The deal comprises securitisation of 9,264 housing loan accounts from HDFC with the principal outstanding of Rs 98.96 crore as on April 1, 2000. The remaining tenure of the pool is 12 years and the total receivables for the same period amounts to Rs 194.51 crore.

The highest rating has been assigned to the Rs 62.52 crore senior class MBS proposed to be issued by a trust established by the National Housing Bank, (NHB) which is acting as a special purpose vehicle (SPV) for the transaction. The placement of securities is expected to take place shortly, a Crisil release said.

The entire future receivables would be transferred by HDFC to NHB. NHB will declare a trust to issue class A MBS (senior class) and class B MBS (subordinate class).

The credit enhancement would be subordinate securities and a corporate guarantee from HDFC to the extent of Rs 1.21 crore. Class A MBS will be placed with investors like financial institutions, banks, mutual funds and insurance companies while class B MBS would be retained by HDFC.

The tenure of class A MBS is seven years and the face value is equal to the principal component of the first seven-year scheduled pool receivable, which amounts to Rs 62.52 crore. The investors will be entitled to receive the principal component of the scheduled monthly pool receivables and interest at the specified coupon rate on monthly rests, during the tenure of class A MBS, every month.

Class B MBS will be subordinate to class A MBS. Investors in class B MBS will be entitled to receive the balance monthly pool cashflows, after meeting obligations on class A MBS fully and after making payments to service providers and topping up guarantee facility.

MBS, is a result of the securitisation of the housing loans. It had earlier revolutionised the housing loans market in US, considered to be a $4-trillion market.

MBS will enable HFCs to overcome the asset-liability mismatch by its usage as a good balance sheet management tool, as also an off-balance sheet form of funding. MBS would also relieve HFCs from increasing their borrowings to maintain their capital adequacy.

Since the originating HFC would normally act as the servicer, it entitles them to a stream of fee income for a certain number of years. Crisil is also in the process of rating MBS issues back by mortgages originated by other HFCs.