Regulatory Alerts2020-10-22
Self-Build Product Instructions for Retail Mortgage Finance
The Saudi Arabian Monetary Authority has issued binding instructions for the "Self-Build" retail mortgage finance product, requiring licensed financiers to cap administrative fees at one percent or SAR 5,000 (whichever is lower) and disburse specified payments within fifteen days of a customer's request upon meeting contractually defined completion milestones. The directive mandates that the total financing amount be reflected in customer credit records at contract inception, with the actual granted amount clearly stated. Financial institutions must implement these requirements for both new and existing financing agreements within thirty days of the circular's issuance.
In the Name of Allah, the Most Gracious, the Most Merciful
Saudi Arabian Monetary Authority Headquarters
Office of the Deputy Governor for Supervision
Reference No.: ................................. Date: ................................. Enclosures: .................................
Reference No.: 42013845 Date: 1442/03/05 Enclosures: None
Circular
To: Respected Parties,
Peace, mercy, and blessings of Allah be upon you,
Subject: Instructions for the "Self-Build" Product for Retail Mortgage Finance.
Based on the authorities vested in the Authority under relevant systems, regulations, and instructions, and in light of its role in protecting the rights of clients of financial institutions under its supervision, and to ensure the soundness of the mortgage finance sector and achieve financial stability; mortgage financiers must comply with the following when granting financing under the "Self-Build" product for retail mortgage finance:
- Determining the total value of construction payments ("financing amount") at the inception of the contract, and linking the payments to specified completion percentages in a single financing agreement.
- Reflecting the total financing amount in the customer's credit record at the inception of the contract, with clarification of the actual amount granted to the customer in the same record.
- Administrative fees collected by the financing entity from the beneficiary for all payments shall not exceed (1%) of the financing amount or (5,000) five thousand Saudi Riyals, whichever is lower, in accordance with the instructions issued by the Authority on this matter, including the Authority's instructions under Circular No. 361000091211 dated 1436/6/30 AH.
- Disbursement of the specified payment amount under the financing agreement within (15) days from the date of the customer's request, provided that the customer achieves the completion percentages specified for each payment according to the agreement.
For information and action within a period not exceeding (30) days from its date, mortgage financiers are also required to take all necessary measures to apply the provisions of this circular to existing financing agreements under the "Self-Build" product for retail mortgage finance.
Yours sincerely,
Fahd bin Ibrahim Al-Shathri Deputy Governor for Supervision
Distribution Scope:
- Banks operating in the Kingdom.
- Mortgage finance companies operating in the Kingdom.
- Credit information companies.