Britam has unveiled a new service that will allow potential home-owners to apply for 100% financing on mortgages. The product, dubbed Collateral Replacement Indemnity (CRI), is the first of its kind in Kenya. Britam adopted the idea from Home Loan Guarantee, a South African non-profit company which started the initiative 21 years ago.

“We wanted to make it easier for Kenyans to own a home,” said Britam Managing Director, Stephen Wandera. Speaking during the official launch of the CRI at the Serena Hotel on Monday evening, he stated that the product would eventually make mortgage collateral irrelevant.

“There is a growing need for 200,000 housing units in this country every year,” said Benson Wairegi, the company’s Group MD. “Kenya can only provide 30,000.” He added that Britam plans to partner with the banking sector to address what he termed as one of the most pressing needs in the country.

How does it Work?

Mortgage lenders usually provide 80% to 90% of the cash needed to purchase a house. The borrower puts down the remaining 10% or 20% as collateral (Britam's current deposit rate is 20%). The borrower usually has the insurance benefit of owning a home, which can be used as an asset.

With Britam’s CRI, the mortgage lenders will be able to give 100% of the loan to the borrower. The product, which targets middle to lower income borrowers, will provide a maximum loan amount not exceeding the value of the property purchased. Britam will put down the deposit (20%) while the lenders will provide the rest of the loan (80%).

However, before any loans are disbursed, borrowers have to attend a mandatory education course offered by Britam. The course will enable them to understand the basic framework of a mortgage as well as teach them how to effectively manage their assets.

In the event of a loan default, the borrower can lose the deposit and suffer a foreclosure on his house. The lender must then sell the property to recover the debt. A claim can only be made to the insurer if the property is sold for less than the default debt at a legal sale.

Any successful claim is paid to the lender. Borrowers have no insurance benefits aside from the fact that they are getting a 100% housing loan. The lender has the power to reclaim the house if the borrower fails to pay his debts.

Tried and Tested

According to Dr Charlene Lea, CEO of Home Loan Guarantee, South Africa, the product has been tried and tested. Having been launched in SA 21 years ago, CRI has so far facilitated KES 40 billion worth of lending in the region. Speaking on behalf of the mortgage provider, Dr Lea said,“300,000 people now have a roof over their heads.”

Also speaking on behalf of all the mortgage lenders, present, Wandera stated that Britam’s CRI had been created under a great deal of scrutiny. He said that the group started work on the project 4 years ago, now enabling mortgage lenders to consider new opportunities in the market.

Britam believes that CRI will revolutionize the housing market. “We see Britam CRI as a catalyst for mortgage lending inclusion,” said Wandera. He added that the insurance provider has already partnered with ZEP-RE (PTA Reinsurance) among other mortgage service providers.