is an independent mortgage credit institution that offers customers financial solutions and other services related to real property.
BRFkredit offers mortgage loans against a mortgage on owner-occupied homes, commercial properties and subsidised housing. In the corporate lending segment, BRFkredit focuses on loans for office and business properties and for private rental and cooperative housing. Loans for residential purposes account for the majority af all lending.
Being owned by a foundation, BRFkredit is under no pressure to pay out dividends or capital in anyway. Hence, BRFkredit has its focus on providing bondholder value rather than shareholder value.
BRFkredit lends great weight to the security of the bondholders. BRFkredit attains this in various ways, for instance by building up a high solvency ratio and focusing on risk management.
BRFkredit's financial goal is to generate earnings that are sufficient to ensure the continued and competitive development of the company.
The following sections give a detailed profile of BRFkredit.
BRFkredit a/s is fully owned by BRFfonden, an independent business foundation, through the holding company BRFholding a/s.
Sven A. Blomberg, CEO
Carsten Tirsbæk Madsen, Executive Vice President
Lars Waalen Sandberg, Excecutive Vice President
Board of directors:
Oluf Engell, Chairman
Kurt Bligaard Pedersen, Deputy Chairman
Partner Rina Asmussen
Laila Busted, elected by staff,
Anette Lykke Poulsen , elected by staff,
Jan Frederiksen , elected by staff
The Danish Mortgage Loans and Mortgage Bonds Act and the Danish Financial Services Act regulate the business of BRFkredit, and BRFkredit is supervised by the Danish Financial Supervisory Authority, an institution under the Danish Ministry of Business and Growth.
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Since 1993, BRFkredit's lending focus has been directed at private owner-occupied homes, private rental housing, non-profit housing and office and business properties.
The chart below shows the composition of mortgage loans in BRFkredit as of Q1 2012
BRFkredit's lending is based on an appraisal of the long term value of the property. The appraisal primarily takes into account factors like marketability, location and expected movements in the price of the property concerned.
Based on the long term value of the property, BRFkredit grants loans within the maximum lending limit provided for in the Danish Mortgage Loans and Mortgage Bonds Act..
BRFkredit finances the current lending by issuing covered bonds and mortgage bonds continuously, i.e. as tap issues.
It is the borrower's choice of loan type that determines the type of bonds that BRFkredit issues as the Danish Mortgage Loans and Mortgage Bonds Act requires a very close link between the loans granted and the bonds issued.
The bonds are bearer bonds issued in book-entry form registered at VP Securities Services (Værdipapircentralen, the Danish Securities Depository and Clearing Centre) or VP Lux VP in Luxembourg). The bonds are listed for trading on NASDAQ OMX Copenhagen (f.k.a. Copenhagen Stock Exchange).
BRFkredit issues bonds in a range of maturities and with a range of coupons:
- Fixed coupon bullet bonds (non-callable) with maturities from one to ten years with annual coupon payment
- Fixed coupon annuity bonds (callable) with maturities of 10, 15, 20 and 30 years with quarterly repayment
- Floating-to-fixed floating rate annuity bonds with a maturity of 30 years and quarterly payments. The bonds are initially carrying a floating interest rate and have an embedded interest rate cap. If the floating rate rises to a guaranteed maximum rate (knock-in interest rate) the bonds change into fixed rate
- Capped floating rate annuity bonds with a maturity of 30 years and quarterly payments. The bonds carry a floating interest rate and have an embedded interest rate cap. The bonds continue to carry floating interest rate even if the interest rate at a previous fixing has been capped at the cap rate (i.e. "capped floaters")
- Ratched capped floating rate annuity bonds with a maturity of 30 years and quarterly payments. The bonds carry a floating interest rate which can not exceed previous set coupons on the bond.
Identical, but separate bond series are issued to where the borrowers have an option of paying interest-only for up to 10 years.
The bullet bonds finance ARM loans (adjustable rate mortgage loans). The bullet bonds are non-callable and are often referred to as RTL-bonds. ARM loans are typically 30 year annuity loans with annual adjustment of the coupon. Such loans are funded by the issuance of one year bullet bonds that are replaced (refinanced) on their maturity date by new one year bullet bonds until the loan is repaid. Refinancing is traditionally performed in December either by sales of new bonds on auctions or by regular sales of new bonds. In 2010 BRFkredit has introduced refinancing on other dates during the year.
Annuity bonds finance fixed coupon mortgage loans with an option for the debtor to make an early redemption (call option or prepayment option). Fixed coupon mortgage loans are typically 30 year loans.
Floating rate bonds are issued to fund Garantilån (mortgage loans with capped floating interest rate) and Rentefaldslån (mortgage loans with ratched capped floating interest rate).
Bonds used for current issuing are called open bonds. These BRFkredit mortgage bonds are rated AAA by Standard & Poor's.
BRFkredit has a market share of the total Danish mortgage market of 7 %
BRFkredit was established in 1959 as an independent business foundation authorised to grant third-mortgage loans under the name "Byggeriets Realkreditfond", abbreviated BRF. The original purpose was for BRF to grant mortgage loans for specific purposes.
In 1970, the Danish Mortgage Credit Act was amended. The system with three layers of mortgage financing was abandoned, and BRFkredit was allowed to grant mortgage loans in general. The amendments led to a series of mergers between Danish mortgage credit institutions and in 1975, the first Danish mortgage credit institution "Husejernes Kreditkasse" merged with Byggeriets Realkreditfond.
In 1990, Byggeriets Realkreditfond changed its legal structure, and the business was transferred from the foundation to a new company named BRFkredit a/s. The business foundation changed its name from Byggeriets Realkreditfond to BRFfonden.