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Business Models

MIK HFC LLC operates under two business models:

The securitization model is to purchase government subsidized mortgage loans without recourse terms from the originating banks to securitize RMBS, though creating SPCs. These RMBS are composed of Senior (90%) and Junior (10%) tranches, which are allocated back to the originating banks. The interest rates on the mortgage loans and RMBS under this model are fixed according to the government’s Affordable Housing Program.

The liquidity model is to purchase market rate mortgage loans with recourse from commercial banks and hold them on MIK HFC’s balance sheet, this model is set in place to increase liquidity for commercial banks to disburse mortgage loans. Currently, this part of the business is funded with MIK HFC LLC’s own funding and the policy loans from German Bank for Reconstruction and Development (KfW).


We purchase mortgages without recourse from commercial banks in Mongolia and securitize the receivables due from individual borrowers from these mortgages.  We issue RMBS, which are secured by the receivables from our purchased mortgages without recourse, through our SPCs and establish a new SPC for each issuance.

We receive offers to purchase mortgages without recourse from originating commercial banks and we evaluate these mortgages in accordance with our eligibility criteria.  Our mortgage asset assessment division ensures all purchased mortgages satisfy our eligibility criteria and prepares the information to be submitted to the FRC for their approval to issue a new series of RMBS. After we receive approval from the FRC to issue a new series of RMBS, we set a completion date for the issuance. Based on our mortgage assets assessment, we group eligible mortgages together on a cut-off day, which is 10 to 14 calendar days prior to the completion date.  We purchase eligible mortgages at their outstanding value as of the cut-off date from various originating commercial banks through our SPCs.  Upon purchase, all rights, title and interests of the originating commercial banks in the mortgages, including in respect of any charges, guarantees, insurance or collateral, are transferred to the SPC established to for the purchase of those mortgages. 

Settlements is concluded through (i) RMBS issued to the originating commercial bank secured by the receivables due under the underlying purchased mortgages without recourse, in proportion to the mortgages purchased from that bank, and (ii) cash payments from interest income earned from our purchased mortgages.

The originators, in their capacity as servicers, will continue to administer their respective portfolios after the securitization exercise.



We purchase mortgages with recourse at their outstanding value from commercial banks in Mongolia to provide liquidity to these commercial banks, allowing them to originate additional mortgages.  We purchase mortgages with recourse with cash from the interest income from our purchased mortgages and borrowed funds, including funds borrowed from KfW through the Government under the Government Housing Program. 

Under the purchase agreements for these mortgages, if any portion of a payment under a purchased mortgage with recourse is overdue for more than 90 days, we have the right to require the originating commercial bank to either repurchase or replace the mortgage. 

  • A repurchase requires the originating commercial bank to pay in cash an amount equal to the carrying amount of the delinquent mortgage and accrued interest on or prior to the settlement day, or fifth calendar day, of the next month. 
  • A replacement requires the originating commercial bank to replace the delinquent mortgage with another performing mortgage with similar terms.

Compared to mortgages without recourse, we believe mortgages with recourse provide to us an additional guarantee to claim the right of payment, in the form of mortgage receivables from the originating commercial banks and the underlying residential properties that are used as collateral to the mortgages.

We carefully monitor the payment status of the mortgages we purchase to determine whether a mortgage should be repurchased or replaced in a prompt manner. In 2018, delinquent mortgages with an outstanding amount of MNT327.2 million, respectively, were replaced or repaid in accordance with our purchase with recourse agreements.

We receive interest under the purchased mortgages with recourse from the originating commercial banks.