DE RUEHJM #1943 2971505
ZNY CCCCC ZZH
P 231505Z OCT 08
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC PRIORITY 3080
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY C O N F I D E N T I A L JERUSALEM 001943
NEA/IPA FOR HOLMSTROM/SACHAR/LENTZ; EEB/IFD/OIA FOR
CULLINANE; R FOR MCDANIEL; TREASURY FOR AHERN
DEPT PLEASE PASS TO OPIC FOR VP ROBERT DRUMHELLER
E.O. 12958: DECL: 10/21/2018
SUBJECT: OPIC'S PLAN FOR AFFORDABLE MORTGAGES IN THE WEST
REF: JERUSALEM 350
Classified By: Consul General Jake Walles, for reasons 1.4b and d
1. (SBU) Summary: Following positive meetings with
Palestinian and international partners on October 19-21,
Overseas Private Investment Corporation (OPIC) VP Robert
Drumheller reports solid progress on the affordable mortgage
finance initiative, announced by President Abbas and OPIC CEO
Mosbacher on April 14. OPIC is on track to have the project
operational as planned by mid-2009, to complement two
large-scale housing/community projects in the West Bank. End
2. (SBU) OPIC VP Robert Drumheller and Investment Analyst
Maria Goravanchi visited Jerusalem and Ramallah October 19-21
to continue work on a USD 515 million mortgage finance
facility. OPIC's partners include the International Finance
Corporation (IFC), the Palestine Investment Fund (PIF), Bank
of Palestine (BOP), Cairo Amman Bank, and the UK's Department
for International Development (DFID) (reftel). The
participating organizations will create the Affordable
Mortgage and Loan Corporation (AMAL). AMAL will generate the
loans, but remain invisible at the retail level, and the BOP
and Cairo Amman Bank will interface directly with customers.
AMAL will offer Palestinians two products: a 25-year fixed
rate loan, and 25-year adjustable rate loan which resets
every five years.
3. (SBU) OPIC plans to issue the first loan in 2009 to
coincide with the start of two large affordable housing
projects in the West Bank undertaken by PIF and Bayti Real
Estate Investment Co. (Note: PIF estimates the housing
shortfall in the West Bank is 200,000 units and will increase
by ten percent annually. To address the need, PIF will
construct 2,000 affordable units in Ramallah. In partnership
with Qatari Diar Real Estate Investment Co., Bayti has
designed a fully self-contained town called "Rawabi," located
nine km north of Ramallah, and plans to break ground in 2009.
Rawabi will offer 5,000 housing units. The Rawabi deal was
the centerpiece of the Bethlehem Investment Conference in
May. End Note.)
4. (SBU) VP Drumheller reports that much work remains to be
done before the first loans can be issued, but is comfortable
with the pace of progress with OPIC's partners. OPIC is
currently focused on two issues. First, IFC and OPIC require
a minimum USD 20m of first loss coverage, and need DFID to
commit in writing to provide the full amount. (Note: OPIC
states it does not need the cash in hand until the end of
2009, but needs a written commitment before the end of 2008.
5. (C) OPIC also needs to secure a Palestinian Presidential
Decree invalidating an Ottoman-era law which stipulates that
the total amount of interest on a loan cannot exceed the
original amount of the loan, thereby making a 25-year loan
impossible. The law also caps the amount of interest at nine
percent, which could prohibit banks from penalizing
delinquent borrowers. (Note: The nine percent clause is
reportedly routinely ignored by local banks; however, it
could provide the basis of a lawsuit if left on the books.
End note.) PMA Governor Jihad al-Wazir told Econoff on
October 21 that the PMA supports repealing the law and will
consult with PIF on the precise language of the needed draft
6. (U) OPIC has cleared this message.
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