prevailing international standards. These controls also set a number of procedures with respect to reporting any suspected anti-money laundering or terrorism funds activities.

• Administrative Penalties
Mortgage Finance Law no. 148/2001 grants FRA the right to investigate with and/or file criminal cases against the companies in violation of the provision of this Law and/or its Executive Regulation. This right is pursuant to the following articles:
Article 45:
Without prejudice to any severer penalties stated in any other law, the actions referred to in the following articles shall be liable to the penalties prescribed for therein.
Article 46:
Whoever exercises, without license, the mortgage finance activity prescribed for in the present Law shall be liable to imprisonment and a fine of not less than EGP 50,000 and not exceeding EGP 20,000, or either penalty.
Article 47:
In practicing mortgage finance, whoever violates the criteria and rules referred to in Articles (4) and (32) of the present Law and determined in the Executive Regulation shall be liable to imprisonment for a period not exceeding three months and to a fine of not less than EGP 10,000 and not exceeding EGP 50,000, or either penalty.
Article 48:
Whoever violates any of the provisions of Clause-I of Article (34) shall be liable to a fine of not less than EGP 200,000 and not exceeding EGP 500,000.
Article 49:
In addition to the penalties carried for the crimes stipulated in the previous articles, a court judgment may be passed depriving a person, on whom any of these penalties is imposed, from practicing the profession or practicing the activity subject to such crime for a period not exceeding three years. This judgment shall be decisive and enforceable in case of recidivism.
Article 50:
With respect to the crimes committed in violation of the present Law and/or its Executive Regulations, no criminal cases shall be filed, set in motion by virtue of any procedure or placed under investigation, unless a request is made to this effect by the competent Minister.

The competent Minister, before a final judgment is rendered in a criminal case, may accept a composition with the violator, in return for paying the maximum limit of the fine prescribed for in the previous Articles. The composition shall then result in extinguishment of the criminal case.
In addition, the competent Minister is entitled to request any investigation or filing cases against who violates the provisions of the law upheld by the law promulgating the establishment of the Financial Regulatory Authority (FRA).
Fourth: Protection of Mortgage Finance Investors and Dealers
As FRA seeks to enhance its supervisory duties and develop the mortgage finance market as well as other non-banking markets, FRA established an investor protection department; it further reformed the mortgage finance dealer complaints office which is assigned to study all the complaints received by FRA, review the opinions of complainants and undertake the procedures for solving same. Under this reform, FRA requested the complainants to support their complaints with a number of substantiating papers and documents. It also applied information technology systems electronically keeping and easily retrieving the complaints raised, and prepared complaint forms for use by complainants.