ENABLING PROVISIONS OF THE NHB ACT

Enabling Provisions in NHB Act for Mortgage Backed Securitisation and Secondary Market Development:

In terms of Section 14 (ea) of the said Act, NHB has been specifically authorised to purchase, sell, or otherwise deal in any loans or advances secured by mortgage or charge on the immovable property relating to Scheduled Banks or Housing Finance Institutions (HFIs);
Section 14 (eb) of the NHB Act allows NHB to create one or more Trusts and transfer loans or advances together with or without securities therefor to such Trust(s) for consideration;
As per Section 14 (ec), NHB is authorised to set aside loans or advances, and issue or sell Mortgage Backed Securities (MBS) based on such loans or advances so set aside, in the form of debt obligations, Trust Certificates of beneficial interest or other instruments whatever name called, and to act as Trustee for the holders of such securities.
Section 18A of the NHB Act facilitates the transfer of MBS issued by National Housing Bank to securitise the loans granted by Scheduled Banks and HFIs, without Compulsory Registration, both at the time of issue of securities by NHB and at the time of their transfer by the investors.
Further, in order to instil confidence among the investors in the securities issued by NHB, the Bank acting as a trustee or otherwise in the transaction relating to securitisation of loans has been authorised to recover the dues as arrears of land revenue in terms of Section 18B of the NHB Act.

Speedier Foreclosure Mechanism:

To provide for introduction of a speedier recovery mechanism a new chapter (VA) has been added to the NHB Act. This chapter provides for appointment of recovery officers of approved institutions and procedures for the recovery of housing loan dues from defaulting borrowers. This chapter also proposes for establishment of appellate tribunal to hear appeals against the orders of recovery officers.
The dues of defaulting borrowers of Scheduled Banks are also included for the purpose of recovery process under Chapter VA of the NHB Act. Besides, in terms of Section 36C of the NHB Act, Scheduled Banks have been defined as approved institutions, which implies that officers of scheduled banks would also be eligible for being appointed as recovery officers.

Announcement